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By David G. Taylor August 16, 2011

No cap-and-trade, no revenue

The possibility of passing cap-and-trade legislation ended for the foreseeable future when the Republican Party took control of the House of Representatives after the 2010 midterm election.
The term 'cap-and-trade" refers to emissions-reduction scheme wherein  the federal government caps the amount of carbon a company may emit. Each company is allotted a number of permits that allows it to emit a specific amount carbon. The individual company must buy additional permits from the federal government, or unused permits from other companies, to go over this cap. Ideally carbon emissions will decline because the free market rewards those who lower their emissions most effectively.

Republicans said cap-and-trade would hurt the economy and destroy jobs, and the opposed the additional costs it would put on the energy industry. So it"s unlikely any sort of cap-and-trade legislation will make its way to the President Obama"s desk in the current Congress. For these reasons we rated Obama"s promise to pass cap-and-trade as Broken and the GOP"s pledge to oppose cap-and-trade as Promise Kept.

In the previous update, we rated this promise Compromise since there existed some hope that funding measures would be included in a renewable energy bill that did not contain a cap-and-trade provision. Yet no bill of this sort has come to pass.

Since the federal government never implemented a nationwide cap-and-trade initiative, there is naturally no revenue that can be garnered from it. As a result, this promise -- to use the funds collected from the auctioning of cap-and-trade permits for environmental and clean energy initiatives -- cannot be fulfilled. Due to the failure of of Congress to pass cap-and-trade we rule this promise as Broken.

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By Lukas Pleva October 4, 2010

Cap-and-trade lacks support in Congress

While on the campaign trail, then candidate Barack Obama promised to use revenues generated by auctioning off pollution credits to pursue cleaner sources of energy.

We last reviewed the status of this promise in August 2009, when we rated it In the Works. The House had passed a comprehensive energy bill in June 2009. In the Senate, Sen. John Kerry, D-Mass., and Joe Lieberman, I-Conn., released their own version of a cap-and-trade bill in May 2010.

As the November elections get closer, however, it has become more difficult for Congress to pass controversial legislation, so we wanted to see how things have been moving along on the cap-and-trade front.

As it turns out, cap-and-trade has hit a major roadblock. On July 22, 2010, Democratic leader Harry Reid told reporters that Democrats simply "don"t have the votes" to pass a comprehensive bill that would put caps on greenhouse gas emissions. Instead, Reid, D-Nev., introduced a scaled-down energy bill that would remove the $75 million liability cap on economic damages from an oil spill, increase funding for the Oil Spill Liability Trust Fund and fully fund the Land and Water Conservation Fund. It would also would provide $5 billion in rebates to encourage homeowners to make energy efficiency upgrades and encourage the retrofit of the nation's heavy vehicle fleet to use natural gas, according to the bill summary. The bill does not contain any cap-and-trade provisions.

Talking to reporters August 31, 2010, Reid said that cap-and-trade "doesn"t have the traction that a lot of us wish it had."

So let's recap. Obama said that he will use revenues from cap and trade to support clean energy and environmental restoration. The Democratic leadership has acknowledged that it does not have the votes to pass legislation that includes cap and trade. Still, the whole point of this promise is to use the money generated by cap and trade to invest in energy efficiency improvements, help develop the next clean energy vehicles and provide new funding to restore environmental habitats. The Reid energy bill addresses all of those goals in some way. We'll keep watching, but for now, we rate this a Compromise.

Our Sources

The Hill, Reid puts renewables mandate in play, eyes lame-duck energy bill, by Ben Geman, Aug. 31, 2010

USA Today, Reid introduces pared-down energy bill, by Jessica Durando, July 27, 2010

The Washington Independent, Short Summary of the Clean Energy Jobs and Oil Company Accountability Act, accessed Sept. 22, 2010

The Christian Science Monitor, Stripped down energy bill leaves out 'cap and trade', by Mark Clayton, July 27, 2010

Reuters, US renewable energy bill faces battle in 2010, Sept. 21, 2010

By Catharine Richert August 31, 2009

House bill includes money for clean energy

In 2008, when candidate Barack Obama laid out his plan for a cap-and-trade bill, he said his administration would use revenue from selling pollution credits to pursue cleaner sources of energy.
In his New Energy for America position paper, Obama said "a small portion of the receipts generated by auctioning ... allowances ($15 billion per year) will be used to support the development of clean energy, invest in energy efficiency improvements, and help develop the next generation of biofuels and clean energy vehicles — measures that will help the economy and help meet the emissions reduction targets."
A little background before we dig into Obama's promise: Cap-and-trade has long been discussed as a way to slow climate change. The idea is to set an overall cap on carbon dioxide and other greenhouse gas emissions. To comply, companies such as electric utilities must either upgrade to cleaner technologies or buy credits — also known as allowances — to continue polluting. 
Earlier this year, Reps. Henry Waxman and Edward Markey, Democrats from California and Massachusetts, respectively, wrote a bill that would do just that. The duo's goal is to lower carbon pollution by 17 percent by 2020 and 83 percent by 2050. Under their plan, most pollution permits initially would be given out for free. But eventually, companies would have to buy those permits from the government. 
But what to do with all that money?
On the campaign trail, Obama said some of the revenues would be reinvested in projects to develop alternative fuels, clean energy vehicles and land conservation. And indeed, the Waxman-Markey bill would achieve some of those goals. 
For example, between 2012 and 2015, 10 percent of the allowances would go to states to invest in renewable energy, energy efficiency and pollution reducing transportation projects, according to a summary of the legislation. After that, states would continue getting the money, but it would decrease over the years. 
Between 2012 and 2025, 5 percent of the revenue would be used to preserve tropical rainforests. And from 2012 through 2016, 0.28 percent of of the money would be used to support carbon sequestration efforts by farmers and investments in renewable energy infrastructure.
Obama also said that "all remaining receipts will be used for rebates and other transition relief to ensure that families and communities are not adversely impacted by the transition to a new energy, low carbon economy."
The Waxman-Markey bill addresses that promise as well by creating five programs that would "protect consumers from energy price increases." Those include a plan that would give utilities 32 percent of the revenue until 2025 to help offset the cost of buying pollution permits or upgrading to cleaner technology; the idea is to help the firms avoid passing the extra cost on to consumers. Natural gas utilities and states that use heating oil would get similar funding. Additionally, the bill would give consumers 15 percent of the revenues in the form of tax credits and direct payments. 
So Obama is on track to fulfilling his campaign promise. But the bill has only passed the House and is still pending in the Senate. As a result, we rate Obama's promise as In the Works.

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