U.S. climate change legislation is unlikely to pass this year due to concerns about the recession and contention over the implementation of the program, according to energy and carbon market experts.
The current cap-and-trade proposal, introduced by U.S. Representatives Henry Waxman and Edward Markey, would cap carbon emissions and require industry to pay for every ton of greenhouse gases.
I think there might be a window (for it to pass) in the last quarter of the year, first quarter of next year when the economy improves and people can relax a little bit and focus on other things, said Veronique Bugnion, managing director of Trading Analytics and Research at Point Carbon.
If I was going to wage my bets about when it would pass, I would say early next year rather than late this year.
The U.S. House of Representative is currently debating the climate change bill and a key point of debate is whether or not industry will initially receive permits for free or whether all permits will be auctioned off to industry.
Opponents of the bill are concerned climate regulations could hurt an already ailing economy by raising costs for businesses and by pushing up consumer electricity prices.
U.S. President Barack Obama's budget, released Thursday, still plans for 100 percent of permits in a future cap-and-trade system to be sold to industry. Although the president ran on a campaign promise to auction all permits in such a program. He has since indicated that he may be flexible on the issue.
Waxman and other Democratic lawmakers have said they are optimistic that the bill will pass this year, but House Republicans are opposed to any cap-and-trade legislation and instead have called for increasing domestic energy production, encouraging conservation and promoting alternative fuels.
One factor that may pressure Congress to pass a climate change bill is the possibility that the Environmental Protection Agency will take jurisdiction over regulating greenhouse gases in the absence of legislation.
Last month, the EPA declared greenhouse gas pollution a danger to human health and welfare, a move that clears the way for the agency to regulate emissions.
In the question of timing, there is starting to be a big game of chicken between the administration and Congress, Bugnion said.
Although President Obama has said that he would prefer legislation over administrative action by the EPA, the Obama administration will continue to push ahead on having the EPA regulate greenhouse gases until Congress acts, she said.
(Reporting by Rebekah Kebede; Editing by Lisa Shumaker)