Canada: Senators Kerry and Lieberman Release 'American Power Act' Bill

Last Updated: May 19 2010
Article by John Goetz

On May 12, 2010, Senators Kerry and Lieberman released their long awaited climate and energy security bill, the American Power Act Bill. Senator Lindsay Graham was a co-sponsor of this bill prior to withdrawing his participation a few weeks ago, primarily for political reasons not related to the content of the bill. Last week, Graham cited the Gulf oil spill as another reason not to move ahead with the bill at this time. Notwithstanding this, the bill has now been released for review by the Senate. The bill will need 60 votes in order to pass in the Senate, which will be difficult to muster without the support of all 59 Democrat senators and at least one Republican senator. Support by some Democrat senators for a climate and energy bill has been in question due to the potential impact of the bill on certain coal state economies and states opposing offshore drilling. However, the draft bill attempts to address some of these issues.

Highlights of the Bill

Since Canada's federal government has stated that it will follow the path of the U.S. in crafting its climate legislation, including the inclusion and design of a cap and trade system or similar market mechanism for reducing greenhouse gas ("GHG") emissions, the American Power Act Bill will have a major impact on Canada if it passes. The provisions highlighted here pertain largely to those that will most directly impact Canadian business and Canada's future climate change legislation.

Emission Reductions

The bill calls for reductions in greenhouse gas emissions from covered entities from 2005 levels as follows:

  • 4.75% by 2013
  • 17% by 2020
  • 58% by 2030
  • 83% by 2050

The covered entities are large stationary sources in certain sectors, emitting more than 25,000 tonnes of CO2e annually. (Note that this is significantly lower than the current Alberta threshold of 100,000 tonnes and the previously proposed federal threshold of 50,000 tonnes.) It is estimated this threshold will mean the program will apply to 7,500 factories and power plants. The emissions reduction requirements will begin with utilities in 2013 and manufacturing will commence in 2016. Producers and importers of fuels will be subject to an emissions cap, but will not be part of the cap and trade carbon market. Instead, they will be required to purchase allowances at a fixed price on a quarterly basis that have been set aside for them. It is not clear what the "fixed price" will be, but it is expected to be based on the price established by the auctions. The EPA will be required to continue regulating the reduction of emissions from transportation.

Cap and Trade System

The bill provides for capping of emissions from the utilities and manufacturing sectors with the distribution of allowances for these sectors equivalent to the number of tonnes of GHG emissions allowed for each year. It is not certain what portion of allowances will be auctioned and what portion will be given away for free to emitters. However, allowances will be given away free to certain energy-intensive and trade exposed industries to offset their cost of compliance and allow them to remain competitive while rewarding efficiency investments. The upstream oil and gas sector will not be part of the carbon market, but as mentioned above, producers and importers of refined fuel products will be required to purchase allowances.

The bill also provides that states will no longer have the jurisdiction to legislate their own cap and trade programs and that any such programs will be replaced by the provisions of this bill. Notwithstanding this restriction, states can still enforce stricter targets for emission reductions than are contained in the bill.


Offsets will be included in the cap and trade system and will be generated from eligible projects primarily in agricultural, grassland and rangeland management and sequestration practices, forestry activities and land use changes, and capture of fugitive methane emissions from coal mines, landfills and oil and gas distribution facilities.

Price Collar

The bill establishes a floor and ceiling price for allowances of $12.00 and $25.00, respectively, beginning in 2013 with a provision for an annual increase of 3% on the floor and 5% on the ceiling, plus inflation.

Border Adjustments

The bill provides for a border adjustment mechanism that will require imports from countries that have not taken action to limit emissions to be subject to an adjustment amount at the border to prevent carbon leakage. Presumably, this will also apply where an exporting country's emission reduction standards are not as stringent as those in the U.S. This is one of the reasons that the Government of Canada has been waiting to introduce its climate change legislation, which will have to be at least as stringent as that of the U.S. to avoid this tariff.

Market Participation

To mitigate market manipulation and volatility, only entities with compliance obligations and a limited number of market makers will be allowed to participate in the auctions and the primary cash market. Jurisdiction over trading of greenhouse gas instruments will be under the Commodity Futures Trading Commission and offexchange trades of futures instruments will be prohibited. Trading of greenhouse gas instruments on the secondary market will be restricted to trading conducted on an exchange and cleared through a greenhouse gas clearing agency. Only regulated greenhouse gas market participants will be allowed to trade and real time publication of trading information will be required.

Carbon Capture and Sequestration

The bill calls for the creation of special funding programs to provide incentives to encourage research and development of CCS technologies and will provide allowances for commercial CCS deployment projects based on the volume of CO2e permanently sequestered.

Agricultural Soil Sequestration

Farmers will be exempt from the obligation to reduce GHG emissions but will be allowed to participate in the offset program by reducing emissions in their farming operations. This is expected to be a multi-billion dollar revenue source to farmers and a key source of offsets for the offset system.

Clean Energy and Nuclear

There are a number of financial incentives and funding sources for research, development and deployment of clean energy and nuclear projects, including tax incentives, accelerated depreciation and loan guarantees. Pilot projects for the use of electric-powered heavy and light-duty vehicles and incentives for the use of cleaner natural gas in heavy-duty vehicle fleets are also contemplated in the bill.

Offshore Drilling

Offshore drilling was initially added to this bill as a political compromise to gain support from certain senators for the bill. The bill recognizes that offshore drilling is required to achieve greater energy independence during the transition period to clean energy. After the recent Gulf oil spill, the bill was changed to address the related environmental issues that became front and centre. The bill still contemplates an expansion in offshore drilling, but not until investigations have been completed and safeguards put in place to ensure that a spill like the Deep Horizon accident does not happen again. The bill provides for the right of coastal states to opt-out of drilling up to 75 miles from their shores. Nearby states can veto drilling if they stand to suffer significant adverse impacts in the event of an accident. It will be interesting to see how nearby a state has to be to veto drilling based on the fear of a major oil spill (which is now and likely always has been, reasonably foreseeable). At the same time, coastal states that do allow drilling will receive 37.5% of lease and royalty revenues. 12.5% of federal royalties will also be directed to a land and water conservation fund.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
25 Nov 2016, Seminar, Toronto, Canada

On Thursday, September 22, 2016, Dentons hosted a panel discussion about the management of liabilities and risks associated with environmental crises, including potential liabilities for directors and officers and provided insight into risk and liability techniques associated with environmental crisis management.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.