US carbon giveaways and spending the proceeds

While the Waxman-Markey bill is making its way through Congress, the administration has stopped short of endorsing it, although President Obama is calling for a carbon cap-and-trade scheme to be approved, which is part of the bill, to be approved.

However two crucial aspects of the cap-and-trade system are being worked out “behind the scenes“, writes the New York Times: the number of free permits that will be given away, and where the money raised from the initial auction of permits, expected to raise about $650bn – will be spent.

Under any sort of cap-and-trade scheme, government sets an overall limit on emissions while allowing companies to trade permits, known as allowances, to pollute. But the House draft does not address two central issues. First, it does not say how many of the allowances the government will give away, if any, and how many it will auction. Democrats from states dependent on coal and manufacturing are asking that a sizable portion of the allowances be granted free, to mitigate the costs of the carbon cap.

Second, the legislation does not say what will be done with the proceeds of any auction of permits, estimated in Mr. Obama’s budget proposal to be worth at least $65 billion a year.

Related stories:

Administration stops short of endorsing climate bill (NY Times)
The new US emissions cap-and-trade bill explained (FT Energy Source)

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