House Democrats retool U.S. climate bill

Thu May 14, 2009 5:36pm EDT

Democrats propose additional breaks for industry * Waxman predicts committee approval next week * Republicans offer energy alternatives

By Richard Cowan

WASHINGTON, May 14 (Reuters) - Democrats in the U.S. House of Representatives on Thursday said they were working out final details of a climate change bill, as they announced new breaks for industry that they said would also minimize the potential impact on consumers' energy bills.

"We have reached agreement on most key matters," said Representative Rick Boucher, who represents the coal-producing state of Virginia.

For months, Democrats on the House Energy and Commerce Committee have been in negotiations with themselves as Republicans refused to consider any "cap and trade" program to reduce emissions of carbon dioxide and other greenhouse gases.

The result is a bill that tries to dampen the short-term impact on companies and thus energy prices. For example, the retooled legislation would lower the price of future pollution permits that industry would have to buy, give more rewards for companies that take added steps to corral carbon emissions and give some firms a couple decades to fully transition into the program. [ID:nN14511030]

The chairman of the committee, Representative Henry Waxman, said his panel will debate and pass the bill by the end of next week. That would clear it for other House panels to consider before a debate by the full House, probably by August.

The legislation faces a more uncertain future in the Senate this year.

New details of the measure prompted some criticisms from environmentalists. Union of Concerned Scientists President Kevin Knobloch said the bill now needed strengthening to ensure it "yields the green jobs and consumer savings that the public deserves." The organization was particularly critical of less aggressive alternative energy standards for utilities than originally envisioned.

But under the House Democrats' compromise, electric utilities could get up to $100 billion in bonus carbon pollution permits, if they capture and store their greenhouse gas emissions, Boucher told reporters. He has been a negotiator on the bill.

The legislation would also allow U.S. companies to offset up to 2 billion tons of their emissions by funding green projects in the United States and in other countries, Boucher said.

The bonuses for utilities would be on top of the pollution permits they would be given -- 35 percent of all the free permits to U.S. firms and about 90 percent of the emissions permits they will initially need -- Boucher added.

Waxman and other Democrats were still negotiating some provisions, including whether oil refineries would get any free emissions permits.

Lou Hayden, a policy analyst at the American Petroleum Institute, said his industry is concerned that the bill will penalize it for pollution not only from refineries but also from fuel emissions from cars, airplanes and heating systems.

"We hope Waxman is interested in reducing emissions; we hope he's not interested in punishing industries," Hayden said in a telephone interview.

Under the Democrats' compromise bill, the free emissions permits for electric utilities would begin to phase out in 2026. By 2030, 100 percent of pollution permits would have to be bought by the utilities, Boucher said.

"We are creating a 100-year solution to carbon, but we create a transition to protect the consumers," said Representative Edward Markey, one of the authors of the bill.

Boucher, who had sought a 100 percent giveaway of permits, pledged to support the compromise. But he said he still had several concerns, which he hoped would be addressed, including the target of a 17 percent reduction in overall greenhouse gas emissions by 2020, from 2005 levels. He said 14 percent would be "more appropriate."

Boucher also said the phase-out period for utilities' free permits was too short.

In opposing the Democrats' cap and trade system for reducing harmful emissions, Republicans said it would devastate the already ailing U.S. economy. They said they will offer alternatives next week.

Those will include setting new emission standards for coal-fired utilities that come on line in the future and encouraging the use of nuclear energy as a clean, renewable fuel. Republicans also will relaunch their attempt to expand domestic energy production, including more offshore oil drilling. (Additional reporting by Timothy Gardner in New York and Tom Doggett in Washington)