Obama’s Final Budget Calls for 100% Auction of Carbon Permits

May 8, 2009

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President Obama’s final $3.6 trillion budget blueprint, released May 7, retains the controversial provision that all permits for carbon emissions will be auctioned.

Many in Congress are pushing for at least half of the permits to be given away.

If all emission permits are sold, that should pull in $646 billion in revenue during the course of the first few years of the program.

When asked if the President’s plan to auction all permits would stay in place when more details about the budget request are released next week, White House budget director Peter Orszag said to “anticipate no changes in our climate proposal,” reports Reuters.

One way or another, the cap and trade proposal will result in higher energy prices, said the nonpartisan Congressional Budget Office

“Giving away allowances is effectively the same thing as selling them and giving the proceeds from the auction away,” the CBO’s David Elmendorf told the Senate Finance Committee, adding that the main point of cap and trade was to force lower emissions, not raise money.

Over 10 years, the auction of emissions could net $1.2 trillion dollars, Elmendorf said, indicating that consumers could expect the extra costs to show up in their electrical bills.

The National Mining Association said the $180 million in the budget for research and development of carbon capture and sequestration (CCS) was “not enough,” reports the New York Times.

Nuclear power growth may suffer under the new budget. This year, the Nuclear Power 2010 Program received $177 million but the new budget gives it only $20 million next year, according to the Times.

The budget also does not include funding for the Yucca Mountain nuclear waste storage site, meaning the costs of accounting for nuclear waste will go up, making the energy more expensive, said the Nuclear Energy Institute.

The Department of Energy’s portion of the budget includes millions for renewable and next-generation energy efforts, including:

$475 million for a variety of renewable sources of electrical generation such as solar, wind, and geothermal
$671 million to accelerate the deployment of clean and rapidly deployable energy conservation measures to reduce energy consumption
$238 million for the Building Technology Program
$174 million to invest in research and development for a smart electrical grid
$333 million to develop lithium-ion batteries, plug-in hybrids, drive-train electrification, as well as test new fuels blends
$20 million for administrative costs to help enable the Advanced Technology Vehicle Manufacturing Loan Program
$383 million for research and development of advanced nuclear technology and fuel cycle technologies
$133 million for the Energy Information Administration (EIA) to improve energy data and analysis programs

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Reader Comments

“the main point of cap and trade was to force lower emissions, not raise money.” If that is the truth, then give the permits away! Point taken Mr. President.

Ima | May 8th, 2009

ah, if only assigning cap and trade credits to businesses were enough to make them stick to it… what a world it would be, Ima. I doubt we’d even be talking about this now, it wouldn’t have been necessary. The only way anyone is going to care about carbon emissions or any other unwanted end is to charge them for it. THAT is what they meant. I do think that this is overreaching and possibly (but not definitively) punishing the wrong people, but severe recessions call for cuts for everyone–the money has to come from somewhere.

newphase75 | May 8th, 2009

The main problem is that cap and trade will be paid for by the consumer. All costs will be passed on to the consumer and the majority of citizens are not willing to pay energy bills that double or triple.

Andy | May 9th, 2009

How does anyone know that giving the permits away won’t reduce emissions when it hasn’t been done? Give the permits away first to see if in fact it does result in lower emissions. If the emissions are not lower, then charge for them. I guess greed doesn’t think like this though.

Ima | May 12th, 2009