Controversy over pollution permits

The Capitol Power Plant in Washington, D.C. provides coal-fired energy for Capitol Hill

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Kai Ryssdal: At the White House today President Obama met with Congressional Democrats to talk about global warming legislation. Leaders have said they want to get a bill passed by the end of the year. But before that can happen they'll have to get the rest of the Democratic caucus to come to agreement. Because where a given lawmaker stands on how to control greenhouse gases depends largely on where they're from, and as Sarah Gardner reports now from the Marketplace Sustainability Desk, how they feel about giving something away for free.


SARAH GARDNER: Capping greenhouse gas emissions is the central idea in this year's global warming legislation. Regulators would lower that cap over time. Polluters would then have to either clean up or trade with cleaner companies for the right to pollute. But Congress has a choice: to give those carbon allowances away or make emitters pay. Yale's William Nordhaus says economically, it's a no-brainer. A license to pollute is a valuable commodity.

WILLIAM NORDHAUS: And we shouldn't give it away. Just as we don't give away outer continental shelf oil, we don't give away the airwaves, we shouldn't give away the rights to emit CO2.

President Obama's budget director told Congress cap-and-trade handouts would amount to "the largest corporate welfare program" in U.S. history. And Obama campaigned on auctioning off 100 percent of the permits. He wants to use the proceeds to fund a middle-class tax cut and clean energy R&D. One problem though. Politicians from coal and oil states are balking.

GENE GREEN: I have five refineries in my district and a lot of chemical plants. And even a middle-class tax cut to someone who doesn't have a job doesn't help.

That's House Democrat Gene Green of Texas. He's referring to industries that complain that carbon permits simply increase their costs and put them at a disadvantage to foreign competitors. Refiners are pushing Congress to get 30 percent of their carbon permits free. Electric utilities want 40 percent. Today Henry Waxman, chair of the House Energy and Commerce Committee, said President Obama will give lawmakers "wide latitude" to strike a deal. But David Doniger at the Natural Resources Defense Council is wary.

DAVID DONIGER: You just can't give power generators a lot of free allowances, no strings attached. They just end up with huge windfalls.

Doniger points to Europe as an example. It gave away lots of free carbon allowances. Utilities there pocketed billions by raising electricity rates anyway and selling off excess permits. Johns Hopkins professor Scott Barrett says we shouldn't repeat the EU's biggest mistake: giving out too many permits.

SCOTT BARRETT: And what that means is there's too much of the stuff around and therefore the price at which these permits are traded was too low. And because the price was too low very little was done to reduce emissions.

And reducing emissions, says Barrett, is the whole point of cap and trade in the first place.

I'm Sarah Gardner for Marketplace.

About the author

Sarah Gardner is a reporter on the Marketplace sustainability desk.

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