Obama Science Chief Holdren Hints at Compromise on Auctions of Cap-and-Trade Emission Allowances

John P. Holdren, head of the White House science office, said that if a cap-and-trade system for emissions is put in place, the administration might agree to auction the allowances in a way that would please factories and utilities.
John P. Holdren, head of the White House science office, said that if a cap-and-trade system for emissions is put in place, the administration might agree to auction the allowances in a way that would please factories and utilities. (By Gerald Martineau -- The Washington Post)
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By Juliet Eilperin
Washington Post Staff Writer
Thursday, April 9, 2009

The Obama administration might agree to auction only a portion of the emissions allowances granted at first under a cap-and-trade system to limit greenhouse gas pollution, White House science adviser John P. Holdren said yesterday, a move that would please electric utilities and manufacturers but could anger environmentalists.

In one of his first interviews since being confirmed March 19 as director of the White House Office of Science and Technology Policy, Holdren said a group of Cabinet-level officials is trying to establish principles to guide the climate legislation that has just begun to move in Congress.

During the presidential campaign, Obama called for auctioning off all the emissions permits issued at the outset of a cap-and-trade system, rather than auctioning some of them and giving the rest away. Industries would buy and sell the allowances in an open market as the cap on total emissions was gradually lowered. Many industry leaders say that having to pay for all the allowances at first would drive up energy costs too quickly.

"The idea, obviously, is to end up with a bill that reflects both the thinking of Congress and the administration, a bill that the president can sign," Holdren said, adding of a 100 percent auction, "whether you get to start with that or get there over a period of time is something that's being discussed."

Holdren's comments shed light on the administration's behind-the-scenes effort to shape national climate policy, an issue that Obama has identified as a top priority but has so far left largely to lawmakers to flesh out.

Last week, House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) and Rep. Edward J. Markey (D-Mass.), who chairs the panel's energy and environment subcommittee, released a draft climate bill that they have vowed to send to the full House by Memorial Day. The Senate Environment and Public Works Committee, which has primary jurisdiction over the issue in the upper chamber, has yet to take up a bill.

In an e-mail, White House spokesman Ben LaBolt wrote that Obama "said during the campaign that his preferred approach was a 100 percent auction to create incentives for companies to reduce their greenhouse gas emissions" and continues to back that goal. "Members of Congress are looking at a variety of policy options to help us make that transition, and the administration will be flexible during the policymaking process as long as those larger goals are met," LaBolt said.

For weeks the president's assistant on energy and climate change, Carol M. Browner, has convened regular meetings with roughly a dozen key administration officials to develop national energy and climate policy. They include Holdren; the secretaries of agriculture, commerce, energy, housing and urban development, interior, and transportation; and the heads of the Environmental Protection Agency and the White House's Council on Environmental Quality, National Economic Council, Council of Economic Advisers and Office of Management and Budget.

The group, whose deputies meet at least once a week, has explored questions such as how to pursue offshore wind energy, agricultural practices and a new national greenhouse gas emissions standard for vehicles.

Keith Trent, chief strategy, policy and regulatory officer for Duke Energy, said his company is hoping for at least a 10-year transition period to a 100 percent auction so it can install emission controls without raising electricity costs too high. He added that emitters would still have an incentive to cut carbon dioxide because of the overall federal cap on carbon emissions: "The cap is what makes the system's environmental integrity, and you can't exceed that cap because you need an allowance to do it."

But environmental advocate Erich Pica, director of economic programs for Friends of the Earth, said giving utilities free allowances would be less efficient than rebating the revenue from auctions directly to taxpayers. A 100 percent auction, Pica said, "forces the polluters from Day One to pay for the transition to a clean energy economy, and keeps low- and middle-income consumers whole during the transition."

Holdren, a Harvard physicist who served as president of the American Association for the Advancement of Science and was one of President Bill Clinton's scientific advisers, was an outspoken proponent of addressing climate change while in academia. He said in the interview that the time has come to stop debating precise targets for curbing greenhouse gases and to settle on an overall trajectory for reducing them.

He compared the way humanity is facing dangerous climate change to passengers in a car with bad brakes heading toward a cliff in a fog. Holdren said, "The sensible passengers will certainly say: 'Let's put on the brakes, even if we don't know it will save us. It may be too late. We don't know exactly where the cliff is. . . . Let's get on with it.' "

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