Any climate bill that passes the Senate is unlikely to adhere to an Obama administration plan that the government auction all of the permits to emit greenhouse gases because it would be too harsh on big industry, a key democratic lawmaker said on Thursday.
Instead, Senator Jeff Bingaman said any system capping and trading emissions developed by Congress will likely include a mix of carbon allowances that are given to polluters -- like cement factories and coal-burning power plants -- and the sale of permits.
President Barack Obama promised during his presidential campaign that he would support a so-called cap and trade system that would put a price on carbon emissions that cause global warming. Obama's plan would require companies that emit more than the limit to purchase all emission permits, to help raise funds for clean energy technology.
Auctioning 100 percent of the permits would essentially make polluters quickly pay for their emissions. In the European Union's Emissions Trading Scheme emissions permits were given away to polluters at first which led to a glut of permits and windfall profits for some emitters.
Bingaman, chairman of the Energy and Natural Resources Committee, said he thinks the chances of passing a climate change bill are reasonably good, but it is not probable that the Senate would approve legislation that does not provide companies with some free allowances for their carbon emissions.
I think it's unlikely we will pass a cap and trade bill with 100 percent auction, Bingaman told reporters at the Platts Energy Podium.
He said such a system has the risk of substantially increasing the burden on some utilities and major emitters.
I don't know that you can properly buffer that without some allocation of allowances in ways other than auctioning, Bingaman said.
He added that at least in the beginning of a cap and trade system it will be necessary to give away some permits, but lawmakers will have to evaluate how many allowances to give out and what industries will receive them.
There needs to be a substantial burden on anyone who would claim a right to an allowance without having to buy it at auction, Bingaman said.
In his budget approval released last week, Obama reiterated his support for a cap and trade system that auctioned 100 percent of permits. Obama's budget proposal estimated the government would receive $646 billion from such a program from 2012 to 2019.
Obama proposed that the proceeds from the cap and trade system would go toward investing $15 billion annually in clean energy technology and a making work pay tax credit.