Climate: With Obama at their side, auction advocates make their pitch

Climate: With Obama at their side, auction advocates make their...

ENVIRONMENT & ENERGY DAILY

Darren Samuelsohn, E&E senior reporter

Advocates for a 100 percent auction of a cap-and-trade program's emission credits made their case yesterday by citing support from 600 U.S. economists and one very powerful new player in the climate debate: President Obama.

Democratic Reps. Chris Van Hollen of Maryland and Lloyd Doggett of Texas spoke up in favor of a complete auction during a press conference organized by the Southern Alliance for Clean Energy. The environmental group released signatures from economists who want Congress to sell all the credits in an auction and then use that new revenue "to help ensure the most efficient and equitable outcome."

Van Hollen, the House Democratic leader for the 2010 election campaign, said in an interview that an auction approach also made sense politically as lawmakers explain the environmental measure to Americans who are more focused on the economy.

"In order to get support for this bill, in order to get it passed, it seems to me that we're going to have to be able to tell the American people we're going to help with some of the additional costs you're going to incur here," Van Hollen said. "Because we're asking them to work together jointly to help reduce the dangers of climate change. There's a price tag to that. To the extent we can minimize the price tag to that, the more likely we are to get their support."

"There's value in this right to pollute," added Doggett. "I don't believe in giving it to polluters. I believe it's held in the public trust."

Both Van Hollen and Doggett said they are working on legislation that embodies Obama's 100 percent auction approach.

Obama's budget proposal assumes nearly $650 billion in projected revenue from a 100 percent auction of emission credits needed for compliance with a national cap-and-trade system. About $60 billion of the climate revenues would go toward Obama's proposed middle-class tax cut each year beginning in 2012, while another $15 billion per year would go toward the development and deployment of "clean" energy technologies.

White House Office of Management and Budget Director Peter Orszag defended the specifics of Obama's cap-and-trade plan in testimony this week on Capitol Hill. At the House Ways and Means Committee yesterday, Orszag said a permit auction is the most important part of making sure a cap-and-trade program works.

And on Tuesday, Orszag warned the House Budget Committee of the prospect of corporate windfall profits should Congress write cap-and-trade legislation without an auction. "If you didn't auction the permits it would represent the largest corporate welfare program that has even been enacted in the history of the United States," he said. "All of the evidence suggests that what would occur is that corporate profits would increase by approximately the value of the permits."

But not everyone agrees with the 100 percent auction approach.

Duke Energy CEO Jim Rogers supports a cap-and-trade system for controlling greenhouse gas emissions, but he objects to Obama's climate platform. Instead, he favors giving electric utilities free permits for their CO2 emissions. Otherwise, Rogers insists that states dependent on coal will suffer more than states that use more carbon-free hydropower and nuclear power.

"We have to have a transition," Rogers said during a seminar Tuesday on Capitol Hill. "And if you take a look at what's in the budget, there are several things that are obvious: One is it creates a tremendous transfer of wealth from the Midwest and the Southeast to the coastal states."

Rogers also found fault in the revenue programs that Obama focuses in on for returning the revenue, including the middle-income tax cuts. "The second thing it does is it uses the revenue for a variety of purposes other than solving the greatest ecological crisis our climate faces, and that's climate change," he said.

Lead authors of this year's House and Senate climate legislation have not said yet how they will respond to Obama's call for a 100 percent auction, though the signs point to the president's plan having significant traction.

For example, House Energy and Environment Subcommittee Chairman Ed Markey (D-Md.) wrote a cap-and-trade plan last year

that would have sold 94 percent of the program's allowances with the proceeds directed toward tax cuts for low- and middle-income Americans, energy technology research, energy efficiency and adaptation. The remaining 6 percent of the allowances in Markey's bill would have been given away to U.S. manufacturers most vulnerable to trade competition, including producers of glass, cement, steel and pulp and paper.

Rep. Joe Barton (R-Texas), the ranking member of the House Energy and Commerce Committee, remains opposed to global warming legislation. He is also a skeptic on the science linking man-made emissions to climate change. "There are many many bills that new presidents have expected to be law that have yet to become law, and I hope this is one of them," he said in an interview yesterday.

But Barton also acknowledged that he sees the reasoning behind a complete auction of the emission credits if Democrats do proceed to enact a cap-and-trade program. "If you're going to do it, I support the auction because I think that's more equitable," Barton said. "The whole point of it is to try to reduce the amount of what it is that's being auctioned. And the way to do that is to charge for it, and not give it away."

Reporter Alex Kaplun contributed