House climate bill aims to minimize price rise

By Richard Cowan and Timothy Gardner

WASHINGTON (Reuters) - Democrats in the U.S. House of Representatives have negotiated a climate change bill that would give industries most of the pollution emission permits they would need, according to documents obtained on Friday.

President Barack Obama has made passage of a bill a top priority and wants demonstrable progress by December, in time for a U.N. climate change meeting at which nearly 200 countries plan to form a pact to succeed the Kyoto Protocol.

In an attempt to ensure enough Democrats back the bill to have it win approval next week in the House Energy and Commerce Committee, the authors agreed to allow oil refiners and natural gas distributors, among others, to enjoy the free permits, at least until 2026.

Democratic leaders hope to win approval by the full House by August, even with Republican opposition. Prospects in the Senate are less certain.

Fifteen percent of emissions permits would be sold to polluters each year with proceeds given to low and medium income families to help pay possibly higher energy bills.

Also, an unspecified number of additional permits would be sold to recoup government costs and ensure the program does not add to already huge federal budget deficits.

By 2026, Washington would begin requiring the sale of a dwindling number of carbon emission permits that were free.

While Obama had called for a 100 percent sale of permits, which would have generated hundreds of billions of dollars in revenues, he has indicated he is open to giving some away.

His spokesman, Robert Gibbs, said administration officials were looking at the large number of free permits being proposed and called the House Democrats' plan a "first step in the process" but a "very positive" one.

Energy Secretary Steven Chu, speaking to reporters after a speech to the National Coal Council, said that even with an initial giveaway of permits, industries were still being warned they must find ways to decrease carbon emissions.

EASING THE BURDEN

Written by Representatives Henry Waxman and Edward Markey, the bill would establish a "cap and trade" system to steadily reduce emissions of greenhouse gases blamed for global warming while also allowing companies to swap pollution permits with each other on an as-needed basis.

But the reforms would inevitably lead to higher prices for consumers as companies switch to more expensive, cleaner fuels, some of which have not yet been developed.

The debate in Congress, coming in the midst of a deep economic recession, required Waxman and Markey to look for ways to ease cost burdens on both consumers and industry.

The result, according to a document obtained by Reuters, is a series of free emissions permits. Oil refiners, for example, would get 2 percent of those permits. They had been seeking 5 percent during protracted negotiations on Capitol Hill.