House Emissions Bill Postpones Decisions on Cost

By IAN TALLEY and STEPHEN POWER

WASHINGTON -- The debate in Washington over climate change shifted into higher gear Tuesday as powerful California Democrat Henry Waxman introduced a bill to cut U.S. greenhouse-gas emissions, but without specifying how the costs would be levied on different sectors of the economy.
The more-than-600-page document published by Mr. Waxman, chairman of the House Energy and Commerce Committee, and Rep. Edward Markey (D., Mass.) represents the opening bid by the party's liberal leaders in the House in what promises to be a long struggle with more moderate Senate Democrats and Republicans over how to curb emissions, and whether to do it in the middle of a recession.
The Waxman-Markey proposal represents another big piece in a complex energy strategy that Mr. Obama and his Democratic allies are pushing through legislation, budget priorities and policies being set by regulatory agencies.
Mr. Obama wants to put a price on emissions of carbon dioxide, a major contributor to climate change, in part to spur development in the U.S. of new power-generation technology, more efficient cars and buildings that consume less energy. Mr. Obama has argued this serves two goals: curbing climate change, and creating new "green" jobs. Mr. Obama has directed billions of dollars in new federal spending to renovate the electric grid, the better to carry power generated by windmills. He has called for more federal support for research into energy-saving technology, and has directed the Environmental Protection Agency to consider letting states regulate automobile emissions of gases that contribute to global warming.
But the key to all of Mr. Obama's initiatives is raising the cost of burning fossil fuels, which provide the majority of the U.S. economy's electric and transportation energy -- a politically challenging endeavor even in good economic times.
Those risks were underscored by Republican attacks Tuesday on the Waxman-Markey bill. The proposal would "raise taxes on every American who drives a car, flips on a light switch, or buys a product manufactured in the United States," House Minority Leader John Boehner of Ohio said in a statement.
The Waxman-Markey bill calls for cutting U.S. emissions 20% below 2005 levels by 2020, compared with the roughly 14% reduction that Mr. Obama has called for in that time frame. It would also mandate tougher efficiency standards for buildings and appliances, and require that by 2025, the U.S. derive at least 25% of its electricity from renewable sources.
But the measure -- which its authors described as a "discussion draft" -- avoids specifying how the costs of fighting climate change will be distributed across the economy. For example, the measure would establish a so-called cap-and-trade system, which would limit the overall amount of carbon dioxide companies are allowed to emit and would let companies buy permits giving giving them the right to pollute if they can't cut their emissions by the required amount. But the proposal doesn't spell out the percentage of those permits that would be given away for free, versus being sold at auctions by the government.
Lobbyists for industries that depend heavily on cheap fossil-fuel power, such as cement, steel and coal-fired electric plants, say any U.S. regulation of greenhouse-gas emissions should include a giveaway of some emissions allowances, to give the companies time to work on new technology.
Mr. Obama's aides say that would lead to windfall profits for some companies. His administration has called for auctioning off 100% of the emission allowances and using the bulk of the revenue -- roughly $645 billion between 2012, when the system kicks in, and 2019 -- to fund tax credits for the middle class.
The Waxman-Markey proposal calls for an unspecified amount of emissions permits to be given away for free to certain trade-sensitive U.S. industries, to ease their costs of compliance.
Write to Ian Talley at ian.talley@dowjones.com and Stephen Power at stephen.power@wsj.com