Climate bill Democrats unveil free pollution permit proposals

The US climate change bill inched forward on Friday, with the unveiling of proposals on how to distribute free emission allowances as part of a nationwide emission cap-and-trade scheme.

The Senate Environment and Public Works Committee confirmed that under the Boxer-Kerry bill's proposed cap-and-trade scheme, carbon-intensive industries would initially receive a share of free carbon allowances to minimise the impact on energy prices and limit the risk of businesses migrating overseas.

The committee proposed that electricity firms receive 30 per cent of the free allowances, while natural gas distribution companies would receive nine per cent and merchant coal firms would receive another five per cent.

Energy-intensive manufacturers in sectors such as steel, cement, paper and glass, which are widely regarded as the most likely to decamp overseas if they are affected by rising carbon costs, would receive four per cent of the free allowances, rising to 15 per cent by 2015 as the overall number of free allowances falls.

Large-scale electricity consumers would also receive about 35 per cent of the free allowances to help them cope with the expected increases in electricity bills.

Barbara Boxer, co-sponsor of the bill and chairman of the Senate Environment and Public Works Committee, hailed the proposals as "another milestone as we move to a clean energy future".

In addition to the allowance allocations, the Committee proposed increased incentives for clean coal technologies designed to secure the support of Democrat senators from coal-rich states.

It also unveiled a new analysis from the US Environmental Protection Agency, which predicted that the new bill will have a fractionally larger impact on energy costs than the previous Waxman-Markey bill that was passed by the House of Representatives earlier this year. According to the study, average domestic energy bills will be $111 (£68) a year more under the Boxer-Kerry proposals, compared to $80 under Waxman-Markey.

The latest proposals kick off a crucial few weeks for the bill as the Environment and Public Works Committee prepares to hold three days of hearings this week with a view to approving a final draft of the legislation by mid-November.

However, the progress of the bill could yet face a major stumbling block after a key Republican senator said that he may boycott key committee drafting sessions.

James Inhofe, the Oklahoma senator who notoriously branded global warming a "hoax" and currently sits as minority leader on the Environment and Public Works Committee, told reporters on Friday that he and some of his colleagues were prepared to boycott bill-writing sessions, denying the committee a quorum unless they are given more time to review the 800-page draft bill.

Democrats are attempting to fast-track the bill through the Senate as they seek to pass the bill ahead of the crucial UN climate change talks in Copenhagen in six weeks' time. But Inhofe insisted that the Republicans would not be rushed into a vote. "We're not being unreasonable," he said. "The only leverage we have is the quorum leverage, and if we get stonewalled, we'll use it."

However, there have been recent signs that Republican opposition to the bill is softening in some quarters, with two senators – Lindsey Graham and Lisa Murkowski – hinting recently that they could support the bill if amendments are included to protect businesses and bolster clean coal and nuclear technologies.

Friday's developments came as President Obama waded into the climate bill debate for the first time in several months, telling an audience at the Massachusetts Institute of Technology that he believed a consensus was building in favour of the bill.

"Everybody in America should have a stake in legislation that can transform our energy system into one that's far more efficient, far cleaner, and provides energy independence for America," he said, urging greater bipartisan support for the bill. "It is a transformation that will be made as swiftly and as carefully as possible, to ensure that we are doing what it takes to grow this economy in the short, medium and long term… I do believe that a consensus is growing to achieve exactly that."

He also aimed a thinly veiled jab at Republicans and business groups that have opposed the bill, arguing that the failure to accelerate the transition to a low-carbon economy will damage US businesses. "There are those who will suggest that moving towards clean energy will destroy our economy – when it's the system we currently have that endangers our prosperity and prevents us creating millions of new jobs," he said.