Washington, DC – With Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) set to introduce their much awaited global warming legislation later this week, the Institute for Energy Research compiled and defined a list of terms expected to be included.

It is important to remember that the principal behind the KGL approach is identical to that of the House-passed Waxman-Markey bill: reduce carbon emissions by artificially increasing the price of coal, oil and natural gas.

Cap-and-trade: Everyone now knows that cap-and-trade is a tax on energy. Since this term is now toxic these three senators have tried to all but eliminate it from their vernacular. Sen. Kerry told reporters “I don’t know what ‘cap and trade’ means. I don’t think the average American does…This is not a cap-and-trade bill, it’s a pollution reduction bill.”

Cap-and-trade, or whatever the Senators want to call it, is nothing more than a tax on energy. Period. And while KGL does not advocate for the exact same cap-and-trade scheme as Waxman-Markey, KGL will use this mechanism to regulate electricity generation, hospitals, schools, nursing homes, sports arenas and yes, even dry cleaners. What does this mean for you, the consumer? Well, that’s anyone’s guess, as the authors have refused to share the legislative language with the American people. But we do know this: if Congress implements policies that increase the price of coal, oil and natural gas, consumers will end up with less money in their pockets.

Renewable Electricity Standard: A renewable electricity “standard” is a mandate to force Americans to use expensive, unreliable, intermittent forms of electricity. While some may characterize the description of these sources as unfair, it is a fact that solar power and wind power are more expensive generating technologies than their more efficient alternatives. And while the renewable industry is quick to ask for—and receive—handouts from Uncle Sam, those billions are not enough. Now they are lobbying for guaranteed market share. There is only one other industry (that we’re aware of) that has guaranteed market share: corn-based ethanol. And we all know how well that’s working. Think about it this way; the U.S. Government bailed out Detroit automakers. In fact, they still hold a 61 percent stake in General Motors. Now, imagine if policymakers on Capitol Hill mandated that the public purchase a GM vehicle. Not exactly a good policy for consumers.

Linked Fee: A linked fee is a Washington code word for a gas tax. The linked fee—thought to be the cornerstone of this legislation—applies a fee on gasoline at the pump, as opposed to inside the refinery gate. The fee was a bargaining tool used to gain the support of a few big oil companies. What KGL are not telling you is that it’s a gas tax – and 71 percent of Americans oppose an increase in the gas tax. And while it is rumored that this exact proposal may have been shelved, rest assured, any proposal to regulate carbon dioxide emissions from a car’s tailpipe will increase the price at the pump. In essence, one way or another, a gas tax will be included in this proposal.

Offshore Drilling/Revenue Sharing: Today, the entire Outer Continental Shelf (OCS) is open for new exploration and development. New legislation is not necessary. The holdup is the Administration’s decision to slow walk any new energy exploration. But, in the wake of the Gulf of Mexico oil spill, there is much debate around whether KGL will include any new provisions to increase domestic exploration and production of oil and natural gas offshore. This provision was drafted by Sen. Graham in an attempt to get the oil and natural gas industry on board to support, or at least remain neutral on the bill. But the reality is this: there is no amount of offshore drilling language that could make this bill worth supporting. Fact is, when you seek to regulate an energy source that will increase the cost to consumers on the one hand, and give industry a carrot on the other, the consumer loses. As for revenue sharing, it’s a must-have in any legislation that seeks to increase domestic production, but in this context is meaningless because of the toxic elements contained in the package as a whole.

Price Collar: A price collar is the maximum and minimum price that the government will auction the right to emit carbon dioxide. A price collar is Goldilocks policy for carbon dioxide prices—not too high and not too low, but just right. The intended purpose of the price collar is to minimize price volatility and not inflict too much harm too fast on trade-intensive industries such as manufacturing, petrochemical refining and agriculture. A price collar may be more efficient than just a price ceiling, but it will strangle the economy nevertheless, as the point of the collar is to artificially raise the price of energy.

Preempting EPA and State Carbon Dioxide Regulation: This bill is said to include language to preempt the Environmental Protection Agency (EPA) from regulating carbon dioxide using the Clean Air Act and to preempt individual states from regulating carbon dioxide. This is a worthy and laudable goal, but until we see the bill, we will not know if the bill’s language will achieve real preemption of EPA’s regulatory authority. For example, the Waxman-Markey bill preempted EPA from regulating greenhouse gases using the Clean Air Act, but it did not forbid EPA from using the Clean Water Act or the National Environmental Policy Act (NEPA). Furthermore, it did not forbid the Fish and Wildlife Service from using the Endangered Species Act to regulate greenhouse gases. In other words, while Waxman-Markey had preemption language, it is not clear that it would actually preempt much regulation.

The three senators involved in crafting this legislation were quick to share their details with big business, the utility industry, and selected environmental groups, but their behind the scenes negotiating left one important interest group out of the equation: the American people. In fact, our affiliate, the American Energy Alliance had to file a freedom of information request with the EPA and Energy Information Administration (EIA) to obtain the details of the legislation. To date, these requests have been acknowledged by the respective agencies, but no response has been issued.


May 10, 2010
Patrick Creighton: 202.621.2947
Laura Henderson: 202.621.2951

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