Monday, February 1, 2010

Obama budget outlines CO2 market without revenues

From Reuters:

The White House called on Monday for Congress to endorse a "comprehensive market-based policy" to fight climate change, while dropping from its proposed budget projected revenues from a cap-and-trade system many lawmakers oppose.

Last year the Obama administration forecast revenues of $646 billion in the years 2012-2019 from an emissions trading program that formed the crux of its proposal to fight global warming.

But the climate legislation is now stalled in the U.S. Senate and cap-and-trade, which sets limits on greenhouse gas emissions and allows companies to trade permits to pollute, may be cut from a final bill if one is passed.

"The $646 billion revenue projection is no longer in the budget," an administration official said.

"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," the official told Reuters.

The budget tripled loan guarantees for new nuclear power plants to $54.5 billion, however, in a bid to win votes for the bill from Republican lawmakers.

The emissions trading system had been key to President Barack Obama's plan to reduce emissions blamed for global warming. He did not mention cap-and-trade last week in his State of the Union address, but did call for Congress to pass a comprehensive climate bill.

Some interpreted his omission of cap-and-trade as a signal that he would not actively pursue wide-ranging climate legislation this year.

The White House rejects that interpretation. The proposed budget for the fiscal year to September 30, 2011, said the administration would push for a market-based mechanism to reduce U.S. greenhouse gas emissions roughly 17 percent in 2020 and more than 80 percent by 2080 compared to 2005 levels.

That is in line with targets Obama has pledged at an international level.

The budget said businesses would have flexibility to find the least costly ways of cutting emissions, such as investments in offsets at farms or in clean energy project offsets abroad.

"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 the 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.

The official said the administration would insist any climate legislation be paid for without adding to the deficit. The deficit has become a major headache for the administration as it seeks fiscal responsibility while still needing to tend a fragile economic recovery....MORE