'Cap-and-trade' unusually detailed in budget

The Baltimore Sun

WASHINGTON -Potentially one of the most far-reaching elements in President Barack Obama's budget blueprint is its call to combat global warming with a "cap-and-trade" system for reducing carbon emissions from power plants and other industrial facilities. Overall, it would cut total emissions 14 percent below 2005 levels by 2020 and 83 percent below 2005 by 2050.

The plan calls for setting emissions limits on facilities and tightening those limits each year to achieve the overall goals. Then the government would create permits for specific quantities of emissions - and companies would have to buy enough permits to cover their expected emission levels.

If a facility found it needed more permits - if a power plant operated more hours than expected, for example - the extra permits could be bought, perhaps from a facility that ended up with more than it needed.

Initially, Obama would require emitters to buy permits at a government auction, unlike Europe's cap-and-trade system, which gave a large chunk of its initial permits out for free.

The cost of the permits - which companies could then buy, sell and trade on an open market - would provide an incentive for companies to reduce carbon emissions, especially since emissions limits would tighten each year, boosting permit costs.

From the money raised by selling permits, Obama would allocate $15 billion a year for renewable energy research, starting in 2012. Money beyond that would offset tax cuts for low- and middle-income taxpayers.

The budget estimates those refunds at more than $60 billion a year, which would be 80 percent of the auction revenues.

The proposal is unusually detailed, suggesting that Obama will be reluctant to negotiate with Congress over the specifics of his global warming strategy.

Critics pointed out that, in the short run at least, permit requirements would probably raise costs for industry and prices for consumers. The top House Republican, Rep. John Boehner of Ohio, said it would increase taxes "on all Americans who drive a car, who have a job, who turn on a light switch."

The administration argues that action cannot be delayed.

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