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The CLEAR Act Carbon Limits and Energy for America’s Renewal \ CARBON PRICING CONFERENCE May 21, 2011 Office of Senator Maria Cantwell What is the CLEAR Act? • A simple, revenue neutral, market-based way to reduce CO2 emissions while protecting household incomes. • An innovative policy that limits fossil carbon upstream as it enters commerce, sends consistent, economy-wide price signals on fossil fuels, and recycles most of the revenues to households. • A source of funding for new clean energy investments, mitigation of a broad suite of greenhouse gases, climate change adaptation, and other climate-related priorities. • A policy that safeguards the climate by cutting greenhouse gases in keeping with state-of-the-art science. Office of Senator Maria Cantwell The CLEAR Act Key Points to CLEAR • Gradual reduction of greenhouse gases that meets internationally agreed 2050 goal – 80+% reduction of greenhouse gases relative to 2005 levels – Allows for reasonable transition period, key for industry support • Does not pick technology or special interest winners or losers • Upstream point of regulation, 100% auction – No free allowances, windfalls to historic polluters – Very easy to administer, does not grow government • Monthly dividend checks to every American – Addresses public concern over transition costs • Congress decides annually how to spend $20-$40 billion on mitigation, adaptation, R&D, and transition assistance – Trillions not divided up in a one-time back of the room deal. Office of Senator Maria Cantwell The CLEAR Act Policy Overview • Emissions certainty--upstream cap on fossil carbon achieves broad, economy- wide coverage of fossil carbon. – Carbon cap in conjunction with additional measures to reduce non-CO2 greenhouse gases meet global warming emissions reduction standards: • 20% emissions reduction (from 2005 level) by 2020; • 30% emissions reduction (from 2005 level) by 2025; • 42% emissions reduction (from 2005 level) by 2030; • 83% emissions reduction (from 2005 level) by 2050. • Price certainty--100% auction establishes accurate price signal and protects consumers from industry windfalls. – Price safeguards (floor & ceiling prices) act as insurance against price volatility and excessive costs. Policy does not add to federal deficit • Equal monthly dividends to all individuals residing legally in the U.S. from 75% of auction revenues -- keeps all but the wealthiest 20 to 30% (who use the most energy) whole. • Dedicated energy and climate fund from 25% of auction revenues pays for key climate programs. Office of Senator Maria Cantwell The CLEAR Act Upstream Cap on Fossil Carbon Upstream cap covers all COAL NATURAL GAS PETROLEUM fossil carbon entering Upstream the economy, Mining/ Imports Production Wells/ Production Wells/ completely and (500 companies) Imports Imports equitably (750 natural gas/ (750 natural gas/ petro companies) petro companies) Only a few thousand entities with compliance obligation Midstream ensure minimal and accurate regulation Rail, Barge, Pipelines, Processing, Refining, Mobile Trucking, and Boilers, Furnaces, and Sources, and Power Power Plants Power Plants Plants Price signal passed downstream, leaving all midstream user revenue Consumers neutral Price signal passed through to end Products, consumers who are Electricity, and reimbursed with Gasoline Dividend monthly dividend Office of Senator Maria Cantwell The CLEAR Act Consumer Dividend • Auction revenue averages $120 billion annually • 75% of auction revenues goes to consumers monthly dividend check to offset energy costs – distributed tax-free on an equal per capita basis returned to all individuals residing legally in the U.S. • Annual refunds for a family of four will average $1,100 • 70 to 80% of the American public will incur no net costs, regardless of what state they live in • Several existing government programs validate dividend distribution is logistically possible and very cost-effective Office of Senator Maria Cantwell The CLEAR Act Refund Covers Consumer Costs $300 Nationwide Net Impact by Income Deciles $200 Annual Net Impact Per Individual $100 $0 -$100 Equal per capita dividend† -$200 Dividend + state level CERT funding* -$300 1 2 3 4 5 6 7 8 9 10 † CLEAR distributes 75% of auction revenues on an equal, per-capita basis nationwide. Income Decile * State allocations from the Clean Energy Reinvestment Trust (CERT) Fund (comprised of 25% of Source: Boyce and Riddle, University of total auction revenues) are based on estimates by Boyce and Riddle and divided equally per capita. Massachusetts, Amherst, March 2010. Assumes a $25/ton permit price. Office of Senator Maria Cantwell The CLEAR Act Clean Energy Reinvestment Trust (CERT) • 25% of auction revenue expected to be $30 Billion annually • Money to go through normal appropriations process with built-in oversight functionality • Legislation calls for money to be spent on adaptation, mitigation, R&D, and transition assistance • Allows for money to go to new solutions as they are created Office of Senator Maria Cantwell The CLEAR Act Carbon Leakage The CLEAR Act requires border equalization fees for the “production-process carbon” in imported, energy- intensive commodities as long as they are: • Consistent with all trade agreements to which the United States is a party, including World Trade Organization (WTO) obligations • Applied only to imports from countries without comparable carbon limits or fees • Restricted to industries with demonstrable disadvantages and international exposure Office of Senator Maria Cantwell The CLEAR Act Carbon Sequestration The CLEAR Act also offers robust incentives for the commercialization and adoption of carbon capture and sequestration technologies: • A midstream entity sequestering carbon would be granted carbon shares commensurate with the amount of fossil carbon that is embedded or sequestered, which can then be monetized. • These “bonus” carbon shares are issued in addition to shares auctioned under the CLEAR Act’s upstream cap because this fossil carbon is permanently prevented from release into the atmosphere. • Compensation is provided to manufacturers who purchase fossil fuel feedstocks used to produce goods (like plastics or fertilizer) that permanently embed carbon and prevent its release to the atmosphere. Office of Senator Maria Cantwell The CLEAR Act Carbon “Offsets” The CLEAR Act provides direct funding for a wide variety of agriculture, forestry and energy efficiency projects, but treats them as additional mitigation activities, rather than substitutes for emissions reductions, commonly known as “offsets.” • Treating these projects as additional allows the CLEAR Act to achieve its mitigation targets while avoiding excessive reliance on questionable international agriculture and forestry activities. • By prohibiting the use of offset-like activities to satisfy compliance obligations, the CLEAR Act achieves a true decarbonization of the economy and ensures that emitters change their behaviors and practices to reduce carbon intensity. Office of Senator Maria Cantwell The CLEAR Act Pacific Northwest Carbon Pricing Conference May 21, 2011
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