Cap-and-Trade's Winners and Losers

Leaked details of the soon to be unveiled Kerry-Lieberman cap-and-trade bill reveal which states and industries will benefit most from the Senate's climate change legislation.

Just before Senators Kerry and Lieberman unveil their cap-and-trade bill today/tomorrow, one Republican staffer knowledgeable about the bill’s contents explained to FrumForum what they expect to see. This, along with the leak of summary documents provided to The Hill earlier today, allows FrumForum to paint a fuller picture of what the bill will look like – who will win and who will lose.

Republicans foresee that the Senate version the cap-and-trade bill will consist of three major sections, focusing on regulating electrical utilities, the transportation sector and manufacturers.

For utilities, the Senate version is much more permissive than the House bill.  It tightly regulates the future market for emissions permits in the utilities’ favor, assuring them that the price will never rise above $25 a ton or be allowed to fall below $12.  This is much closer to a fee or tax than to cap-and-trade.

As with the House version of cap-and-trade, some utilities – and some states – win much more than others. The Kerry-Lieberman bill gives away even more free permits than the House bill, at least 2 to 3 billion dollars more per year in the early years.

Manufacturers also win.  They will be exempt from joining the cap-and-trade system until 2016. At that point, they will be forced to join the same cap-and-trade market as the utilities, and pay the market price for carbon, between $12 and $25 per ton.

The Lieberman bill woos Florida property owners.  It allows coastal states to opt-out of off-shore drilling within 75 miles of the shoreline.

Coal Democrats can claim a victory too: $2 billion in research grants to the coal industry.

For the moment, of course, the prospects for climate change legislation remain grim.  In a period of high unemployment, constituents are unlikely to approve of what essentially amounts to a hike in energy prices.  On the other hand, climate change legislation does remain at least notionally a presidential priority.  If President Obama looks stronger as the economy revives, this new bill may look more like the shape of things to come.