Senators seek tweaks in carbon permit plans

WASHINGTON (Reuters) - In the latest obstacle to proposed U.S. climate legislation, key lawmakers on Thursday urged Senate Democrats to change distribution plans for carbon permits to offer more protection for coal-dependent utilities.

The lawmakers said the allocation scheme in the current Senate bill does not apportion permits in an equitable manner and will result in higher electricity rates for consumers in regions that rely mostly on coal for power generation.

The 14 lawmakers who signed the letter mostly hail from heavy coal using states, including Senators Tom Harkin, of Iowa, Byron Dorgan, of North Dakota, and Robert Byrd of West Virginia. Senate Democrats are trying to craft a bill that could receive enough support to be approved by the chamber.

"We believe it is essential that we strive to formulate legislation that equitably distributes transition assistance across individuals, as well as states and regions and economic sectors," the Democratic Senators said in a letter to Senate Majority Leader Harry Reid.

The bill passed by the Senate Environment and Public Works Committee would require polluters to get permits for the greenhouse gases they release into the atmosphere.

Initially, industries would receive most of the permits for free, with local electric distribution companies allocated 30 percent of the free permits. The current formula for divying up those permits would probably lead to higher costs for utilities in more sparsely populated areas where coal use is prevalent.

To remedy this, the lawmakers said permits should be distributed based solely on emissions, without taking sales into account as the current formula would do.

Coal, a major fuel for many U.S. electric utilities, is a big source of global carbon emissions.

"We urge you to ensure that emission allowances allocated to the electricity sector--and thus, electricity consumers--be fully based on emissions as the appropriate and equitable way to provide transition assistance in a greenhouse gas-regulated economy," the letter said.

(Reporting by Ayesha Rascoe; Editing by David Gregorio)