Washington (Platts)--26Feb2009

President Barack Obama's budget released Thursday assumes $646 billion in
"climate revenues" from the auction of greenhouse gas emission allowances in a
national cap-and-trade system beginning in 2012. The climate program would
raise about $80 billion/year through 2019.

The cap-and-trade system would force utilities, oil refineries and heavy
industry to purchase 100% of their carbon allowances in an auction. In such a
program, each ton of CO2 would have to be auctioned off to the highest bidder
for the right to pollute.

The budget calls for greenhouse gas emissions to be cut 14% below 2005
levels by 2020, and 83% below 2005 levels by 2050.

This White House budget outline represents the first time revenue from a
cap-and-trade system will be factored into the government's budget.

Of the total raised from the auction, $150 billion over 10 years would go
toward clean energy investments, businesses and low-income consumers. The 100%
auction would allow for no "windfall profits," according to the White House.
Many analysts have said such profits have occurred in the European Union
carbon trading scheme when emitters were given pollution credits for free.

The implementation of a 100% auction also means that businesses would
have to start cutting their carbon emissions immediately as part of their
long-term business plans, since they will not receive any allowances for free
in the future.

"Through a 100% auction to ensure that the biggest polluters do not enjoy
windfall profits, this program will fund vital investments in a clean energy
future totaling $150 billion over 10 years, starting in FY 2012," the budget
says. "The balance of the auction revenues will be returned to the people,
especially vulnerable families, communities and businesses to help the
transition to a clean energy economy."

--Alexander Duncan, alexander_duncan@platts.com