Manufacturers Worse Off Under Kerry-Boxer Climate Bill Emissions Allocation Scheme

On Friday, October 23rd, the EPA released its scoring of the Clean Energy Jobs and American Power Act (S. 1733), also referred to as the Kerry-Boxer Climate Bill. The EPA found that the costs of Kerry-Boxer do not differ greatly from the Waxman-Markey climate bill. Both bills are expected to cost around $100 per household. However, this analysis does not fully account for energy efficiency provisions, which ACEEE estimates could save as much as $36 billion by 2030.

On the same day, Senator Boxer released the Chairman's Mark of the Kerry-Boxer bill. This version filled in some of the major sections left out of the original bill. One of the most anticipated sections was the greenhouse gas emissions allocations. The percentage allocations for "energy-intensive, trade-exposed" (EITE) industries are almost the same as the House-passed Waxman-Markey bill, except the Senate bill allocates slightly more allowances in the early years (4% instead of 2% in 2012 and 2013). However, there are about 1% fewer allocations in the Senate bill because it has a slightly stricter emissions cap. Much more importantly, about 20% of lifetime allowances are set aside for other purposes before the rest of the allocations are divvied up. Even though EITE industries receive more allowances in the first two years, the Senate bill will result in about 15% less allowances than the House bill. The Senate bill gives about 6% of all allowances over the life of the bill to EITE industries, while the House bill gives about 8%.

Both the Waxman-Markey and the Kerry-Boxer bills compel the program administrator to determine eligible facilities based on the following criteria: Any manufacturing facility that has either an Energy Intensity or a Greenhouse Gas Intensity of at least 5% AND has a Trade Intensity of at least 15% is eligible. Additionally, any facility has an Energy Intensity or a Greenhouse Gas Intensity of at least 20% is also eligible. It should be noted that only about 1.3% of US manufacturing facilities would be directly affected by a carbon cap.

Definitions:

  • Energy Intensity: $energy / $shipments;
  • Greenhous Gas Intensity: (20 * Tonnes-CO2e) / $shipments;
  • Trade Instensity: ($imports + $exports) / ($imports + $shipments) of the sector;

However, there are still issues with administrability, particularly data collection, that have yet to be properly addressed. In many cases, data for each industry (at the six digit NAICS code level) is not readily available, and current estimates often use surveys such as the Manufacturing Energy Consumption Survey, which are not designed to provide information with the precision required.