Clear Skies Act of 2003 - Competing Proposals

Competing Proposals

In May 2004, the Energy Information Administration (EIA) released a study comparing the Clear Skies Act with the Clean Air Planning Act of 2003 (S. 843), introduced by Senator Thomas R. Carper, and the Clean Power Act of 2003 (S. 366), introduced by Senator James Jeffords.

The differences between the three bills are summarized as follows:

• Carbon dioxide emissions: While all three bills implement emissions targets on power sector emissions of NO_x, SO₂, and mercury, the Clean Air Planning Act and the Clean Power Act also call for limits on carbon dioxide (CO₂) emissions. Under the Clean Air Planning Act, greenhouse gas emission reductions outside of the power sector, referred to as offsets, can be used to meet the emission targets for CO₂.

• Size of generators covered: All three bills cover emissions from larger generators that generate power for sale, including central station generators and generators at customer sites that sell power they do not use for their own needs. The Clear Skies and Clean Air Planning Acts cover generating facilities 25 megawatts and larger, while the Clean Power Act covers facilities 15 megawatts and larger. The bills have differing provisions regarding the coverage of combined heat and power facilities that generate some power for sale.

• Emissions caps: The bills generally rely on emissions cap and trade programs to achieve the required reductions. Under such programs, allowances will be allocated and covered generators will have to submit one allowance for each unit of emissions they produce. However, for mercury, the Clean Air Planning Act combines a minimum removal target for all plants with an emissions cap, and the Clean Power Act specifies a maximum emissions rate for all facilities and allows no trading of mercury allowances. The Clear Skies Act contains a "safety valve" feature that caps the price that power companies would have to pay for mercury ($2,187.50 per ounce or $35,000 per pound), SO2 ($4,000 per ton), and NOx ($4,000 per ton) allowances. Should one or more of these "safety valves" be triggered, the corresponding cap on emissions would effectively be relaxed.

• Emissions allocation: Under the Clear Skies Act, emission allowances are to be allocated based on historical fuel consumption, what is often referred to as "grandfathering". Under the Clean Air Planning Act, a grandfathering approach is used to allocate emission allowances for SO₂, but allowances for NOx, mercury, and CO₂, are allocated using an output-based scheme. Under this approach, referred to as a generation performance standard (GPS), generators are given allowances for each unit of electricity they generate. The number of allowances allocated for each unit of generation changes each year as the total generation from covered sources changes. The use of a GPS dampens the electricity price impacts of the bill but raises overall compliance costs.

• Control technology: In addition to the emission caps, the Clean Power Act also requires that all plants have the best available control technology (BACT) beginning in 2014 or when they reach 40 years of age, whichever comes later. This provision, often referred to as a "birthday" provision, requires older plants to add controls even if the total emissions of covered facilities are below the emission caps.