energy subsidies

EIA's newest subsidy study leaked on the weekend, and was officially released today.  It's a long report, so I want to spend more time reading through it before doing a detailed post.  However, my quick read on the weekend was enough to know that my earlier concerns on their mandated scope of research have largely been borne out. 

They've done a bit better job breaking out renewables (so the large portion going to ethanol is more clearly visible), steered clear of showing subsidies per unit energy produced (though others will calculate this from EIA's provided data in about five minutes), and done more to describe all the things they have left out up front.  But in the end, it is clear that the majority of the limitations from last time remain, plus a handful of new ones.  As a result, the picture of subsidies that they have painted, and that others will quote widely, remains as incomplete as ever.

An update of US energy subsidies being prepared by the US Energy Information Administration, slated to be released on Tuesday, has been delayed.  Stephen Lacey, in a blog post at Climate Progress, notes that one source attributed the delay to  "quality assurance" issues. 

I noted back in April that the research mandate for the new study was problematic (my critique of EIA's last report is here).  The mandate issue pointed to a more important underlying principle for statistical agencies than simply how to report on energy subsidies.  At its core is the question of who gets to define the research agenda, and along what parameters. 

While it is important that organizations such as EIA help Congress evaluate options, they should not be in a position of having to meekly respond to a Congressional request verbatim.  The statistical agencies are funded by taxpayers not to provide fodder for a particular Congressional policy agenda (the lobbyists and trade associations already do a fine job there), but to provide unbiased analysis that helps answer broad questions on resource allocation and important societal patterns.  If a Congressional request skews how the statistical agencies are allowed to evaluate these key patterns, we risk seeing results that are more reflective of the scoping of the research task than of the actual problem being studied.

Thus, I view the delay for this particular report as a very positive signal.  If there are issues with scope of coverage, it is better they address them now than to come out with skewed coverage again.  I hope that in the future the holds won't be at the the time of release (when analytic modifications are both more difficult and more expensive).  Rather, they should be at the very beginning of the process, with the analytical staff working with Congressional requestors to refine their requests to ensure the statistical agencies have appropriate professional discretion to implement a robust and unbiased review.

My original information suggesting that Senator Lamar Alexander had put in a new request for EIA to update its work on energy subsidies turns out to have been incorrect.  The actual requestors this time were from the House side:  Congressmen Jason Chaffetz, Marsha Blackburn, and Roscoe Bartlett.  I'm grateful to the office of Congressman Chaffetz for providing a copy of the request they submitted to EIA in this matter.  That request is included below.

While not submitted by Alexander, the request is nonetheless almost identical to the letter Senator Alexander put in last time around.  Congressman Chaffetz' office said this was done purposefully so the data could be compared to earlier studies. In my view, replicating the old scoping is quite unfortunate.

While the comparability is certaintly a benefit, it is not inherently so.  First, as I documented last year there have already been substantial changes in EIA's methodology over time so the time series is already problematic.  Second, identical scoping means that the more troublesome of the assumptions and policy omissions in the 2007 study will be replicated in the 2011 release.  This is a far more important deficit than a time series between 2007 and 2011 is a benefit.  The Congressmen could just as easily have empowered a more robust research mandate for EIA, and asked the authors to highlight in a table or chapter how those changes affected the time series data.  A summary of how changes in assumptions, data, or other factors influence comparability from study-to-study would be a good thing for EIA to be including anyway.

Aside from the specific problems that using the Alexander research mandate will generate in understating the overall magnitude of energy subsidies and distorting their distribution across fuels, there are a number of broader policy issues that warrant consideration:

• Does EIA or any other statistical or oversight agency (e.g., GAO) of the federal government have the right to enter into a dialog with Congressional requestors over the scope of work they are being asked to do, or are they mere order-takers?  This would be important both in terms of resources required to complete the requested task, and with respect to the relevance and accuracy of the results that this expenditure of governmental time and taxpayer resources will generate.
• If EIA did have this right, but didn't exercise it, why not?  Clearly the subsidy study is widely cited and of interest to a much broader audience -- even within Congress -- than the three members who put in this particular request.
• When such a request for a non-routine analysis of broad interest to the Congress is placed, should there be a process by which EIA or other statistical agency can vet the scope to a somewhat wider audience -- at least within Congress -- before embarking on the research?  Such input at the early stages could result in a much more robust and useful product, but becomes increasingly difficult to integrate once research is well underway and a delivery time has been commited to. 
• Finally, if EIA did in fact work through the terms of reference with the requestors and determined the existing structure was appropriate, this too would be a problem.

The debate on US energy policy continues to rage.  The reminder from Japan that nuclear reactors can, and sometimes do, have accidents is merely the worst of a number of examples in recent years about the risks and potentialities of various energy pathways.  Coal mine and oil rig accidents do kill people and harm the environment; large scale biomass production for energy takes land and water from other uses (including baseline carbon sequestration), and can compete with food consumers as well; there is more natural gas than we thought, but there might be some negative surprises when we fracture bedrock to get it.  In short:  there is no free lunch, complicated systems break down, and what seems the best way forward can change quickly.

Against this backdrop, politically-directed subsidies to most forms of energy continue to escalate.  To map the distortions, the U.S. Energy Information Administration is presently at work on an update to its earlier review of subsidies to the US energy sector.  Their updated analysis is supposedly due out later this spring.  Given that the EIA is the most respected government source of energy data, their subsidy data will again we widely read and cited. 

Unfortunately, few specifics on the new analysis have been made public at this point.  I've been told that Senator Lamar Alexander (R-TN) has again put in the request for the study and set the research terms.  However, attempts to confirm this, and to get a copy of his actual request, have been met by a wall of silence from Conrad Schatte, Alexander's energy point person.

Past EIA Subsidy Numbers Have Suffered from Limitations in Their Research Mandate

I have been critical of past EIA reports (see here and here).  Some of the Administration's simplifying assumptions and definitional rules have led them to exclude very large subsidy programs and to understate the magnitude and uncertainty of some of those they have included.  As illustrated in the table below, this is not a small problem.  Appropriate adjustments to their research scope and methods would have increased EIA's aggregate subsidy estimates by billions of dollars per year and greatly altered the relative subsidy shares to different fuels.  Both absolute subsidies and relative shares of total support to oil, coal, nuclear would rise substantially.  Absolute subsidies to wind would likely have been substantially higher as well, though aggregate support would have remained much lower than for conventional fuels.

One of the problems here is that at least some of these large omissions seem to have been driven by the allowable scope of research.  These terms were set by Senator Alexander in his letter to EIA. 

Because Alexander holds strong preferences for some forms of energy and animosity for others (hates wind, loves nukes, for example - see discussion after the table), there is some risk that the scoping of the research mandate can be shaped to support his desired outcomes rather than to neutrally assess the impact of subsidies.  Because of this potential risk, the research mandate for EIA's current subsidy work be made public now, rather than just published along with the final study.  Should there be gaps in their allowed work program that would again skew their results, at least there would be time to fill them without undue delays in the report's timeline.

Table ES-1.  Expected Bias Resulting from EIA Subsidy Definition and Valuation Conventions

' Going to War in Sailboats' and Lamar's other thoughts on our nation's energy future

Too often the federal government seeks to pick energy sector winners via targeted subsidies to favored fuels and industries.  This approach is not one likely to achieve robust or efficient solutions, but appears to be a central element in the way Senator Alexander approaches energy markets.

The Senator is not shy about his preferences.  Wind energy is "going to war in sailboats" according to a 2010 compilation of five addresses Alexander has given in recent years outlining his energy vision.  True, the cover graphic is amusing, what with the brave soldier using his dulled sword to fight the bombers and all (Lamar couldn't even give the guy a musket?)  But as a road map for our energy future, it leaves much to be desired.

The preface, written in early 2010, cites the numbers from EIA on the relative subsidies to nuclear versus wind based on the research criteria that Alexander himself crafted. The document notes:

At current rates of subsidy, taxpayers would shell out $170 billion to subsidize the 186,000 wind turbines necessary to equal the power of 100 reactors. While federal government loan guarantees should jump-start the first few reactors, the subsidy cost to taxpayers of building 100 reactors would be one-tenth as much.

A striking phrase contrast, to be sure -- if it weren't flat out wrong.  EIA's study ignored all subsidies to new reactors if they weren't yet costing the treasury money (none were).  Yet the 100 plants the Senator is pushing to build would clearly tap into that support in a big way.  Alexander may believe that only the "first few" reactors would need loan guarantees, but there has not been any evidence to support such a conclusion, though much evidence to refute it.  Lobbying expenditures spiked when loan guarantee programs were being formulated; and nuclear projects have been regularly cancelled when reactors were culled from the loan guarantee finalist list or term sheets came out that actually required appropriate premiums for default risks.   

Alexander's research mandate to EIA also excluded an array of other important supports such as favorable accelerated depreciation schedules and caps on nuclear liability. 

Specific clauses of concern in the 2007 research mandate include:

• Look only at "energy-specific" energy subsidies..."Broad policies or programs that are applicable throughout the economy need not be considered."  EIA interpreted this to exclude a wide range of energy-specific asset classes receiving special depreciation schedules if the Treasury didn't present those subsidies in a separate line item in its tax expenditure budget.  Billions in tax-exempt bonds widely used for energy-related purposes were ignored as well since the same instruments were used for non-energy purposes.  Subsidized bulk water transport, heavily used to move oil and coal, was also excluded.  As noted in my critique, there are few bright lines here, and many of the provisions EIA included are also used by non-energy sectors.  

• Look only at subsidies "that provide a financial benefit with an identifiable federal budget impact."  If all that one cared about here were budget outlays, this strategy might make sense.  But Alexander clearly has a much bigger energy mission:  to expand conservation and build 100 new nuclear plants.  EIA, as well, is concerned with the impact of federal policy on broad energy market trends.  Alexander notes that construction of his reactors should go ahead even if the government needs to make it happen "because conservation and nuclear power are the only real alternatives we have today to produce enough low-cost, reliable, clean electricity to clean the air, deal with climate change, and keep good jobs from going overseas."

There's no mention of using competitive energy markets, the price system, or pursuing the lowest carbon abatement strategies first.  Rather, we should proceed based on the Senator's view of the optimal path.  But political beliefs do not a vibrant market make, and others -- hardly anti-nuke partisans -- do not share his optimism for nuclear as the primary greenhouse gas abatement strategy.  Exelon CEO John Rowe, for example, despite operating the largest fleet of merchant reactors in the country, found in 2010 (see PDF page 8) that new nuclear power plants were the fifth most expensive option.  By last month -- though before the Japanese earthquake and tsunami -- new reactors had fallen further still in attractiveness, becomming their third most expensive option (see PDF page 11).

The limitation to "identifiable federal budget impact" excludes the large intermediation value of federal loan guarantees on high risk energy investments (valuable even if they don't default because they allow high risk enterprises to tap large amounts of low cost debt); increasingly large consumer subsidies triggered by the Renewable Fuel Standards; outlay equivalent values of tax breaks where the tax breaks themselves are not taxed; the provision of very expensive, high risk energy services (such as nuclear waste management) by taxpayers on a break-even basis at best, and with no built-in return on investment; and assuming energy-related trust funds that are running operating surpluses but actuarial deficits are not conveying subsidies.

• Stipulation of what types of subsidies to include.  The list of program types to review, provided by Alexander to EIA, included tax expenditures, direct expenditures, federal R&D, and federal electricity programs.  It did not include federal credit and insurance programs not linked to federal electricity programs; government-owned energy service organizations other than electricity generators; tax-exempt organizational structures; and regulatory mandates such as the Renewable Fuel Standards that force consumers to buy specific goods and services at above-market prices.  While EIA did touch on some of these categories, the report authors did not cover them systematically or in-depth last time around.  The challenge is that some forms of support are very important for one type of energy and irrelevant for another.  Thus, without systematic capture of all subsidy mechanisms, the relative subsidies by fuel will be highly inaccurate.   
• "The report should include an estimate of the size of each subsidy over a recent, representative year."  This phrase may have been one factor in the decision for EIA to look at energy-related trust funds in terms of their operating balance rather than their long-term actuarial adequacy. Subsidized insurance programs or caps also need to be viewed over a long time horizon.
• "If a valid methodology can be developed, a forecast of subsidy impacts would be very informative at well."  This sentence seemed to give an opening to evaluate how subsidies now on the books are affecting marginal investment decisions; however, there was little detail in this area in EIA's 2007 report.  Stan Kaplan, who did a great analysis of this issue while at CRS, is presently at EIA.  This may be a sign that the distortionary role of subsidies on the country's energy path by skewing marginal investment decisions will be systematically addressed this time around.  That would be a good thing. 

Ryan Lizza has a detailed and interesting look at the failure of the United States to pass climate change legislation.  A combination of strategic gaffes (not necessarily by the bill's sponsors), political pressures, external events such as the Gulf oil spill, and the inevitable political backstabbing were contributing factors in the failure of the Kerry-Lieberman-Graham initiative (K.L.G).  The article ("As the World Burns," published in the The New Yorker) can be found here.

Lizza notes that "Obama had served the dessert before the children even promised to eat their spinach" (or as Pink Floyd put it "If you don't eat your meat, you can't have any pudding...")  There were at least a couple of circumstances noted where the Obama administration gave away key multi-billion dollar bargaining chips, for free, undermining the ability for bill sponsors to use these chits to bring supporters aboard. To extend the food analogy one step further than I probably should, K.L.G. was like one of those enormous, all-you-can-eat buffets.  Once the word got out that a good deal was going down, the lines grew quickly, the din louder, and folks became insatiable, piling their plates high with whatever they could get their hands on.

Truth be told, I thought it was a bad bill and wasn't unhappy that it failed.  I prefer knowing there is nothing in place to deal with climate change to the illusion of action.  At least it is harder to pretend the problem has been solved.

K.L.G. fit the illusion category fairly well.  In their effort to make everybody happy, it's sponsors agreed to more and more "compromises."  Quite quickly, the bill turned into a massive pork-laden piece of legislation with real benefits difficult to measure.  It was full of complex language on subsidies and other industry supports that were (often purposefully) difficult to interpret and (as noted by Lizza) sometimes drafted by the beneficiary parties themselves.  With each additional layer of giveaways, the climate benefits became more muted and further delayed in the future.  Subsidies to conventional fuels were large enough to worsen the competitive environment for emerging, lower carbon, approaches. 

Erich Pica at Friends of the Earth put it well when he said of one of the versions of K.L.G:

The bill showers polluting corporations with billions of dollars, but doesn’t require them to reduce pollution fast enough to avoid devastating climate change impacts. And it contains massive carbon offset loopholes that would allow U.S. polluters to keep polluting by paying for often-non-existent pollution reductions overseas. Other loopholes, such as excluding pollution from bioenergy, also undermine the bill’s intent.
 
These flaws are unacceptable, and they are the result of a defective political system in which polluting corporations, Wall Street traders, and their lobbyists continue to exert far too much influence. Too many senators are siding with special interests instead of advocating solutions that are in the public interest.

But failure on this particular round of climate change legislation doesn't mean the US should do nothing, pretending that the world will right itself and emissions of greenhouse gases don't matter.  The path Congress has been following for decades is to introduce a never-ending cascade of narrowly targeted subsidies. The reason is clear:  they don't have the will to pass neutral, cross-cutting legislation that will directly address the core problem. Despite its "big picture" framing, K.L.G. was not much different.  Though its subsidy provisions, and very large targeted grants of, and exemptions from, carbon credits, K.L.G. simply became a larger version of this old model. 

If using less oil per vehicle mile traveled is important on both energy security and GHG grounds, should Congress really be implementing different rules and incentives for every variant of fuel, drive train, and vehicle class out there?  If we want more low power carbon sources, should Congress be hardwiring energy finance such that the federal government becomes the primary selector of who gets funds, and the taxpayer the de facto risk-taker on all of the large new energy infrastructure?  Clearly not.  The Congressional action needed is to establish a neutral playing field that both forces GHGs into markets, yet does not micromanage which of the hundreds of potential solutions are anointed winner.

Cap-and-trade will likely always be gamed the way it was in Kerry-Lieberman-Graham.  Carbon taxes are not free of political lobbying to be sure.  But the resultant giveaways are far more visible, and therefore carry a larger political risk for beneficiary and Congressional sponsor alike.  Administrately, they are also much easier than permits because a good chunk of the fees can be levied at the base of the economy (e.g., the point of energy extraction), with subsequent usage in hundreds of different industries ignored.  Aside from administrative efficiency, this also means that price signals hit far more sectors of the economy than cap-and-trade would have. 

Yes, I know the reprise.  No new taxes.  Lower taxes.  Zero taxes.  Smaller government.  No government at all. 

So then what?  I don't like taxes either.  But in an effort to avoid any association with taxes, it makes no sense to pass instead all sorts of less-efficient, more corruptible energy legislation and narrowly-targeted subsidies.  That strategy is far more expensive, does little to leverage the power of competitive markets, and has a much smaller chance of actually solving the problem at hand.

There are many ways to avoid the taint of the "T" word.  Simply rebate the taxes in total, preferably by reducing other taxes, so you don't finance more government bloat.  The linkage I like best is to use the proceeds to reduce the fixed costs of hiring people.  Job creation, after all, is a key component of getting out of recession.  The fees on labor, in the form of medicare and social security, are particularly problematic at the lower pay scales, where these fees comprise a substantial portion of a firm's total cost per worker.  Carbon taxes could be productively used to reduce these fees, funding a portion of the FICA and medicare obligations rather than relying entirely on labor taxes.  We could learn from the successes and failures of other places where this has been tried.  Germany, for example, has for some years used taxes on energy to reduce the mandated social security payments into the national pension fund.

For all things carbon tax, a good reference site is the Carbon Tax Center, run by Charles Komanoff and Daniel Rosenblum.

Congratulations to the Marcus Peacock's team at Subsidyscope (and, to Kevin Webb's group at the Sunlight Foundation -- they have also played an instrumental role), for the launch of their energy subsidy module yesterday.

The energy sector is the fourth module to be completed by Subsidyscope.  Earlier releases have included a review of subsidies in the financial bailout, transport subsidies, and subsidies to non-profit institutions.  Support for housing, and cross-cutting work on integrating data on tax expenditures are currently underway.

Because government involvement with energy cuts across so many agencies and activities, tracking energy subsidies has been a challenging task.  Inevitably, not everything could be addressed in the first go, and some of the issues they hope to address in the coming months are summarized here.  As programs are added, expect susidy numbers to rise substantially.  Better resolution on accelerated depreciation benefits, impacts of purchase mandates such as the Renewable Fuel Standards, and excise tax exemptions (they've focused on income taxes initially) will each add billions of dollars per year.

In my role as an external advisor to this project over the past few years, I've been struck by a couple of things about Pew's engagement with the subsidy issue.  First, they have been willing to tackle a set of very complicated policy areas recognizing full well that complete exposition of sector subsidies would need to be built gradually over time.  This iterative approach is something that the G20 fossil fuel subsidy reform effort will likely need to embrace as well. 

Second, due to their scale and contacts, Pew has been able to engage directly with key officials in relevant government agencies in order to expand the available information set on subsidy programs.   This is quite important, and something that I hope will succeed in permamently changing the way some of this information is compiled and released.  Over the long-term, more timely, comprehensive, and comparable data sets in areas such as federal tax expenditures, credit, and insurance subsidies alone would have immense value in improved governance and economic efficiency.

The internet has been aflutter with the findings by New Energy Finance that conventional fuels receive way more in subsidies than does renewable energy.  The press coverage generally refers to this short summary. Today it was picked up in Andrew Revkin's influential dot Earth blog.

Turns out that New Energy Finance is really Bloomberg New Energy Finance, a research consultancy owned by Bloomberg.  The actual study itself is nowhere to be seen (my e-mail to the Bloomberg reporter on this issue went unanswered).  It is hard to imagine such widespread coverage of a subsidy study -- released without the actual study -- had it been done by a random research institute rather than one affiliated with a media powerhouse.  While the full report may be available behind NEF's firewall, perhaps to their paying clients, I hope NEF CEO Michael Liebreich will do the right thing and post the report in a place we can easily access and evaluate it.  I'm guessing Andrew Revkin would be happy to post a link.

Some of the findings do seem interesting.  For example, the press release refers to total subsidy estimates for feed-in tariffs within the EU, something I've been looking for for awhile.  However, it is also clear that subsidy tallies need to be done systematically and comprehensively if they are to be valid (see my review of EIA's subsidy estimates for an illustration of how complicated this can be).  NEF does not seem to have reported metrics other than gross dollars (subsidies per unit energy delivered would have been important as well); and may not have picked up all of the relevant programs. There also seem to be valuation errors, as they pick up subsidies to petrol consumers in the developing world (via their inclusion of IEA's $557 billion subsidy estimate) while likely missing the subsidies to producers of biofuels granted via consumption mandates in both the US and Europe.

I've posted some additional comments on the NYT's site, as have Ron Steenblik and Lee Schipper.  We learn as well from commenter James in Northern Nevada that liability caps for nuclear accidents under the U.S. Price Anderson Act is a tax, not a subsidy.  Time requires I defer a take-down of that little nugget of fantasy to another day...

Just last week, the Economist magazine noted in an editorial that:

However you measure the full cost of a gallon of gas, pollution and all, Americans are nowhere close to paying it. Indeed, their whole energy industry—from subsidies for corn ethanol to limited liability for nuclear power—is a slick of preferences and restrictions, without peer. The tinkering that will follow this spill will merely further complicate it.

As if on cue, out comes "The American Power Act."  For some reason, idle hands in Congress always find particular comfort in working on energy bills, and an early summary of the latest of a long line of government energy initiatives has just been released.  A short summary of that summary can be accessed here.  The American Power Act will dole out all sorts of goodies, with some huge potential gains to coal and nuclear power.

Before going into what the bill contains in giveaways, it is useful to note some of the key things it does not do.  It does not remove the government from the role of choosing technology winners and losers, and it does not build a neutral policy platform on which all energy technologies must compete for whatever public support is offered.  In fact, the bill summary views this not as a bug, but as a feature, noting that the bill is "investing in innovation across all energy sources."  Investing in everything is not a very good theory of change, as I've examined in detail previously.  Finally, it does not work to quickly establish greenhouse gas price signals for key energy and industrial sectors, but rather seeks to shelter them from these prices for many years.

In terms of the new subsidies in the bill, in depth analysis requires the specific legislative language.  However, some choice nuggets are already evident in the summary:

Nuclear

• 5 year depreciation on nuclear reactors expected to last 60 years.
• Formally increases Title 17 loan guarantees to nuclear by $36 billion, to $54 billion (there is an additional $2-4 billion above this total that is already in place for front-end facilities such as enrichment).
• Introduction of a "loan guarantee retention fee" on nuclear loan guarantees, supposedly to expedite repayment of the guarantees.  (The language here is strikingly weak:  "to ensure that money is returned to the program as expeditiously as practicable").  The actual form and meaning of these fees is not clear from the summary however.  It could be a withholding from the loan guarantee amount (in which case firms will overstate need to create a buffer).  Also not clear is how the retention fee will interact with the credit subsidy payments already required.
• A tripling of the coverage for nuclear delay insurance, from $2 billion to $6 billion in face value; covering 12 rather than 6 reactors.
• Accelerated licensing and review procedures for new reactors, and elimination of some review steps.  How these complex projects can be properly overseen with the expedited process remains to be seen.
• Increased research push on small reactors and fuel reprocessing.
• Since production tax credits can only be earned once a plant begins operation, the bill adds a 10% investment tax credit that can be captured earlier, and likely even if the plant is never completed.  A 10% federal grant would be available to non-taxable entities involved with reactor construction, as such entities can't use tax credits.  Detailed legislative language is needed to see whether these can be combined with other subsidies, such as production tax credits, or much be used instead of them.
• Allows nuclear to access Advanced Energy Project Credits, providing up to a 30 percent tax credit for manufacturing eligible project components (credits may be carried forward up to 20 years).  The credits have a national cap, so look for subsequent legislation to dramatically increase the available support.  The current cap of $2.3 billion is rounding error in nuclear projects, and remains low even after the APA's  additional $5 billion (Section 4003) in credits is included. 
• Expanded use of tax-exempt private activity bonds in the nuclear power sector.  Because nuclear projects are so big, this provision may not be popular with other users of private activity bonds.  Usage of Build American Bonds (BABs), another tax-advantaged financing tool, by the Vogtle reactors is among the largest BAB projects in the country.
• Allows existing production tax credit (PTCs) for nuclear to be entirely allocated to private participants on a project that includes both taxable and non-taxable entities.  This will increase the effective value of existing nuclear PTCs.
• Extends suspension of import duties on imported nuclear components.  Although nuclear is touted as a solution to energy security concerns, many of the most expensive reactor elements are manufactured outside of the United States.

Coal

• The bill provides some additional subsidies to advanced coal and carbon capture and storage.  However, the most valuable subsidies to the coal sector will likely come through the grants of emissions credits.  The impact of these schemes is difficult to gauge without more detailed language, but Section 1431 of the bill does indicate that where plants or utilities capture and store carbon, they will actually earn GHG allowances.  Under a strict cap and trade, such facilities would simply avoid the need to buy credits by reducing emissions. 
• Section 798 appears to buy off up to 35 GW of premature closure of merchant coal plants by allowing them to continue to receive emissions permits even if the plant has been closed or repowered.  There is no detail suggesting that the buyouts will go first to the dirtiest plants (whether merchant or not), or require high levels of operations in order to be eligible.  The risk of this subsidy being gamed seems high.

Clean Energy Funding

• Section 1801 establishes a "Clean Energy Technology Fund" to promote development of new energy technologies, though provides little additional details on eligibility, structure, or funding levels.  One concern is that the wording sounds like this could be an effort to implement some type of clean energy bank, along the lines of poorly structured earlier proposals for a Clean Energy Deployment Administration (critiqued here). 

Credit Offsets and Allocations

• Title II of the bill attempts to establish some centralized vetting of offset claims, both domestically and internationally, to ensure that offsets are awarded for behaviors that actually reduce emissions.  This is a useful element of the bill, though likely extremely difficult to do well.
• As with other climate bills, this one contains broad giveaways of carbon credits for a sizeable period at the inception of the new law.  As explained by Joe Romm, the bill also attempts to deal with credit price volatility through gradually increasing floors and caps.
• Title IV provides widespread rebates and allowances to industrial emitters of GHGs, suggesting that key industrial sectors will see little price incentive to curb emissions.

"Fast" Mitigation of Hydrofluorocarbons

• Though "extremely potent greenhouse gases," HFCs are to be reduced to 15 percent of baseline, but not for another 22 years.  Hard to imagine what "slow" mitigation looks like.

Oil and Gas

• Section 1204 allows state opt-out of oil and gas drilling within 75 miles of its coastline (otherwise federal laws pre-empt state wishes).  While this provision was introduced in response to the recent Gulf oil spill, its actual protection of coastal resources may be more symbolic than real.  As of May 11th, the Gulf spill oil slick was 130 miles long and 70 miles wide -- enough to have blown through the proposed buffer zone.
• Provides substantial subsidies to convert vehicles to natural gas (starting section 4121).  This is another example of government micro-managing technology selection.  The transport policies should be neutral with respect to any option (better engines, hybrids, electric vehicles, improved fleet management) that reduces oil demand.

Update:  The full bill, in all 987 pages of glory, has now been released.  It will obviously take some time to go through.