Cap-and-trade policy begins to take shape

WASHINGTON, April 9 (UPI) -- The White House science adviser says there's room for compromise on an emission allowance, a stance that would please business but anger environmentalists.

John P. Holdren, director of the White House Office of Science and Technology Policy, told The Washington Post a cadre of Cabinet-level officials is trying to develop principles to guide cap-and-trade legislation as it travels through Congress.

Cap-and-trade, also called emission trading, is an administrative process that seeks to control pollution by providing economic incentives to polluting companies for achieving reductions in the emission of pollutants.

While campaigning for U.S. president, Obama called for auctioning off all emissions permits issued at the outset of a cap-and-trade system instead of auctioning some off then giving the rest away. Industries would buy and sell the allowances on the open market as the cap on total emissions was gradually lowered, the Post said.

Many industry leaders paying for the allowances up front 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.

Environmental advocate Erich Pica, director of economic programs for Friends of the Earth, said giving utilities free allowances is less efficient than rebating revenue from auctions directly to taxpayers.

A 100-percent auction, Pica told the Post, "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."