Obama Budget Proposal Includes Revenue From Auctioning 100% of CO2 Allowances Under a Cap and Trade Plan

In the budget proposal that President Obama will send to Congress today, the administration has included revenue from auctions of 100% of allowances that will be issued as part of an economy-wide, mandatory cap-and-trade program. It’s a lot of money and the administration has big plans for it.

As highlighted in the President’s joint address to Congress on Tuesday night, the cap-and-trade program is expected to bring in billions of dollars per year. Today’s budget proposal adds the detail that the President intends to direct $15 billion per year from these funds towards renewable and alternative sources of energy such as wind and solar, and wants the money to start flowing in fiscal year 2012. It’s also the first time that the President has called for a 100%, economy-wide auction.

The budget proposal also includes specifics on the caps the President wishes to see — a somewhat odd place to introduce his proposal for legislation that reduces greenhouse gas emissions 14% below 2005 levels by 2020 and 83% below 2005 levels by 2050.

It may be that the President’s approach is intentional. If the proposal were accepted, it would form the fiscal year 2010 budget resolution, a bill that only needs a simple majority to pass. The budget resolution is nonbinding, but still sends a strong statement on the legislative priorities it funds. If Congress were to then pass a law known as a budget reconciliation, it would require key House and Senate committees to pass a climate bill which accounts for the budget resolution’s projections on cap-and-trade funding. This strategy, too, would need only a simple majority, as budget reconciliation bills cannot be filibustered in the Senate. With such a tactic, cap-and-trade advocates would not need to cross the 60-vote threshold that is viewed as a hurdle to passage of other cap-and-trade legislation.

This tactic is not new: four years ago, the Republican majority attempted to open up the Arctic National Wildlife Refuge to oil drilling through the budget reconciliation process, a move that failed in the House when moderate Republicans joined with Democrats to oppose the bill on other grounds.

Whether this is actually what the President has in mind is not yet clear. However, regardless of the administration’s ultimate strategy for enacting a cap and trade program, the budget lays down a very large marker on the side of auctioning 100% of allowances.

One thought on “Obama Budget Proposal Includes Revenue From Auctioning 100% of CO2 Allowances Under a Cap and Trade Plan

  1. I would have thought that this much of an undertaking and this much of a change in policy would have been a leading news item in all the news sources. It should have been! I am glad you saw this and shared it with the rest of us.

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