Obama’s budget includes revenues from a cap-and-trade programme

Publish date: February 25, 2009

Written by: Charles Digges

US President Barack Obama’s budget blueprint submitted Thursday includes revenues from the sale of greenhouse-gas emission permits to polluters, putting new pressure on Congress to pass emissions cap-and-trade such legislation by early next year – something that would bring America into closer accord with European climate change mandates.

Obama’s backing of a cap-and-trade system puts a challenge to Washington to depart from years of denying the reality of climate change by engaging in combating it – while turning a profit for the federal budget at the same time.

Bellona Europa’s Eivind Hoff noted that the inclusion of a cap and trade system was predicted – and welcome.

“This was widely expected and part of Obama’s campaign promises,” he said. “Now we need to get the Congress moving quickly so that the US is ready to make real commitments in Copenhagen in December.”

Copenhagen will in December host United Nations climate negotiations aimed at producing an international agreement to succeed the Kyoto Protocol. The cap-and-trade system will put the United States on the same page as many other important actors would will hold sway over the negotiations’ outcome.

Complicated patchwork

“The US cap and trade system, if it does not contain any of its previous incompatibilities, will be similar to European Union nations’ climate mandates,” said Svend Soeyland, Bellona’s international policy advisor.

“Should these incompatibilities have been eliminated in the current budget proposal, the a US cap-and-trade system will put the United States on better footing going into Copenhagen.”

Soeyland explained, however, that adopting a federal cap-and-trade system that Obama can send to Copenhagen and Congress will be complicated by individual states’ rights, who may or may not be on board with the programme.

“It is an incredibly complicated patchwork,” said Soeyland.

Anything that will be approved in Copenhagan will also, by law, have to be adopted by US Congress, as well as respect the rights of individual states, whose stance on cap-and-trade vary.

In submitting a 140-page summary to Congress Thursday morning, Obama called his budget an “honest accounting of where we are and where we intend to go."

Lawmakers and the media are still pouring over the figures within the budget to ascertain how much money has been allotted to each line item.

But the preliminary results are that the Obama Administration is aiming at a $3.55 trillion spending plan, much of which would be aimed at halving America’s $1.74 trillion deficit, according to televised remarks by Peter Orzag, director of the White House’s Office for Management and Budget.

As of midday in the United States on Thursday, Obama’s budget blueprint assumes at least $75 billion in revenues from a “cap-and- trade” programme starting in 2012, said administration officials.

About $15 billion would be used for investments in “clean” energy, and about $60 billion would help finance a tax credit for some workers. Funds also would offset higher energy costs for low- and middle-income people, White House officials said.

Stemming the ‘end of civilization’
Democratic leaders in Congress are being pressured to set a mandatory cap on carbon-dioxide pollution, which scientists say is causing rising temperatures, rising sea levels and erratic weather patterns throughout the world – a phenomena former Vice President and Nobel Peace Prize winner Al Gore said “could completely end human civilization.”

Dan Weiss, director of climate strategy for the Washington-based Center for American Progress, said: “The Obama administration is now upping the ante for action in this Congress” by throwing down the gauntlet on passing a cap-and-trade system.

The cap-and-trade programme favored by Obama would set limits on carbon-dioxide emissions and let companies trade pollution allowances on a market.

Congress would have to pass legislation this year or early in 2010 for the system to be operating and providing revenue by 2012, said David Doniger, policy director of the Washington- based Natural Resources Defense Council’s climate center, Reuters reported.

Some companies, including General Electric Co., say they want a cap-and-trade program because it would spur investment in “green” technologies, the Bloomberg financial news wire reported. 

The Congressional Budget Office estimates money generated from the sale of pollution credits may ultimately range from $50 billion to $300 billion a year, according to its website.

Departure from Bush ideas
Former President George Bush opposed such a measure, arguing that it would cost jobs and harm the economy. Senator James Inhofe of Oklahoma, the top Republican on the Environment and Public Works Committee, says a system capping emissions would cost taxpayers as much as $330 billion a year.

Senate Majority Leader Harry Reid of Nevada and House Speaker Nancy Pelosi of California, both Democrats, have said they want to pass climate-change legislation capping emissions this year, they said in televised comments.

Democratic majority not enough for budget passage

Even though Democrats have majorities in both chambers of Congress, that doesn’t assure passage. Democrats split regionally on climate-change initiatives, as lawmakers from rural districts and manufacturing and coal states – particularly Democratic members of the Senate and Congress from Michigan, the US capital of auto making – seek to protect local industries and jobs, especially during the current recession.

Indeed, Republican Senator Richard Lugar, the ranking Republican on the Senate Foreign relations committee who has worked closely with Obama, has suggested an alternative to a cap-and-trade system that would fix an 18 cent per gallon tax on gasoline. In a recent op-ed piece in the Washington Post, Lugar argued that increasing the federal gasoline tax would be a better way of persuading Americans to be more energy efficient.

Such a system, argued Lugar, would be transparent, easy to manage, and targeted at the sector that that burns most oil in the United States. Lugar’s suggestion will likely be a flashpoint of debate while Congress works to pass the legislation during 2009.

Support from energy giants
Along with General Electric, Obama has backing for a market-based cap from companies including Duke Energy Corp. and investors such as BlackRock Inc., the biggest publicly traded asset manager in the US, Bloomberg reported.

Environmentalists praised Obama’s willingness to put cap- and-trade assumptions in his budget plans.

“Barack Obama had made this a priority during the campaign,” said Tim Greeff, deputy legislative director at the Washington-based League of Conservation Voters told Bloomberg.

“What this shows is President Obama has the full intention of coming through on this issue.”