Climate bill gives polluter and nuclear breaks

Nuclear reactor operators man the control room at Browns Ferry Nuclear Plant in Athens, Alabama, June 21, 2007.

WASHINGTON (Reuters) - The U.S. climate change bill expected to be unveiled on Monday contains incentives to spur development of a dozen nuclear power plants, but delays emissions caps on plants that emit large amounts of greenhouse gases, industry sources said on Friday.

The draft bill, led by Democratic Senator John Kerry, has loan guarantees, protection against regulatory delays and other incentives to help companies finance nuclear plants, which can cost $5 billion to $10 billion to build, the sources said.

"I think it's a start that combined with a price on carbon" should help the power companies build new nuclear capacity, said one source briefed on a call held by Kerry on Thursday night with industry representatives.

Nuclear power plants emit almost no carbon dioxide, the main greenhouse gas blamed for global warming. But no new plants have won government approval in three decades, due partly to high costs and concerns about nuclear waste.

The compromise bill, also being written by Senators Lindsey Graham, a Republican, and Joseph Lieberman, an independent, is easier on big emitters than previous legislation, a move an environmentalist said could help win its passage.

The senators face a narrowing window of opportunity to win the necessary 60 votes to avoid procedural hurdles before congressional elections in November.

Signing a new energy and climate law is a priority for President Barack Obama, who would like the United States to be a leader in moving to a low-carbon economy. The Copenhagen Accord he helped devise in the Danish capital last year seeks to limit a rise in temperatures to below 2 degrees C (3.6 F) over pre-industrial levels.

The bill contains a cap on greenhouse gas emissions from power plants that would begin in 2013, a year later than outlined in previous legislation, the source said.

The draft also takes a sector-by-sector approach rather than creating an economy-wide market for emissions, an approach favored in the climate bill that cleared the House of Representatives in June.

It would create a regulated market in which polluters and speculators would be allowed to buy and sell emissions permits. Polluters who cut emissions would earn permits they could sell.

Initially the price of permits in that market would be limited to a maximum of $25 per ton, to help reduce costs for polluters. Previously, the senators had been aiming for a price ceiling of $30 a ton.

REALITY CHECK

Even with the breaks, the bill seeks to reduce U.S. emissions 17 percent by 2020 from 2005 levels, the same level talked about for months. It is also about the level of cuts that Obama favors.

Eileen Claussen, president of the Pew Center on Global Climate Change, said the bill would likely contain items considered necessary to get votes.

Asked if the bill might be weakened too much from an environmental standpoint in order to lure Republican support, Claussen said: "No. People whose major concern is climate change have to temper their ambitions."

"The reality is you have to get 60 votes for anything to happen," Claussen said.

Claussen also said Monday's draft bill would include legislation already passed by the Senate Energy Committee that calls for incentives for offshore oil drilling, a better transmission grid and minimum levels of power from clean sources like solar and wind power.

Shares in a number of power and nuclear utilities closed higher on the day as the Dow Jones Utility Average index, rose 0.95 percent to 388.52, slightly higher than gains in the broader market.

The bill will be supported by the Edison Electric Institute, a leading power industry group, and three oil companies, sources said. BP, Shell and ConocoPhillips. They did not immediately return calls.

The American Petroleum Institute will not say whether it supports the bill until the bill is unveiled.

The API's Lou Hayden said his group would continue to support Energy Citizens, a coalition of industry and local advocacy groups that generated grass-roots opposition to the climate bill passed by the House, known as Waxman-Markey.

Matt Dempsey, a spokesman for Republicans on the Senate Environment and Public Works Committee, said members of his party would focus largely on the impact the bill would have on consumer gasoline prices.

"Republicans will make sure the public understands the price of gas at the pump is going to go up if Kerry-Graham-Lieberman passes," Dempsey said.

While full details of the transportation part of the bill were not yet available, it might contain a provision requiring oil refiners to obtain pollution permits based on the amount of carbon in their motor fuels.

Such a provision could cause prices to rise, which likely would be passed on to consumers. There also could be protections to help consumers with higher energy prices.

(Additional reporting by Richard Cowan and Ayesha Rascoe; graphics by Jasmin Melvin; Editing by Peter Cooney)