House Democrats Reach Accord on a Climate Bill

Legislation Lowers Targets for Cutting Emissions and Gives Breaks to Utilities, Auto Makers, Other Industries

By STEPHEN POWER and SIOBHAN HUGHES

WASHINGTON -- House Democratic leaders said Tuesday evening they had reached agreement within their caucus on climate-change legislation that sets easier targets for emissions reductions and renewable-energy requirements than originally proposed.
House Energy and Commerce Committee Chairman Henry A. Waxman (D., Calif.) has been negotiating with a group of Southern and Midwestern Democrats on his committee who have withheld support for his bill because they feared it would hurt the economies in their states.

Mr. Waxman's bill calls for capping emissions of greenhouse gases, and requiring companies to hold permits in order to emit such gases. But the original version of the proposal was silent on the degree to which companies would have to pay for those permits, versus being given them free. Utilities dependent on coal and other carbon-intensive industries such as steel plants or oil refineries have been lobbying Congress to give them the permits for free, at least initially.
"I think we have the basis of an agreement with members of the Democratic caucus," Mr. Waxman said. He said a new version of the proposal would be made public Thursday and that he expects the Energy and Commerce Committee to vote on the measure next week.
Virtually all of the Republicans on the panel are expected to oppose the bill, but Mr. Waxman may not need their support if most of the Democrats are on his side. "I expect we're going to have the votes to pass this out of committee," he said.

If the bill can get passed by his panel, which is among the largest and most ideologically and geographically diverse in Congress, the legislation is widely seen as having a strong chance of passing the full House and possibly the Senate as well.
Bowing to members of his party whose states depend heavily on cheap, coal-fired electricity, Mr. Waxman told reporters late Tuesday that he has agreed to amend the legislation so that it requires a cut in U.S. greenhouse-gas emissions of 17% below 2005 levels by 2020, rather than a 20% cut in that time frame, as called for in the original version of his proposal.
Mr. Waxman said Tuesday he has agreed to give away to electric utilities 35% of the emissions permits that would be created by the bill, at least initially, rather than require them to pay for the permits.
People familiar with the outlines of the deal said that under the revised proposal, auto makers initially would receive 3% of the permits free, and that certain trade-sensitive industries, such as aluminum, glass and steelmakers, initially would get 15% free.
Those concessions would be a win for the affected industries, potentially worth billions of dollars. It wasn't clear how long the free permits would be granted.
A senior Republican on the committee, Rep. Fred Upton of Michigan, said Republicans are preparing to introduce as many as 200 amendments aimed at slowing down the bill and eliminating major provisions of the legislation. "Bring your No Doze," he said, predicting numerous late-night meetings of the panel next week.
Republicans and other interest groups were already turning up the heat on Democrats and the Obama administration ahead of Tuesday's deal. Earlier in the day, Republicans pounced on a White House document that says regulating greenhouse gases under the Clean Air Act "is likely to have serious economic consequences for regulated entities throughout the U.S. economy, including small businesses and small communities."
The document, an amalgamation of comments by government agencies sent from the Office of Management and Budget to the Environmental Protection Agency earlier this year, presents a more dire view of the consequences of regulating greenhouse gases under the Clean Air Act than the Obama administration has publicly stated.
Asked about the memo at a Senate hearing Tuesday, the EPA's administrator, Lisa Jackson, said the agency's recent declaration that greenhouse gases endanger health and welfare is preliminary and might not lead to regulations under the Clean Air Act. She reiterated the administration's preference for legislation such as Mr. Waxman's that would cap and gradually reduce emissions, while allowing companies to buy and sell emissions permits.
House Minority Leader John Boehner (R., Ohio) said the OMB memo "suggests that a political decision was made to put special interests ahead of middle-class families and small businesses struggling in this recession."—Ian Talley contributed to this article.
Write to Stephen Power at stephen.power@wsj.com and Siobhan Hughes at siobhan.hughes@dowjones.com