Date: 02-Feb-10
Country: US
Author: Jeff Mason and Timothy Gardner
 

The cover of U.S. President Barack Obama's 2011 Budget is seen as copies are unpacked for distribution to Senate staff on Capitol Hill in Washington February 1, 2010.
Photo: Jonathan Ernst

WASHINGTON - The White House on Monday dropped prospects for revenue from a climate cap-and-trade system opposed by many lawmakers, but its proposed budget still called for a "market-based" policy to fight climate change.

Last year the administration forecast revenues of $646 billion for 2012-2019 from a program in which the output of greenhouse gas would be capped and polluters would be forced to buy, and could later trade, emissions permits.

"Unlike last year, we do not show an assumed amount of cap-and-trade revenue since the exact nature of the legislation remains in flux," an administration official told Reuters.

As a bill to tackle climate change was stalled in the Senate amid opposition from lawmakers from coal-and oil-producing states, the omission of the revenues shows uncertainty about how much revenue can be generated.

It also shows a wariness that revenues could be seen by some lawmakers as a tax on oil and coal companies that would raise energy prices.

"Keeping the revenues out of the budget is a political calculation to make it harder for skeptics to characterize cap-and-trade as a tax," said Michael Levy, a climate expert at the Council on Foreign Relations.

Obama pledged during his campaign to auction 100 percent of the credits in the early years of an emissions trading system, an assumption that was included in last year's budget.

But the climate bill passed by the House of Representatives would auction only 15 percent of the permits, while most of the rest would be given away at first to polluters.

In another compromise, the budget on Monday tripled loan guarantees for new nuclear power plants to $54.5 billion in a bid to win votes for the bill from Republican lawmakers.

NO CARBON TAX, FORGING AHEAD

Some have wondered whether Obama would pursue another type of climate legislation this year such as a carbon tax.

The proposed budget for the fiscal year to September 30, 2011, said the administration would push for a "market mechanism" to reduce U.S. greenhouse gas emissions by roughly 17 percent in 2020 compared to 2005 levels.

"The President doesn't support a carbon tax, so the market mechanism is cap and trade," a White House official said.

The emissions reduction targets in the budget are in line with those Obama has pledged at an international level.

"I don't think you can read anything into the budget about the administration's wavering on a commitment on a comprehensive climate bill," said Evan Ard from Evolution Markets, a carbon and energy broker based in New York.

"The idea is to set a target for reducing emissions and setting up a program that hopefully allows you to do it at low cost; it's not about generating revenue."

The budget unveiled on Monday is subject to change by Congress.

White House aides are working to advance climate legislation among lawmakers, and the budget includes the loan guarantees for new nuclear power plants as well as $545 million for capturing and burying carbon emissions from utilities to win over skeptical Republicans.

A Senate bill is still in the works, but chances of passage appear dampened by the congressional election in November as lawmakers fear being punished for supporting a measure that some say would increase energy costs.

A climate law is crucial to Obama's efforts to get international momentum behind efforts to fight global warming and craft a follow-up pact to the Kyoto Protocol. The administration last week formally embraced the Copenhagen Accord on global warming.

The budget also said the United States "will take prompt, substantial action to help vulnerable countries adapt and build resilience to the effects of climate change."

The administration is also pushing the federal Environmental Protection Agency to move toward regulating greenhouse gases in an effort to push companies to support climate legislation.

The budget includes more than $6 billion in funding for clean energy technologies, with a focus on research, development and demonstration projects, the White House said.

(Editing by Russell Blinch and Vicki Allen)