Inslee Cap Included in House Climate Legislation

By Chris Kissel April 2, 2009

Rep. Henry Waxman (D-CA,30), chair of the House Energy and Commerce committee, introduced a draft version of a comprehensive climate change bill yesterday. Included in the bill is legislation proposed by Rep. Jay Inslee (D-WA,1) that would establish a cap-and-trade system where some polluters could get emissions permits from the government without paying for them.

Inslee's plan is one of two competing ideas that have emerged from the Washington State delegation that tweaks the standard cap-and-trade system (where companies buy permits from the government and trade them in a carbon permit market) floated by the Obama Administration . The other, a bill by Rep. Jim McDermott (D-WA,7) that I posted about on Monday, adopts an even stricter stance on polluters, where companies must buy permits from the government, but are not allowed to trade them. 

Inslee's bill gives emissions permits away for free to select companies and doesn't prohibit those companies from trading them. The goal of Inslee's bill, his office says, is to avoid forcing companies that are facing expensive permits from sending jobs overseas in a time of economic crisis. It also helps Waxman, an Inslee ally who helped Inslee's energy decoupling amendment into the stim package, assuage concerns on both sides of the aisle that a new cap-and-trade scheme could cause an untimely spike in energy prices. 

The text of Inslee's emissions rebate bill hasn't been made public yet and Inslee's office didn't return a call yesterday, so it's unclear which specific companies would be exempt from paying for the allowances. "[The] provision is critical for industries that are important to the Northwest economy, including aluminum, wood product processing, cement production, and metal recycling," reads an Inslee press release, which also touts the endorsement of Seattle-based Nucor Steel.

Two other Inslee bills, like a bill that mandates a low carbon standard for transportation fuel and a bill that regulates black carbon emissions, were also included in the Waxman legislation.

UPDATE: I got ahold of Inslee's office, and they emphasized that the goal of giving some emissions credits away for free is insuring U.S. industry doesn't lose out on the world market after the adoption of strict cap-and-trade system. "If we move first on [cap and trade], companies that are vulnerable may have to move jobs overseas," Inslee spokeswoman Torie Brazitis told PubliCola.

Concern voiced in the Senate right now, specifically on the GOP side, over a spike in energy prices that would follow an emissions cap, is theoretically addressed in Inslee's plan (as well as McDermott's) because government revenue from the emissions allowances is given back to consumers, possibly in the form of a utility bill credit. "The revenue goes directly back to people," said Brazitis. The idea that energy prices will spike is "a false argument. They're using a false formula," she added.

About 15 percent of emissions allowances under the Waxman cap-and-trade plan would be given out for free, and manufacturing facilities would have to prove that they are in the top range of both energy use and trade sensitivity to qualify for the allowance, according to testimony from an Energy and Commerce hearing last month. Forty-one industries qualify for the free credits, includingthe aluminum, iron, steel, paper, cement and chemical sectors.

P.S.-Sightline has a good, in-depth post up now in which they engage the McDermott plan on a deeper level.

Filed under
Show Comments