**[Potential Specter Amendments]{.smallcaps}**

**Emissions Caps/Targets Amendment -** Substitute the Bingaman-Specter
(S. 1766) emissions limits in place of the Lieberman-Warner limits.

  ------------------------------------ ----------------------------------
  **Lieberman-Warner**                 **Bingaman-Specter**

  2012 -- cap at 2005 level            2012 -- cap at 2012 level

  2020 -- 15% below 2005 (1990 levels) 2020 -- cap at 2006 level

  2030 -- 30% below 2005               2030 -- cap at 1990 level

  2050 -- 70% below 2005               2050 -- ≥60% below 2006 contingent
                                       on international effort
  ------------------------------------ ----------------------------------

**Cost-Containment Safety-Valve Amendment -** Include the so-called
"safety valve" or Technology Accelerator Mechanism that was included in
the Bingaman-Specter bill; That provision states that if the price for
an allowance for each ton of greenhouse gas (Carbon Dioxide equivalent)
being traded on the open market reaches a certain level, then regulated
entities have the option of purchasing additional allowances directly
from the government at a set price; Specifically, we set the price at
\$12 per ton, rising 5% over inflation annually.

**International Competitiveness Amendment --** Address the standard used
to determine if our trading partners are taking "comparable action";
Restrict an Administration's ability to simply waive requirements on
importers; Bring the compliance date in line with the start of the
program (ie. 2012, rather than 2014 in the new version -- changed from
2020 in the original); Revise provisions added for "downstream" products
that may ironically result in exempting the "upstream" inputs like
steel; include all countries, not just large emitters; and equalize the
ability of U.S. and foreign entities to purchase international
allowances to meet the requirements.

**Process Gas Emissions Amendment** - Clarify that process gases for
which there is no technological alternative will not be counted in a
company's annual requirement to submit emissions allowances.

**Pathway to the Future for Coal Amendment** -- Potentially including
provisions: Providing technology funding and incentives; Adding a carbon
dioxide storage liability framework; Adding a safety-valve; Aligning
emissions caps/targets with technology; Improving allocations;
Addressing duplicative State programs; and other issues.

**Emissions Caps/Targets Amendment**

-   As I stated yesterday, I have serious concerns about the stringency
    of the emissions reductions in the Lieberman-Warner "Climate
    Security Act."

-   There is great concern in the industrial, electric, and general
    business sectors that these emissions levels are unattainable
    without serious demand destruction in the form of lost jobs and
    production in the U.S. that would result from higher cost.

-   If we do not set the emissions caps at a reasonable level, the
    supply and demand situation set up under a cap-and-trade program
    will impose high costs by definition.

-   I intend to propose an amendment to substitute the Bingaman-Specter
    (S. 1766) emissions limits in place of the Lieberman-Warner limits.

-   This will more closely align technology development with the
    emissions reduction targets.

-   In my view, the most important thing our nation can do is start a
    mandatory climate change reduction program as soon as possible.

-   If we wait until there is consensus among important stakeholders
    from both sides of the equation, we will lose another year or two or
    three that we frankly do not have.

Emissions Targets/Caps

  ------------------------------------ ----------------------------------
  Lieberman-Warner                     Bingaman-Specter

  2012 -- cap at 2005 level            2012 -- cap at 2012 level

  2020 -- 15% below 2005 (1990 levels) 2020 -- cap at 2006 level

  2030 -- 30% below 2005               2030 -- cap at 1990 level

  2050 -- 70% below 2005               2050 -- ≥60% below 2006 contingent
                                       on international effort
  ------------------------------------ ----------------------------------

**Cost-Containment Safety-Valve Amendment**

-   Senator Bingaman and I worked very hard to find the right balance
    between starting the U.S. on an emissions reduction path, but
    protecting the economy;

-   We are talking about taking unilateral action on a global problem --
    reducing concentrations of greenhouse gases in the atmosphere;

-   We cannot solve this problem alone and until a comprehensive
    international agreement is in place, the U.S. remains at risk of
    competitive disadvantages.

-   If some proponents of climate change legislation are correct in
    their predictions, the cost of domestic action on the problem will
    not be high.

-   However, if costs are above what Congress determines in
    unacceptable, there must be an adequate mechanism to keep the
    program in line with what the U.S. economy can handle;

-   I intend to offer an amendment to include the so-called "safety
    valve" or Technology Accelerator Mechanism that was included in the
    Bingaman-Specter bill;

-   That provision states that if the price for an allowance for each
    ton of greenhouse gas (Carbon Dioxide equivalent) being traded on
    the open market reaches a certain level, then regulated entities
    have the option of purchasing additional allowances directly from
    the government at a set price;

-   Specifically, we set the price at \$12 per ton, rising 5% over
    inflation annually;

-   This protects the economy, while still sending the necessary price
    signal to industry that there is an escalating price to carbon that
    must be factored in investment decisions;

-   I am open to a debate about the appropriate level at which to set
    such a safety-valve;

-   Unfortunately, opponents of this provision have flatly attacked it
    without addressing the question of what an appropriate price trigger
    would be;

-   I was very glad to hear Chairman Boxer state on the Senate floor
    yesterday thanking Senator Bingaman and I for our proposal on this
    subject. She described it as "what I thought was a very important
    off ramp. The one thing I didn't agree with them on is the price
    they picked for the price of carbon."

-   I hope this is an indication that we can finally have a legitimate
    debate about this important protection for the U.S. economy and
    consumers.

-   While Senator Boxer inserted a new "cost containment auction," I
    believe the new cost containment provisions require extensive review
    and a true safety-valve should be added.

-   Senator Warner provided leadership in adding provisions to empower
    the President to alter the program, but I fear this still provides
    too much discretion and would potentially be used
    [after]{.underline} adverse effects have already happened.

**International Competitiveness Amendment**

-   Senator Bingaman and I included key international provisions in our
    bill. These provisions were based on a proposal from American
    Electric Power (AEP) and the International Brotherhood of Electrical
    Workers (IBEW).

-   Senators Lieberman and Warner included our provisions in their
    legislation as well;

-   The purpose of these provisions is to ensure that greenhouse gas
    emissions occurring outside the U.S. do not undermine our efforts to
    address global climate change and we further want to encourage
    effective international action.

-   As first introduced, if eight years after the enactment of the U.S.
    program, it is determined that a given major emitting nation has not
    taken comparable action, the President at that time is authorized to
    require that importers of greenhouse-gas-intensive manufactured
    products (iron, steel, aluminum, cement, glass, or paper) from that
    nation submit emissions credits of a value equivalent to that of the
    credits that the U.S. system effectively requires of domestic
    manufacturers.

-   I testified before the Senate Finance Committee on February 14^th^
    of this year on these provisions. It is my view that since the
    provisions treat imports the same as domestic products, I believe
    they are compliant with GATT and would survive a WTO challenge.

-   Now, I understand that modifications of this proposal are found in
    the Boxer substitute.

-   As my staff and various industries review the language, there remain
    concerns that the provisions may still require changes to ensure
    their effectiveness;

-   Specifically, I am considering offering an amendment to:

    -   Address the standard used to determine if our trading partners
        are taking "comparable action";

    -   Restrict an Administration's ability to simply waive
        requirements on importers;

    -   Bring the compliance date in line with the start of the program
        (ie. 2012, rather than 2014 in the new version -- changed from
        2020 in the original);

    -   Revise provisions added for "downstream" products that may
        ironically result in exempting the "upstream" inputs like steel;
        include all countries, not just large emitters; and equalize the
        ability of U.S. and foreign entities to purchase international
        allowances to meet the requirements.

**Process Gas Emissions Amendment**

-   It is my understanding that some emissions resulting from production
    of energy-intensive manufacturers like steel and cement would be
    exempted because there is no feasible technological alternative;

-   For example, the use of carbon is irreplaceable to the processes and
    the metallurgical reactions necessary to produce virgin steel.
    Carbon, in the form of coal or coke, is used as a reducing agent to
    strip oxygen molecules from iron ore, producing iron, the basic
    building block of steel, and carbon dioxide. Without carbon there
    can be no steel.

-   Without this exemption, given current technology, the only way to
    substantially reduce emissions in the integrated steel industry is
    to reduce production and employment.

-   Cooperative efforts are underway between the steel industry and the
    U.S. Department of Energy to find technologies to produce steel with
    far less carbon emissions, but they are far from commercial
    viability.

-   I intend to offer an amendment to clarify that process gases for
    which there is no technological alternative will not be counted in a
    company's annual requirement to submit emissions allowances.

-   This exemption will only impact a very small percentage of U.S.
    emissions, but will protect an essential industry that will play a
    major role in the energy sector expansion that would result upon
    passage of this bill or even in its absence given rising energy
    demand.

**Pathway to the Future for Coal Amendment**

-   I am considering offering an amendment to address the serious
    shortcomings in the Lieberman-Warner bill in terms of providing a
    pathway to the future for coal;

-   I am concerned that the bill does not provide sufficient funding or
    incentives for carbon capture and storage (CCS) and advanced coal
    technologies;

-   It is my understanding that the Boxer substitute replaces the
    original Lieberman-Warner advanced coal research program with a
    "kick-start program" that dramatically cuts carbon capture and
    storage technology funding. According to the National Mining
    Association, the substitute provides 85% less funding through 2030
    for advanced coal and sequestration development, and eliminates all
    funding for carbon storage demonstration projects.

-   Without adequate funding for these priorities, the result is likely
    to be severe reductions in U.S. coal use -- America's most abundant
    energy resource.

-   Further, the substitute dramatically reduces the number and rate of
    bonus allowances for CCS deployment from the previous
    Lieberman-Warner bill. The Bingaman-Specter bill was the first to
    create this incentive for early deployment of carbon capture and
    storage technologies. I am told the substitute reduces CCS bonus
    allowances 19% through 2030 compared to levels in Lieberman-Warner
    which were already insufficient.

-   Broadly, the Boxer substitute fails to harmonize the timeline for
    emission reductions with the availability of commercially deployed
    technologies necessary to reduce emissions.

-   I look forward to working with my colleagues and the coal industry
    to find the right balance between imposing a mandatory cap on carbon
    emissions while ensuring the future of coal.

-   Some issues we need to consider are:

    -   Providing technology funding and incentives;

    -   Adding a carbon dioxide storage liability framework;

    -   Adding a safety-valve;

    -   Aligning emissions caps/targets with technology;

    -   Improving allocations;

    -   Address duplicative State programs; and others.