Washington (Platts)--7Oct2008

The jurisdictional committee in the US House of Representatives Tuesday
released a draft bill to cut greenhouse gases 80% across the US economy by
2050 from 2005 levels through an emissions cap and allowance trading system.

Under the proposal from the House Energy and Commerce Committee, sources
required to meet the emission controls include power plants, petroleum and
other fossil-based fuel producers and importers, large industrial facilities,
natural gas local distribution companies and importers and producers of other
bulk gases.

Emission limits would start at 6% below 2005 levels by 2020 then increase
to 44% below 2005 levels by 2030 before tightening to 80% reductions.

To limit compliance costs, the covered entities could bank and borrow
emission allowances to aid their compliance. If the allowance price hits a
pre-determined level, a "strategic reserve" of additional allowances could be
auctioned, according to the proposal.

The draft bill further permits emitters to use an increasing number of
domestic and international offsets as emission reduction requirements become
tighter. By 2024, emitters would be able to use offsets to fulfill 35% of
their compliance obligations.

The draft bill offers four options for how emission allowances could be
distributed. The include providing free allowances to the regulated emitters
or a mix of fewer allocations to industry and more to other programs that
reduce greenhouse gases. A third option would direct allowance value to
adaptation and international programs and a fourth option would use most of
the allowance revenue as rebates to consumers for higher energy prices.

The draft bill proposes to go to a 100% auction of emission allowances by
2026 with proceeds returned to taxpayers unless Congress reauthorizes the
measure before then.

Climate change legislation is expected to top the congressional agenda
next year as both presidential candidates Democrat Barack Obama and Republican
John McCain have pledged to address global warming and control the nation's
carbon emissions.

In circulating the draft bill to their House colleagues, Energy and
Commerce Committee Chairman John Dingell, a Michigan Democrat, and Energy and
Air Quality Subcommittee Chairman John Boucher, a Virginia Democrat, are
circulating the proposal with the goal of crafting a bill "that can be
enacted quickly and lead to regulations that can be implemented with a minimum
of administrative or legal impediments."