A long-awaited energy bill was unveiled today by its Senate sponsors, John Kerry (D-MA) and Joseph Lieberman (I-CT). According to a summary (pdf) of the bill, it would reduce carbon emissions by 17 percent by 2020 and by over 80 percent by 2050 by putting limits on the amount of carbon dioxide emissions from power plants and heavy industry, and from producers and importers of refined fuels for transportation.

The limits will only apply to those who emit over 25,000 tons of carbon dioxide a year, which works out to about 7,500 factories and power plants, according to the summary. These emitters will have to purchase emissions allowances, cut emissions, or both to meet the targets. Those who pollute less than their allowances can sell them to others in a market-based system.The proceeds from buying the allowances will be divided up--some will go to pay down the deficit; some will fund research and development; some will go to businesses to help them meet the caps; and the rest will be mailed to taxpayers in the form of a refund check. As the years go by, more of the proceeds will go directly to taxpayers.

The plan is very similar to the cap and trade system in a bill the House passed last year, except that one didn't involve sending out refund checks (although there were provisions to help out poor people who are affected by higher energy bills). The new bill also only covers parts of the economy, rather than the whole thing.

Numerous provisions cater to different interests. It supports offshore drilling but lets states opt out. For those worried that a cap on carbon emissions will hurt the coal industry, the bill contains support for capturing and storing carbon from coal plants, which could help them meet the caps. Supporters of natural gas will find tax incentives for people to switch to natural gas powered vehicles, as well as other subtle changes that will make it more attractive to build natural gas power plants. Industries affected by the cap get a couple of boons. First, factories (not power plants) don't get regulated until 2016, and the money from the purchases goes back to them to help them pay for switching to cleaner technology. They also are protected by trade provisions designed to keep business from moving to countries without caps on carbon. Farmers are exempt. And they'll make billions with carbon offsets--such as planting trees that absorb and store carbon dioxide. Nuclear gets $54 billion in loan guarantees, as well as "risk insurance" to help get new power plants financed. There will also be money to promote battery-powered cars.

Renewable energy, carbon capture, and energy efficiency researchers should be happy. Money from the allowances and direct government funding will help extend R&D funding launched by the stimulus package last year.

The summary is careful to emphasize that Wall Street won't make money by buying and trading carbon allowances because of strict regulations. But it didn't mention how much this is likely to increase energy bills.

Now the sponsors have to start gathering votes. We'll soon see if they've spread enough incentives around first to get it taken up on the Senate floor, and then maybe even passed.

This week the U.S. Congress heard testimony supporting a bill that would push to replace diesel with natural gas in heavy vehicles. It's an attempt to cut oil imports, and at the same time reduce greenhouse gas emissions. Part of the argument is that natural gas is substantially cleaner than diesel, and results in the emission of about 25 percent less greenhouse gas.

But experts are warning that natural gas might not be as clean as it seems.

In fact, using natural gas rather than diesel in vehicles could actually increase climate change, says Robert Howarth, professor of ecology and environmental biology at Cornell University. "You're aggravating global warming more if you switch," he says.

Howarth is basing his conclusion on a preliminary analysis that includes not only the amount of carbon dioxide that comes out of a tailpipe when you burn diesel and natural gas, but also the impact of natural gas leaks. Methane, the main component of natural gas, is much more effective at trapping heat than carbon dioxide, so even small amounts of it contribute significantly to global warming. When you factor this in, natural gas could be significantly worse than diesel, he says. Using natural gas would emit the equivalent of 33 grams of carbon dioxide per megajoule. Using petroleum fuels would emit the equivalent of just 20 grams of carbon dioxide per megajoule.

Howarth goes further, suggesting that natural gas could even rival greenhouse gas emissions from mining and burning coal--the dirtiest of fossil fuels. He says it's "not significantly better than coal in terms of the consequences of global warming" and is calling for a moratorium on extracting natural gas from shale, which requires more energy (and so emits more greenhouse gases) than extracting it from conventional natural gas sources.

Howarth's analysis, however, is just a preliminary one. He's already found one major error in his original calculations. "I blew it," he says, by not including the impact of methane leaks from coal mining. (Here's a link to his original, which contains the error; and here's the updated version). But he still says the gap between coal and natural gas is far smaller than generally thought. And his numbers are significantly different than those researchers at MIT came up with a year ago. (On a CO2 equivalent grams per megajoule basis, they scored diesel at 10.7 and gasoline at 14.4, with natural gas splitting the difference at 12.5). The two studies make different assumptions about the strength of methane as a greenhouse gas, and the amount of methane leakage, for example. A complete analysis should also look at the different efficiencies of natural gas and gasoline or diesel vehicles. The MIT study concludes that there is a benefit from switching to natural gas, all told, but it might not be worth the cost or the hassle. Making more efficient gasoline and diesel vehicles might work better, and be a faster way to reduce greenhouse emissions, it suggests.

But for all the shortcomings of Howarth's analysis, it points to a real need. Before Congress passes any bill promoting natural gas, a thorough study of the potential impact needs to be taken into account, including the energy it takes to obtain it, and the impact of methane leaks.

Otherwise the U.S. might end up subsidizing something that does little to reduce carbon dioxide emissions--as happened with corn ethanol.

Energy efficiency has been called the low-hanging fruit for reducing carbon emissions, because it actually pays for itself. But it can be difficult to get people to take simple steps to save energy, and it's hard to maintain those savings over time. For example, people offset the savings from a new efficient refrigerator by changing their habits or buying a plasma TV.

A company called OPOWER has what appears to be a successful strategy for dealing with this human element of energy efficiency. It has increased participation in energy efficiency programs from about 5 percent to 80 percent for the utilities that have used it so far, and the savings appear to be sustained.

So far, since its founding in 2007 the company claims its program has saved over 90 million kilowatt hours of electricity. The company has even attracted the interest of the White House--last week President Obama dropped by, highlighting the company as a source of the green jobs he hopes to help create.

The company's approach is based on the idea that people want to fit in. OPOWER first lets people know how their energy use compares to that of their neighbors. Then for each billing period the company gives them a single tip that they can act on, also connected to what they're neighbors are doing, such as "Most people in your area keep their AC at 78 degrees." They also tell people how much energy they will save.

It's obvious how this could work with people who are using more electricity than average. But for those using less than average, the company also compares them to their "efficient" neighbors to motivate change.

The company makes use of public information (such as from the tax assesor's office and weather data) as well as third-party demographics to tailor results. If a person is renting, OPOWER doesn't recommend insulating the house, for example. It also has software that looks at energy use patterns to identify likely sources of energy waste. Power spikes during hot days greater than that shown in neighboring houses could suggest someone has an inefficient air conditioner.

It seems like a promising approach. But it's not going to solve the world's energy problems on its own. On average the program has cut energy consumption by a modest amount--about 2.5%.