President Obama's $3.6 trillion budget plan ($1.7 trillion budget deficit) includes the provision that is projected to raise $646 billion over ten years by auctioning pollution permits (allowances) to industries that generate greenhouse gases. Our question is: why increase utility bills via an auction instead of issuing the allowances for free and allowing companies to invest in solutions themselves? The investments in innovations will be passed on to ratepayers anyway. The Obama administration plans to fund renewables projects and help poor people pay energy bills with the proceeds from the auction. But if you do not increase bills, you do not need to help them with their bills. If the utilities and other companies directly finance renewables projects, there isn't the extra layer and extra expense of the auction.
Critics argue that the auction would increase the cost of electricity, gasoline and other forms of energy for every U.S. consumer. The funds from the auction to finance a permanent tax credit of up to $800 a year for working families would be neutralized by rising energy costs. Critics argue that the 20 cents an hour made under the credit would barely cover the added $1.60 per gallon EPA says gas could cost, let alone the potential for an 80 percent jump in electricity rates. (Wash Post 3/3/09) The EPA Acid Rain Program should be the model for the Obama administration. Allowances were allocated free and the program was a complete success.