Obama’s cap, trade irk some in party

Senate Democrats are breaking with President Obama over his plan for sweeping new climate-change laws that he says will rake in billions of dollars to help offset massive budget deficits.

The dissenters, mostly Democrats from Rust Belt states likely to be hit hardest by the proposed environmental rules, question the economic impact of the program that would cap carbon-dioxide emissions and then sell to businesses the right to emit that carbon dioxide.

The senators also want their states to get a chunk of the windfall from selling the credits - $646 billion over 10 years by Mr. Obama’s estimate.

“We should ensure that revenue generated by a cap-and-trade system goes back to the consumers, states and industries that are most affected by the changes,” said Sen. Sherrod Brown, Ohio Democrat.

But Mr. Obama wants to spend about two-thirds of the money on tax cuts for low- and middle-income families to soften the bite of higher energy prices expected to result from the cap-and-trade law.

He also wants to move fast, passing the legislation within the next year in order to start collecting by 2012 what the administration calls “climate revenue.”

Mr. Brown and other Democrats with misgivings about the proposal said they share the president’s commitment to addressing climate change and decreasing U.S. dependence on foreign oil. But they wondered at what cost.

Sen. John D. Rockefeller IV, West Virginia Democrat, said the administration and Congress must not ignore other climate-change solutions, such as scientific research into capturing carbon dioxide and sequestering it in the ground.

“The president’s plan for a cap-and-trade system is ambitious, but the senator is not completely convinced that it is the best or only solution to curbing carbon emissions,” Rockefeller spokesman Steven Broderick said. “We need to be sure we don’t negatively impact the economy.”

Similar concerns among a significant faction of Senate Democrats helped kill a somewhat less ambitious cap-and-trade bill last year. This time, however, the effort will benefit from White House support that was absent under President Bush.

But dissatisfaction among rank-and-file Senate Democrats is not the only potential pitfall.

The plan’s massive scope and high price, as well as a rapid implementation schedule, provide a large target for opponents and give pause to some would-be supporters.

“We want to thank the administration for killing all industry support for cap-and-trade,” said William Kovacs, the top energy specialist at the U.S. Chamber of Commerce. “President Obama has consolidated the opposition.”

Even the Edison Electric Institute, the utility lobby that bucked other energy lobbies to endorse last year’s cap-and-trade bill, said Mr. Obama’s proposal was too aggressive.

“We much prefer the model that we have articulated,” EEI spokesman James Owen said, because green technologies are still being developed and the company feels that moving too quickly into a full-blown cap-and-trade system will be a costly burden both for utilities and their customers.

The White House’s allies shrug off such complaints, saying Mr. Obama is merely making good on his campaign promises.

“The only way industry should be surprised by this is that they haven’t paid attention for the last 18 months,” said Daniel J. Weiss, director of climate strategy at the Center for American Progress, a liberal Washington think tank.

Sen. Barbara Boxer, California Democrat and chairman of the Environment and Public Works Committee, heralded the president for presenting “a clear path toward passage of a strong global-warming bill.”

“With the latest science on global warming pointing to the need for urgent action, this breakthrough comes not a moment too soon,” Mrs. Boxer said. “This budget makes it clear that President Obama fully intends to keep his promise to prevent the ravages of global warming while investing in clean energy that will lead to a brighter economic future.”

Still, 15 Senate Democrats have signed on to a letter stating principles for cap-and-trade legislation that would “ensure that consumers and workers in all regions of the U.S. are protected from undue hardship.”

The signatories include Mr. Brown, Mr. Rockefeller, Sens. Debbie Stabenow and Carl Levin of Michigan, Blanche Lincoln and Mark Pryor of Arkansas, Jim Webb of Virginia, Evan Bayh of Indiana, Claire McCaskill of Missouri and Ben Nelson of Nebraska.

They have been joined by Democratic Sens. Jeff Bingaman of New Mexico, Robert C. Byrd of West Virginia, Kent Conrad and Byron L. Dorgan of North Dakota, and Tim Johnson of South Dakota.

The tenets, outlined in a June 2008 letter to Mrs. Boxer and Senate Majority Leader Harry Reid of Nevada, include demands for cost controls and prevention of economic hardship; equitable treatment of affected states; price relief for families facing higher energy bills; and protections for U.S. manufacturing jobs.

“Senator Webb believes that the U.S. must work in concert with the world community to achieve meaningful, long-term reductions in carbon dioxide emissions,” said his spokeswoman, Jessica Smith. “As proposals are being debated in the Senate, he believes that scientific principles should be applied in a way that both preserves our environment and allows for sensible economic growth.”

Satisfying both environmental and economic priorities with a cap-and-trade law is a daunting task. The White House hopes to gain leverage by using the new revenue to pay for Mr. Obama’s signature “Making Work Pay” middle-class tax breaks.

“Cap-and-trade system will have some effects on households,” White House budget director Peter R. Orszag said last week. “That’s one reason we are linking the cap-and-trade program to making work pay.”

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