Cap and Trade Coming in April- Gasoline to go up 27 cent gallon

A compromise climate and energy bill being drawn up by US Senators will see the light of day on Monday week, April 26, sources have told Reuters. Democrat Senator John Kerry, Republican Senator Lindsey Graham and independent Senator Joseph Lieberman have been working hard to draft a bill that could win the cross-party support necessary to win Senate approval. Their bill would be more pragmatic than the Waxman-Markey bill passed in the House last year, the main cap-and-trade features of which have since failed to find support in the Senate.

The Senators have kept close counsel on content of the bill, but it appears the thrust of emissions reduction elements would be a cap-and-trade scheme for the power sector only first off, and a carbon tax on the oil and gas industry linked to the cap-and-trade price. Other high-emitting sectors might be included in cap and trade at a later date.

It is expected that the bill would keep a national target to cut greenhouse emissions by 17 per cent below 2005 levels by 2020, contained in the House bill and tabled at the UN climate talks by President Ob ama. Latest speculation suggests that the bill would also prohibit the Environmental Protection Agency from regulating carbon emissions, a significant carrot offered to Republicans who have rallied in vehement opposition to  EPA plans for such rules. The new bill could also require all state based schemes, existing and planned, to be terminated.

Analysis by Carbon research firm Point Carbon estimates that, based broadly on the above scenario, a successful bill would produce a carbon price averaging $31 per tonne from 2013 to 2020 and add 27 cents to the retail price of a gallon of US gasoline. Its research finds that the carbon price could be cut to $18 a tonne during the period if the power sector alone was used to meet the national target and asked to cut emissions by 27 per cent.

Leading voices in the Senate are also considering a new tax on gasoline, as part of this bills effort to reduce America's consumption of carbon based fuels.  The tax, which according to early estimates would be in the range of 15 cents a gallon, was conceived with the input of several oil companies, including Shell, BP and Conoco Phillips, and is being championed by Republican Sen. Lindsey Graham of South Carolina.