Office of Senator Maria Cantwell The CLEAR Act Carbon Limits and Energy for America’s Renewal

Office of Senator Maria Cantwell

The CLEAR Act

Carbon Limits and Energy for America’s Renewal

Office of Senator Maria Cantwell The CLEAR Act

What is the CLEAR Act?

• A simple, market-based way to reduce CO2 emissions while protecting household incomes.

• An innovative policy that limits fossil carbon 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.


Policy Overview• Upstream cap on fossil carbon achieves broad, economy-wide

coverage of fossil carbon.

• 100% auction establishes a robust price signal and protects consumers from industry windfalls.

• Equal dividends to all legal U.S. residents from 75% of auction revenues keeps 70 to 80% of income earners whole.

• Dedicated energy and climate fund from 25% of auction revenues pays for key climate programs.

• Price safeguards act as insurance against price volatility and excessive costs.


Upstream Cap on Fossil Carbon

Upstream cap covers all fossil carbon entering the economy, completely and equitably

Price signal passed downstream, leaving all midstream user revenue neutral

Price signal passed through to end consumers who are reimbursed with dividend

COAL NATURAL GAS PETROLEUM

Mining/ Imports

(500 companies)

Production Wells/ Imports

(750 natural gas/ petro companies)

Production Wells/ Imports

(750 natural gas/ petro companies)

Rail, Barge, Trucking, and Power Plants

Pipelines, Processing,

Boilers, Furnaces, and Power Plants

Refining, Mobile Sources, and Power Plants

Products, Electricity, and

Gasoline

Upstream

Midstream

Consumers

Dividend


Upstream Cap on Fossil Carbon

0

1

2

3

4

5

6

7

8

2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Year

ly C

O2

Em

issi

on

s (

Gig

ato

ns p

er

year)

Science-based 2050 Target

No Policy

CLEAR Act

Waxman-Markey Goals

EPA Analysis of Waxman-Markey (ADAGE Scenario 2)

Van Hollen (H.R. 1862)

• Cap starts slowly and accelerates over time• Emissions still decline by 80% of 2005 levels before 2050


0

20

40

60

80

100

120

140

160

180

200

2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Pe

rmit

pri

ces p

er

ton

CO

2 (i

n $

20

05)

Reference

Advanced Nuclear and Carbon Sequestration

Advanced Renewables and Efficiency

Comprehensive Advanced Technology

EPA Analysis of Waxman-Markey (IGEM Scn. 7 No Int'l Offsets)

Price Safeguards

Price Safeguards

• Floor ($7) and ceiling ($21) prices rise annually at 6% real rate.• Carbon share prices always remain within 50% of mean.• All valid bids are accommodated at the safety valve price.• All revenues from carbon share sales in excess of the cap at the ceiling price are

directed to the CERT Fund, explicitly for non-CO2 greenhouse gas mitigation


-1%

0%

1%

2%

3%

4%

5%

6%

7%

Income Decile

Per

cen

t o

f In

com

e

U.S. average

Source: Boyce and Riddle (2009), assumes 80% refund, $25/ton permit price.

Net Impact of Cap and Refund

1 2 43 65 7 1098

Refund Covers Costs

Nationally, only the top two income deciles receive a very marginal cost after the refund.

• 75% of auction revenues distributed on an equal per capita basis returned tax-free each month to all legal U.S. residents

• Several existing programs prove this is logistically possible


Energy and Climate Trust FundThe Clean Energy Reinvestment Trust (CERT) fund accelerates and

eases the transition to a green economy through:

• Targeted and region-specific transition assistance to workers, communities, industries, and small businesses of the United States experiencing the greatest economic dislocations due to efforts to reduce carbon emissions and address climate change and ocean acidification;

• Targeted and region-specific compensation for early retirement of carbon-intensive facilities, machinery, or related assets in the United States that are stranded by new market dynamics;

• Targeted relief for energy-intensive industries, including agriculture, that export their goods or products to countries that do not have similar restrictions on fossil fuels;

• Mitigation of greenhouse gases other than carbon dioxide from fossil carbon and non-greenhouse substances that exacerbate or accelerate climate change (such as black carbon);


Energy and Climate Trust Fund (continued)

• Cost-effective domestic and international projects that verifiably reduce, avoid, or sequester greenhouse gas emissions, such as agriculture, forestry, or other land use practices;

• Investments in low and no carbon energy and fuels research, development, and deployment activities;

• Projects or initiatives that verifiably increase energy efficiency or energy productivity;• Projects or initiatives that support residential fuel switching, particularly home heating oil;• Projects that verifiably increase energy efficiency and otherwise might not be undertaken

without assistance;• Weatherization and energy efficiency improvements of low-income and public buildings;• Funding for climate change mitigation and adaptation projects, activities and research to

increase the resilience of human populations and communities, fish and wildlife, and managed and unmanaged terrestrial, aquatic and marine ecosystems;

• Cost-effective projects that provide adaptation services in areas and countries in which climate change or ocean acidification impacts are likely to be most severe;

• Ensuring that the program does not contribute to the budget deficit of the Federal Government.


Predictable Carbon Price Signal Greatly Diversifies America’s Energy Mix

Energy portfolios under four technology scenarios, with and without the CLEAR Act


Impact on Foreign Oil DependencePrimary Energy in 2050 under CLEAR Act (GCAM) and Waxman-Markey (ADAGE)

0

20

40

60

80

100

120

CLEAR ActReference

Technology

CLEAR ActAdvanced

Nuclear andCarbon

Sequestration

CLEAR ActAdvanced

Renewables andEfficiency

CLEAR ActComprehensive

Adv. Technology

EPA Analysis ofWaxman-Markey

Pri

mar

y E

nerg

y C

onsu

mpt

ion

(in E

xajo

ules

)

Energy Reduction

Renewable Elec.

Hydro

Nuclear

Oil w/ ccs

Petroleum

Gas w/ ccs

Natural Gas

Coal w/ CCS

Coal w/o CCS

Under the CLEAR Act, petroleum use decreases from 33.8-36.4 EJ in 2020 to 11.9-26.6 EJ in 2050.

Under the House-passed bill, petroleum use increases from 38.9 EJ in 2020 to 39.8 EJ in 2050.


Carbon Leakage

The CLEAR Act requires border equalization fees for the “production-process carbon” in imported, energy-intensive commodities as long as they are:

• Compliant with the World Trade Organization (WTO).

• Restricted to industries with demonstrable disadvantages.

• Applied only to imports from countries without comparable carbon controls.

Documents

Office of Senator Maria Cantwell The CLEAR Act Carbon Limits and Energy for America’s Renewal