Obama Budget Scales Back Expectations for Climate Bill

| Mon Feb. 1, 2010 3:02 PM EST

The most significant thing about the Obama administration's 2011 energy budget is what it doesn't contain.  Last year's budget projected that a cap and trade system would raise $79 billion from the auction of carbon credits in 2012, and $605 billion from the sale of credits over the following decade. This time around, the Obama administration hasn't named a dollar figure for expected revenue from cap and trade, or even noted when it expects to see a carbon cap in place.

Sadly, this is perhaps a more realistic approach. There is no new cap-and-trade law to speak of yet, and it's not clear whether there will be one this year. And the bill that passed the House last June auctioned off very few of the pollution permits—roughly 85 percent of the permits would be given away for free in the early years. 

The Obama administration's $3.8 trillion 2010 budget does still call for legislators to establish a "comprehensive market-based climate change policy" that would cut emissions in the range of 17 percent below 2005 levels by 2020 and by more than 80 percent by 2050. It says the administration expect cap-and-trade to be deficit neutral, and that some of the proceeds would be used to "compensate vulnerable families, communities, and businesses during the transition to a clean energy economy." It also notes that there will be "investments to reduce greenhouse gas emissions, including support of clean energy technologies, and in adapting to the impacts of climate change, both domestically and in developing countries." There aren't, however, any dollar figures to flesh out those expectations.

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But there are other signs that the Obama administration hasn't given up hope on regulating greenhouse gases. The Environmental Protection Agency budget includes $25 million to help states and the agency begin implementing both the greenhouse gas reporting rule the agency finalized last year, and anticipated new regulations on emissions—whether those come from the agency under the Clean Air Act or from a new law from Congress. That means the agency is moving ahead with the rules despite efforts in Congress to thwart them. 

The budget request also calls for the elimination of more than $2.7 billion in tax subsidies for the coal, oil, and gas industries. The Department of Energy estimates this will generate more than $38.8 billion in revenue for the federal government over 10 years. The Obama administration last fall called for an elimination of fossil fuel subsidies in partnership with other G20 leaders. But closing the litany of breaks and loopholes for the energy industry has proven difficult in the past; the Senate has repeatedly rejected measures that would have closed loopholes to pay for an extension of the tax credits for renewable energy, for example. (Even if the Obama administration can convince Congress to slash these subsidies, they are a mere fraction of the tens of billion of dollars the government spent on fossil fuel subsidies.) The DOE's budget would also cut the ultra-deep water oil and gas exploration program, saving $50 million. "We feel that the oil and gas companies can take that on," Energy Secretary Steven Chu told reporters on Monday.

The budget is a nice reminder of where the administration wants to go. But it's leaving it up to Congress to find a way to get there. And after the past year's foot-dragging on Capitol Hill, it's hard to imagine major action happening anytime soon.