U.S. House climate bill to include free carbon permits

WASHINGTON (Reuters) - A U.S. House of Representatives bill aimed at fighting global warming will allow some polluters access to free permits to emit greenhouse gas emissions in its cap-and-trade system, Democratic Representative Edward Markey said on Thursday.

“There are going to be some free allocations of allowances,” Markey told reporters, without specifying what entities would receive the allowances.

Markey and House Energy and Commerce Chairman Henry Waxman unveiled climate-change legislation last month that would limit greenhouse gas emissions and require companies to acquire permits to emit carbon dioxide.

U.S. President Barack Obama has supported auctioning all carbon permits, essentially making big polluters such as coal-powered power plants pay heavily for their emissions. The White House has indicated flexibility on this point, however.

Markey said backers of the bill are talking with all members of the Energy and Commerce Committee on how to structure the carbon allowances.

“We are working toward finding a formula that can work and deal with the impact on industry and consumers while solving the problem that climate change poses,” Markey said.

As lawmakers work to find the right mix, influential committee member Democrat Representative Rick Boucher of Virginia is planning to unveil a proposal that would give 40 percent of carbon allowances to utilities and 20 percent to industrial companies and refineries, an aide said.

The issue of how carbon permits are distributed will be key to the success or failure of the bill as Republicans have been strongly opposed to the measure. As well, Democrats from heavy industrial states have voiced concerns about placing too much burden on companies by forcing them to buy permits.

Representative Jay Inslee said lawmakers are working to find consensus but that he thinks it is important to have “high level” of auctions.

“It’s the right thing to do because this is a public asset,” said Inslee, a Democrat from Washington. “It doesn’t belong to any one company, it belongs to the public and the public ought to have the benefit of the auction.”

Obama’s climate change plan would use the revenue from the sale of carbon permits for investments in clean energy technology and to offset higher energy costs for consumers through tax breaks.

The committee is holding a hearings marathon this week on the bill that Democratic leaders want approved by the panel by Memorial Day, with a full chamber vote later this year.

U.S. utilities also urged lawmakers on Thursday to provide power companies with free permits to emit greenhouse gases, at least initially.

“Allocating allowances is critical initially in order to cushion the economic impact of climate change legislation on electricity customers,” Jeffry Sterba of the Edison Electric Institute said in testimony to the committee.

Sterba said the institute supports a gradual transition to a full auction system, with utilities being allocated 40 percent of all allowances annually until technology that can trap and store carbon emissions from coal power plants is commercially viable.

Editing by Christian Wiessner