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Distribution of CO2 permits in U.S. Senate bill

I hope Reuters won’t mind me reproducing their short piece a few days ago on where CO2 permits will perhaps become law quite soon. (If they do I’ll take it down!)

It provides an interesting breakdown of how they will likely be allocated.

Worth a read.

“(Reuters) – The climate bill introduced by Democrats in the U.S. Senate would initially give away the majority of permits to emit greenhouse gases to entities like electricity distributors and big energy users, such as steel and cement plants, in a cap-and-trade program.

The distribution of the permits in the Senate bill, announced late on Friday, was similar to that of the bill that was narrowly passed in the House of Representatives in June.

There were some changes. Oil refiners, for example, made out slightly better, getting 2.25 percent of the permits instead of 2 percent. The Senate bill would also auction more of the permits than the House bill.

To avoid windfall profits for big polluters, an aim of the bill would be to give the permits, worth billions of dollars, to power and natural gas distributors rather than big fossil fuel-burning power plants. The idea is that the distributors, which are regulated by the states, would pass on breaks to consumers through lower bills or investments in energy efficiency.

The legislation can still be amended and it’s unlikely the Senate will act this year on climate change amid opposition from many Republicans and some moderate Democrats, as well as Congress’ preoccupation with healthcare reform.

Below is a breakdown of how most of the permits would be distributed in the Senate bill.

PERMITS TO BE AUCTIONED: 25 pct

– Fifteen percent with proceeds pushed to low- and moderate-income households to protect them from rising energy costs from cap and trade. Would increase to 18.5 percent of permits auctioned after 2029.

– Ten percent with proceeds going to reducing the deficit from 2012 to 2029, increasing to 22 of permits in 2030.

THE REST OF PERMITS TO BE GIVEN AWAY INITIALLY TO:

LOCAL ELECTRIC DISTRIBUTION COMPANIES 30 pct

– Distributors, which are regulated by the states, must use the allocations to protect consumers from electricity price increases.

– Allocations to phase out from 2026 to 2030.

MERCHANT COAL, LONG TERM POWER PURCHASE AGREEMENTS 5 pct

HEAVY INDUSTRIES LIKE CEMENT AND STEEL 4 to 15 pct

– Allocations would start at 4 percent in 2012 and 2013, then move to 15 percent through 2015. They would start to decrease after that.

STATES 4 to 10 pct

– For investments in renewable energy and energy efficiency. Would start at 10 percent then slip to about 4 percent in 2022.

LOCAL NATURAL GAS DISTRIBUTION COMPANIES 9 pct

– Also regulated by the states, must be used to protect consumers from rises in natural gas prices

– Phases out from 2026 to 2030

NUCLEAR

– Training for workers 0.5 pct

TROPICAL DEFORESTATION OFFSETS 5 pct

ADVANCED AUTO TECHNOLOGY 3 pct

OIL REFINERS 2.25 pct

CARBON CAPTURE AND STORAGE 1.75 to 5 pct”

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