Today in Greenwire, Darren Samuelsohn rightly notes that the big — and by big we’re talking multi-billions of dollars — question around a cap-and-trade system is how the credits are initially allocated. Do you give more to utilities with lots of coal plants, because they need help transitioning to a low-carbon future? Do you give more to utilities with gas and hydro, to reward their low-carbon ways? Do you auction them all? Some mix? You can be sure lots of utility lobbyists are rapidly becoming experts on the subject.
You need a subscription to read the article, so here’s a good chunk — a nice little primer on how various bills handle credit allocation:
Sens. Bernie Sanders (I-Vt.) and Barbara Boxer (D-Calif.) coauthored a bill that has EPA making the most critical decisions, with a qualifier that any allowance allocations would be geared toward people and companies most affected by global warming and its policies. Sen. John Kerry (D-Mass.) introduced his own legislation that caps CO2 but puts the details in the hands of the president and EPA.
Sponsors of other legislation are proposing far more specific allocation methods.
Sen. Lamar Alexander (R-Tenn.), for example, mirrors the 1990 Clean Air Act Amendments in his bill that sets emission caps just for power plants — the source of about one third of U.S. greenhouse gas pollution. The Alexander bill gives about 75 percent of the pollution credits away for free to utilities based on their historic pollution levels — a method favoring the biggest and oldest of the coal-fired power plants.
A bill by Sen. Tom Carper (D-Del.), on the other hand, would give away about 85 percent of the credits to power plants for free based on their energy use. This system, known as an output-based approach, rewards gas companies, nuclear power plants and “clean coal” plants that run more efficiently and produce fewer tons of CO2.
Both the Alexander and Carper plans also phase out the free allocations after about 20 years and turn the credit distribution over entirely to an auction with revenue geared toward technology development and adaptation.
Hybrid approaches also are in play for bills covering the entire U.S. economy, including proposals from Sens. Joe Lieberman (I-Conn.) and John McCain (R-Ariz.), and most recently from Sen. Jeff Bingaman (D-N.M.).
Under Lieberman-McCain, EPA gets to pick how many credits to give away for free and how much to auction. Through the Bingaman bill, about half of the credits go for free to utilities based on historic emission levels. Both the Lieberman-McCain bill and the Bingaman approach gives auction revenue to climate-related adaptation, technology and agriculture efforts.
To date, congressional leaders have not signed off on any idea, so industries have launched a lobbying blitz aimed at designing a program that best suits them. Bingaman told state electric utility regulators in New York yesterday that he was open to changing his allocation approach.
Some of the heaviest lifting on the issue is expected to fall on Lieberman and Sen. John Warner (R-Va.), members of the Senate Environment and Public Works Committee who have vowed to produce a compromise bill from among many different proposals. Lieberman has said he would have a bill ready for introduction by the end of the month.
“They have a big pair of scissors out and they’re ready to cut and paste,” said Bob Baugh, director of the Industrial Union Council at the 9-million member AFL-CIO. “And that’s not me talking.” Baugh, a supporter of the Bingaman approach, said he met last week with staff to Lieberman and Warner.