1. Point of Regulation, Permit Allocation, Uses of Revenue, and Offsets in S. 2191 (Lieberman-Warner) Presentation to the Kansas Energy Council Greenhouse Gas Policy Committee May 13, 2008

2. Stated Purposes (1) to establish the core of a federal program that will reduce United States greenhouse gas emissions substantially enough between 2007 and 2050 to avert the catastrophic impacts of global climate change. (1) to establish the core of a federal program that will reduce United States greenhouse gas emissions substantially enough between 2007 and 2050 to avert the catastrophic impacts of global climate change. (2) to accomplish that purpose while preserving the robust growth of the United States economy and avoiding the imposition of hardship on United States citizens. (2) to accomplish that purpose while preserving the robust growth of the United States economy and avoiding the imposition of hardship on United States citizens.

3. Some Definitions Trigger = 10,000 Carbon Dioxide Equivalents “Carbon dioxide equivalent” = quantity of GHG that EPA determines makes the same contribution to global warming as one metric ton of CO2. Point of Control (covers 75% of U.S. Emissions) Three sectors defined: 1) Electric power sector (emitters) 2) Industrial sector (emitters) 3) Transportation sector (producers/importers)* 4) Non-fuel chemical sector (producers/importers)* * = Assumes no carbon capture and storage, based on end-use emissions from product.

4. Administration 1. EPA will catalog the allowances 1. EPA will catalog the allowances –Create Emission Allowance Accounts for each year, 2012-2050, reducing each year 2012 – 5.2 billion allowances2012 – 5.2 billion allowances 2020 – 4.43 billion allowances2020 – 4.43 billion allowances 2050 – 1.56 billion allowances (70% below 2005 emissions)2050 – 1.56 billion allowances (70% below 2005 emissions) –Each emission allowance will have serial number 2. Carbon Market Efficiency Board 2. Carbon Market Efficiency Board –Created to monitor the market and report to the President and Congress

5. Administration (continued) 3. Climate Change Credit Corporation 3. Climate Change Credit Corporation –Auctions the initial allowances –Redirects proceeds to US Treasury – new programs/funds: Energy Technology Deployment ProgramEnergy Technology Deployment Program Energy Assistance FundEnergy Assistance Fund Climate Change Worker Training FundClimate Change Worker Training Fund The Adaptation FundThe Adaptation Fund The Climate Change and National Security FundThe Climate Change and National Security Fund

6. The Market –Anyone can trade (not just covered facilities) –“Banking” allowed –“Borrowing” allowed up to 15% of given year’s obligation (at 10% interest rate, five year limit) –“Offsets” allowed up to 15% of given year’s obligation –“International credits” allowed up to 15% of given year’s obligation (EPA must certify)

7. Allowance Allocations Annual Auction 18% in 2012, increasing annually to 73% by 2036 to 205018% in 2012, increasing annually to 73% by 2036 to 2050 Reward for Early Action 5% will be given away in 2012 (4% in 2013, 3% in 2014, 2% in 2015, 1% in 2016) to owners and operators who have adopted clean energy/emission reduction strategies since 19945% will be given away in 2012 (4% in 2013, 3% in 2014, 2% in 2015, 1% in 2016) to owners and operators who have adopted clean energy/emission reduction strategies since 1994

8. Allowance Allocations, continued States 5% to all state governments, 90% of which must be used to mitigate impacts on low- income consumers, promote EE, etc.5% to all state governments, 90% of which must be used to mitigate impacts on low- income consumers, promote EE, etc. 1% to reward states with EE building codes for 90% of new buildings1% to reward states with EE building codes for 90% of new buildings 1% to reward states that have enacted policies to “decouple” utility rates1% to reward states that have enacted policies to “decouple” utility rates 2% to reward states that have enacted more stringent carbon protocols2% to reward states that have enacted more stringent carbon protocols

9. Use of Auction Revenue – New Programs Energy Technology Deployment (55%) incentives for renewable electricity technologies, low-carbon technologies, advanced biofuels, CCS, PHEV, high-efficiency consumer productsincentives for renewable electricity technologies, low-carbon technologies, advanced biofuels, CCS, PHEV, high-efficiency consumer products Energy Assistance Funds (20%) 50% to LIHEAP50% to LIHEAP 25% to WAP – Low Income25% to WAP – Low Income 25% to new Rural Energy Assistance Program25% to new Rural Energy Assistance Program

10. Use of Auction Revenue – New Programs (continued) Climate Change and Worker Training Program (5%) Workforce training, education, and placementWorkforce training, education, and placement Adaptation Program for Natural Resources in U.S. and Territories (20%) 65% to the Interior Department (wildlife conservation)65% to the Interior Department (wildlife conservation) 5% to Agriculture Department (U.S. Forest Service)5% to Agriculture Department (U.S. Forest Service) 25% to EPA and Corp of Engineers (ecosystems)25% to EPA and Corp of Engineers (ecosystems) 5% to U.S. Commerce Department (land conservation and coastal management)5% to U.S. Commerce Department (land conservation and coastal management)

11. Use of Auction Revenue – New Programs (continued) The Climate Change and National Security Fund 5% to fund if deemed warranted5% to fund if deemed warranted Taken pro rata from above fundsTaken pro rata from above funds

12. Corey Mohn Corey Mohn Kansas Energy Council Staff Kansas Energy Council Staff Kansas Department of Commerce Kansas Department of Commerce (785) 296-3737 (785) 296-3737 www.kansascommerce.com www.kansascommerce.com