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Senate cap and trade bill would allocate free allowances

October 27, 2009


The U.S. Senate released a revised version of a climate change bill late last Friday that largely tracks the free emission allowance allocations under legislation approved in late June by the House of Representatives. The Senate will begin three straight days of hearings on the bill Tuesday and may begin voting on the measure as early as next week with a goal of passing a bill by the Thanksgiving Day holiday.
Sen. Barbara Boxer (D-CA) described the legislation as “another milestone as we move to a clean energy future, creating millions of jobs and protecting our children from dangerous pollution” in a statement released Friday night.
The Senate bill would require the US to cut greenhouse gas emissions, or GHG emissions, 20 percent below 2005 levels by 2020, tougher than the House target of a 17% cut by 2020. Both measures call for an 83% cut in GHG below 2005 levels by 2050. The Senate Bill tracks the House language for the distribution of free emission allowances. The free allowances would begin to phase out starting in 2026 and end entirely after 2030, according to a draft of the bill released on Friday. The revised Senate bill would give away 35% of total allowances created under a cap-and-trade program to the electric power sector, with 30% of total allowances going to regulated electric utilities. Merchant coal generators and other independent power producers would receive 5% of total allowances.
The Senate measure also mirrors House provisions that would provide 0.5% of total allowances to local distribution utilities, including rural electric cooperatives. In addition, the revised Senate bill would grant regulated natural gas distribution utilities 9% of allowances while home heating oil and propane consumers would receive 1.5%. The Senate bill again followed the House’s lead in providing free allowances to energy-intensive industries, which lawmakers worry would be put at a competitive disadvantage under a cap-and-trade program. The Senate measure, like the House bill, would provide 4% of all allowances to steel, cement and aluminum makers, in 2012 and 2013. The percentage of free allowances would then increase to 15% in 2014 and 2015, before declining. Oil refiners would receive 2.25% of the bill’s allowances starting in 2014 and ending in 2026 under the Senate bill, unchanged from the House proposal
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