Jeff Bingaman's climate bill has industry backing. Credit: A. WONG/GETTY

Legislation to cut carbon emissions has traditionally received little support in corporate boardrooms and union halls, but this may soon change. Several large utility companies are among those backing a new proposal offered in the US Congress on 11 July by Senators Jeff Bingaman (Democrat, New Mexico) and Arlen Specter (Republican, Pennsylvania).

The Bingaman–Specter proposal is the latest of several major climate bills now under consideration by Congress (see table). Some observers see this one as setting the tone for a compromise package aiming to bring together competing interests to fight climate change. The 'Low Carbon Economy Act' would require the United States to reduce its carbon output to 2006 levels by 2020 and to 1990 levels by 2030. (The Kyoto Protocol on climate change, which the United States has not ratified, calls for cuts below 1990 levels by 2012.) Further reductions, to at least 60% below 2006 levels by 2050, are contingent upon cuts being made by other countries.

Table 1 Climate bills in congress
Full size table

Companies such as Duke Energy, one of the nation's largest utility suppliers, back the new bill because it includes a provision allowing carbon emitters to buy extra allowances at a set cost. This would provide a 'safety valve', ensuring a stable price for emissions, and keeping the companies' future costs at a foreseeable level.

The bill also has the support of the union group AFL-CIO, which has traditionally challenged climate-control legislation on the grounds that it would drive jobs overseas, and key Republican legislators — such as Lisa Murkowski and Ted Stevens, both senators from Alaska — who have been sceptical of other climate proposals. “The other bills are more aggressive and less realistic,” says Frank Maisano, a spokesman in Washington DC for Bracewell & Giuliani, a law firm representing many of the fossil-fuel industries. “They're all show and no go.”

But environmental advocates say that pricing extra allowances at a set cost will weaken the nascent American carbon market. “I think it's unlikely to achieve absolute reduction if the safety valve undercuts the programme,” says Vicki Arroyo, director of policy analysis at the Pew Center on Global Climate Change in Arlington, Virginia. “It's more like an escape hatch.”

Under the bill, 53% of carbon allowances would be handed out to utilities, manufacturers and other carbon-producing industries. From 2017 on, an increasing proportion of allowances would be auctioned off, generating billions of dollars for green technology and climate-change adaptation. The safety valve would start at $12 per tonne of carbon dioxide emitted, and would increase each year at 5% above inflation.

The Bingaman–Specter bill also packs in several features that don't appear in other proposed legislation, says Jonathan Pershing, a climate expert at the World Resources Institute, an environmental think-tank in Washington DC. It provides additional allowances for companies that invest in carbon capture and storage, and spells out how the government will divvy out carbon allowances, including a share for states to distribute. “None of the other bills has this,” Pershing says.

The major sticking point for environmental groups is the bill's safety valve. If the market price for carbon exceeds the safety valve, emitters can instead buy allowances — essentially a carbon tax. The cost of credits is likely to surpass the limit early on and disrupt the carbon market, says Arroyo.

Such a feature would also complicate US participation in an international carbon-trading market. European governments are unlikely to allow companies to purchase American offsets directly, but a less formal link-up based on options trading could emerge, says Pershing. The European carbon market, which opened in 2005, has got off to a shaky start. Prices for a tonne of carbon plummeted from €31 (US$43) to €12 in April 2006, when leaked emissions data revealed that several nations hadn't used up their allotted credits.

Jeff Holmstead, former head of the Environmental Protection Agency's Office of Air and Radiation and now also with Bracewell & Giuliani, says a safety valve is needed because technologies to make deep cuts in carbon emissions are not yet available.

Larger questions about effects on the domestic economy and the likely migration of carbon-producing industries abroad mean climate legislation has no prospect of passing soon, Holmstead argues. He is confident that there will be insufficient votes supporting it in either the House of Representatives or the Senate “until there's a much better understanding of what it will mean”.

Those pushing for a strong climate bill are more optimistic. Congress is likely to act soon, says Pershing, given the growing pressure from the US public to address global warming. “The question is not whether, but when,” he says.

A subcommittee led by Senators Joe Lieberman (Independent, Connecticut) and John Warner (Republican, Virginia) is expected to work out a compromise climate bill that is likely to reach the Senate floor in coming months.