A source close to Obama once told me, when I asked how serious the White House is about getting a climate bill this year, to watch the budget. If permit auction revenue is included, that should send a clear signal that this was no empty campaign promise.

Obama’s budget outline won’t be released until Thursday, but the New York Times has an early preview that includes this:

On energy policy, Mr. Obama’s budget will show new revenues by 2012 from his proposal to require companies to buy permits from the government for greenhouse gas emissions above a certain cap. The Congressional Budget Office estimates that the permits would raise up to $300 billion a year by 2020.

This is fairly sketchy. It doesn’t say anything about the amount of new revenues projected by 2012, which would be a tip-off about the strength of the targets and the percentage of auctioned permits the administration expects. Perhaps on Thursday we’ll get a clearer picture. But at the very least, this is an unmistakable sign that they’re serious about a cap-and-trade program with (some) auctioned permits, and soon.

Now, here’s a part I’m not as thrilled about:

Since companies would pass their costs on to customers, Mr. Obama would have the government use most of the revenues for relief to families to offset higher utility bills and related expenses. The remaining revenues would cover his proposals for $15 billion a year in spending and tax incentives to develop alternative energy.

There are lots of fans full rebating (sending back 100 percent of tax or auction revenue to taxpayers) in the Grist community. I am not one of them. I am not even particularly a fan of rebating "most" of auction revenue. The fact is, we need enormous public investments in green energy and infrastructure — far beyond $15 billion a year. Rebates should be the minimal necessary to compensate those hardest hit by higher energy prices, and the rest of the revenue should go to investments in a green economy. After all, the best way to provide long-term relief to American consumers is to accelerate the clean energy transition.

How much revenue is necessary for sufficient rebates? The Center on Budget and Policy Priorities did a study in late 2007 and determined that 14 percent of auction revenue could "hold low-income consumers harmless." The CBPP recently updated that report to show what it would take to extend the rebates to middle-income consumers. ("Policymakers have expressed interest" in handing out some money to "consumers with somewhat higher incomes." Ahem.) The whole report is worth reading, but for our purposes here’s the relevant conclusion:

Because a rebate program aimed at middle-income as well as low- income households would go to more people and provide larger rebates, it would require more funding. The Center’s low-income rebate program can be funded with about 14 percent of the total market value of the emissions allowances under a cap-and-trade program (or 14 percent of the revenues from a carbon tax). A rebate that would offset the average purchasing power loss of consumers in the next higher quintile would require about 35 percent of the total value of the allowances and one to offset the average loss of the middle 20 percent of the population would require about 55 percent of the total allowance value.

Now, people can disagree about the relative policy value of rebating money back to the middle 20 percent of the population vs. having 20 percent more auction revenue to plow into, as the CBPP puts it, "research and development on alternative energy, conservation efforts and energy efficiency investments, transition assistance for workers and communities harmed by the shift to a less carbon- intensive economy, adaptation to the impacts of climate change here and abroad, green job training, and offsetting impacts on federal, state, and local budgets." I happen to think the latter represent far better investments than the former.

But I can’t see any policy rationale for spending more than 55 percent of the revenue on rebates. Given, 55 percent is "most," so maybe that’s what Obama’s people have in mind. Still, the paucity of their proposed investments indicates that they might have a bigger percentage in mind. That would be, in my humble opinion, a considerable wasted opportunity.