CLIMATE:

100% emission auction unlikely in Senate cap-and-trade bill -- Bingaman

The final version of Senate cap-and-trade legislation is unlikely to include an auction for all carbon emission credits, the chairman of the Senate Energy and Natural Resources Committee said today.

New Mexico Democrat Jeff Bingaman described the 100 percent auction plan as "a good place to start the discussion."

President Obama's proposed budget assumes a full auction of emission credits that would generate about $650 billion -- most of which would pay for a middle-class tax cut and the development and deployment of clean energy technologies. Allocating emission credits to companies "would represent the largest corporate welfare program that has ever been enacted," said Office of Management and Budget Director Peter Orszag during a House panel hearing Tuesday.

Bingaman likewise maintains that giving away too many credits is a bad idea. The European Union handed out so many emission credits in its cap-and-trade program that it created windfall profits for utilities at the expense of consumers, he said.

"We need to start at the other end of the argument," Bingaman said. The burden should be on industry to push for allowances, and the program should not start with the assumption of a "fairly robust" allocation scheme, he said.

But Bingaman warned that starting with a 100 percent auction "runs the danger or risk of causing a substantial increase in burden" on electric utilities, which would simply pass its costs on to customers.

To help find the proper balance of auction and allocation, Bingaman said he supports setting a ceiling and floor for carbon prices. The Edison Electric Institute's cap-and-trade proposal includes such a mechanism, calling it a "price collar" (E&ENews PM, Jan. 14).

While the Senate is focusing on an energy bill before proceeding to climate legislation, the House is taking a different tack.

House Energy and Commerce Chairman Henry Waxman (D-Calif.) said his panel would approve an energy and cap-and-trade bill by Memorial Day. That schedule might be delayed, since two other committees -- Ways and Means and Agriculture -- have claimed jurisdiction over pieces of the bill.

In the Senate, Bingaman said, the Environment and Public Works Committee would produce the final climate legislation but with a lot of input from his committee.

"Many of my committee members are anxious to be involved," he said. And with 95 percent of U.S. greenhouse gas emissions coming from energy production and use, he added, "I think we have a legitimate concern."

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