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White House Open to Giving Away Some Emissions Permits

President Obama has consistently called for all emissions permits to be auctioned off to polluters under a cap-and-trade scheme to produce strong and immediate

Jul 31, 202073829 Shares1845736 Views
President Obama has consistently called for all emissions permits to be auctioned off to polluters under a cap-and-trade scheme to produce strong and immediate incentives to reduce carbon emissions. But today White House science adviser John Holdren told The Washington Postthat the administration would consider phasing in a full auction by initially giving away some permits for free.
Most environmentalists support a 100 percent auction, but the ambitious and comprehensive Waxman-Markey energy and climate billreleased last week was largely silent on the issue, leaving open the possibility that some permits might be distributed without an auction. Utilities and pollution-heavy industries tend to oppose an 100 percent auction, which could cost them a great deal. If Obama endorses a partial auction, it would likely be to win over some moderate senators from coal- and heavy industry-reliant states.
The Post piece presents the two opposing arguments:
Keith Trent, chief strategy, policy and regulatory officer for Duke Energy Corp., said utility executives are hoping for a 10-year transition to a 100 percent auction so they can install pollution controls without raising electricity costs too high. He added that emitters would still have an incentive to cut carbon dioxide because of the overall federal cap on carbon emissions: “The cap is what makes the system’s environmental integrity, and you can’t exceed that cap because you need an allowance to do it.”
But environmental advocate Erich Pica, director of domestic programs for Friends of the Earth, said giving utility providers free allowances would be less efficient than rebating the revenue from auctions directly to taxpayers. A 100 percent auction, Pica said, “forces the polluters from Day One to pay for the transition to a clean energy economy, and keeps low and middle-income consumers whole during the transition.”
Given the strong opposition that cap-and-trade has faced, a partial auction would not be a huge surprise. However, it would still represent a major concession by the Obama administration on one of the president’s core agenda items.
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