Compromise deal reached over US climate bill

The chances of the US having a climate bill based on binding emission targets in place ahead of the UN's Copenhagen talks later this year increased yesterday, but only after a compromise deal saw the proposed legislation watered down.

Democrat leaders working on the Waxman-Markey climate bill released details of a compromise deal late yesterday, confirming that the original target of a 20 per cent cut in emissions on 2005 levels by 2020 had been reduced to a 17 per cent cut.

The latest draft of the bill also reduces the obligation on energy firms to source a proportion of their power from renewable sources, replacing an original target of generating a quarter of energy from renewables by 2025 with a new target of 15 per cent by 2020.

Democrats from coal and industrial states that had threatened to oppose the bill secured further compromises in the form of free allocation of pollution permits under the carbon cap-and-trade scheme which sits at the heart of the bill.

President Obama had signalled that he wanted to see all the carbon credits in the scheme auctioned, in a move that would provide all firms with a financial incentive to cut emissions and help avoid the profit windfalls that some polluters have enjoyed under the EU's cap-and-trade scheme.

However, under the new draft legislation 35 per cent of all pollution permits would be handed out free to energy firms, while 15 per cent of credits would go to heavy industrial firms for free and the auto sector would receive three per cent of the permits.

Some free allowances are expected to go to the oil industry, although a deal on how many has not yet been reached and further details are expected today.

The compromises are bound to result in disappointment for green groups, but Henry Waxman, the Democrat representative tasked with steering the bill through the House, hailed the deal as a significant step forward.

"This will spur jobs, investment, and growth in the renewable energy sector and overall economic activity," he said in a statement. "It achieves all these goals while ensuring substantial flexibility in how the renewable energy and efficiency objectives are met."

The deal was also welcomed by those Democrats that had been wavering over the legislation, with a number of representatives signalling that they were more comfortable with the compromise.

Waxman said that the deal meant that he remained hopeful the bill could be passed before the Copenhagen conference in December. It is now set to go before the The House Energy and Commerce Committee next week with its backers hoping it can be approved by week's end and sent to the full House.

However, it remains to be seen how big an impact the compromise deal will have on global climate change negotiations.

A US climate bill is widely regarded as an essential component of any global deal that will signal to developing economies that the US is serious about curbing emissions. The EU has also said it will increase its emission reduction targets from 20 per cent by 2020 to 30 per cent if the US and other large emitters agree to similar cuts.