WASHINGTON (Reuters) - U.S. power generating companies would get free pollution permits, at least initially, as part of a compromise climate change bill being written in the Senate that also would give the coal industry $10 billion to develop "clean" technology, sources said on Friday.

Democratic Senator John Kerry is trying to push a bill through a skeptical Senate this year that would address global warming by reducing the 6.4 billion tons of greenhouse gas emissions the U.S. puts into the atmosphere annually, mostly by burning fossil fuels.

While the bill is not yet ready to be introduced in the Senate, Kerry has held a series of briefings for lawmakers, industry groups and environmentalists to preview the proposal.

Power companies, which emit 40 percent of U.S. greenhouse gases, would be the first to face pollution limits. In return, the industry has demanded breaks claiming that otherwise it would have to shut down plants.

Those breaks include some free permits to pollute and "offsets" that give them the option to invest in clean energy projects that preserve lands and forests in the United States and abroad.

A coalition of 20 environmental groups on Friday praised Kerry's effort, saying the pollution-reduction goals provided "the leadership needed by the U.S. Senate to create jobs, increase energy security, reduce carbon pollution and protect public health."

Kerry, working with Republican Senator Lindsey Graham and independent Senator Joseph Lieberman, is weighing a climate change bill that would impose a cap-and-trade system in 2012 on electric utilities, many of which burn large amounts of coal, the fuel that emits the most greenhouse gas.

According to trade industry sources, the power companies would initially be given many of the required pollution permits for free, similar to the bill passed last June by the House of Representatives. But the House bill calls for an economy-wide cap-and-trade program starting in 2012, not just utilities.

When he ran for president in 2008, Barack Obama called for selling all of those permits to industry under cap-and-trade, in which carbon dioxide emissions fall as fewer and fewer permits are allowed over 40 years. Once companies obtain the permits, they could be traded on a regulated market.

The House's cap-and-trade provision has been reduced to apply only to utilities at first in the compromise bill. In 2016, factories would begin to be covered as well. Other elements likely to be in the bill, according to industry and environmental sources, are:

-- $1 billion a year over 10 years from the federal government to help the coal industry develop green technology such as "carbon capture and sequestration" of emissions. Such a provision could be crucial to West Virginia Senator John Rockefeller and others from states that mine and use coal.

-- A new carbon tax on oil, possibly at the refinery level, which would filter down to consumers. The taxes would be linked to the price of carbon stemming from the utility industry cap and trade program. The goal is to encourage consumers to buy more fuel- efficient cars. Some of the revenues could go back to consumers.

-- $54 billion in new loan guarantees to encourage an expansion of the domestic nuclear power industry, whose plants do not emit greenhouse gases, but face big problems with storage of waste and the cost of building new plants. There would be new tax breaks for the nuclear industry too. It's unclear how the bill would fix the nuclear waste problem or speed up regulatory review of new construction permits.

-- The establishment of a "clean energy standard" that would expand a Senate Energy Committee "renewable energy standard" to allow more fuels to participate, including nuclear. The committee plan focuses on wind, solar and other renewable sources. While it's nearly emissions-free, nuclear is technically not a renewable power source.

-- New incentives to encourage heavy-duty trucks to transition from diesel fuel to natural gas.

Other elements of the bill previously reported include:

-- A price collar to protect against fluctuations in the price of carbon traded under the power company cap-and-trade. It would keep prices in the range of $10-$30 per ton.

-- The legislation would aim to bring carbon emissions down by 17 percent by 2020, from 2005 levels.

-- Firms with smokestack emissions below 25,000 tons would not face new pollution restrictions.

-- Controls on smokestack emissions from factories, including steel, chemical, paper and cement, would be phased in beginning in 2016 under a cap and trade program.

-- The EPA would be prohibited from regulating factory greenhouse gas emissions.

-- A border tax to be triggered in future years to protect U.S. manufacturers from cheaper goods from countries that do not have as strict environmental controls in place. Ohio Democratic Senator Sherrod Brown has been insisting on this. It could offend some "free-trade" senators though.

-- New incentives for offshore oil drilling.

(By Richard Cowan and Timothy Gardner; Additional reporting by Thomas Ferraro, editing by Anthony Boadle)

© Thomson Reuters 2010 All rights reserved.

Source: Reuters

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TOKYO/LONDON (Reuters) - Trade in "recycled" carbon credits, which companies have already used to offset their greenhouse gas emissions, is unlikely to become widespread enough to hit prices, analysts said on Friday.

Hungary last week carried out the first such sale of certified emissions reductions (CERs) which its own companies had already surrendered to offset against their emissions in the European Union's emissions trading scheme.

Such CERs are not valid for re-use in Europe and the EU executive Commission on Thursday amended trading rules to stop them from re-entering the EU carbon market.

But that still left about 100 million used carbon offsets, equivalent to the national greenhouse gas emissions of Austria, in the registries of European governments which they could re-sell to non-European buyers if they pleased.

Under the Kyoto Protocol, rich countries can buy carbon offsets to help them meet emissions caps, paying for carbon cuts in developing countries.

Japan has been the biggest buyer of offsets outside Europe, and if it started buying used CERs that would effectively increase the global supply and may dampen prices. Tokyo said on Friday that it would not block Japanese companies from buying recycled credits.

"It's not a problem for companies to use them here to meet their voluntary emissions targets," said Eisaku Toda, head of the environment ministry's office of market mechanisms.

But Japanese traders doubted they would find a large market there. "In Japan, the buyers are all volunteers with high morals," said one carbon trader in Tokyo. Japanese companies are using offsets to meet voluntary emissions caps, unlike the binding targets in Europe.

PRICES

International trade in recycled credits is not illegal, and exploits the fact that the greenhouse gas emissions of some former communist countries are far below their Kyoto targets, leaving them with surplus emissions rights called assigned amount units (AAUs).

Hungary last week sold some 800,000 tonnes of used CERs, saying it would put aside the equivalent number of AAUs.

That deal allowed Budapest to benefit from a higher price for CERs compared with AAUs, whose trade is also much less liquid and disparaged by some environmentalists as "hot air".

Japanese companies, mainly steelmakers and power generators, have bought about 300 million tonnes of carbon offsets under the Kyoto Protocol for delivery between 2008 and 2012, almost all of which are thought to be CERs, 2009 data show.

The companies will eventually submit these to Tokyo to count against their voluntary targets, but in the meantime in theory could exchange some for cheaper, recycled credits, effectively increasing the global CER supply and impacting prices.

"From a market impact perspective, we could see more CERs come back onto the market and it could soften prices a bit and make the market less tight, but actually the impact would be quite small," said Barclays Capital's Trevor Sikorski.

He estimated that east European countries had no more than 11.5 million CERs which they could recycle in this way.

The Hungarian deal has attracted huge market criticism, especially after the used CERs were traded on the Paris-based BlueNext exchange, meaning European companies could unwittingly buy invalid offsets which left them out of pocket.

Such negative publicity would also likely limit further trades, said Deutsche Bank's Mark Lewis. "Given the fuss this has caused I would be very surprised if we saw many more deals of this kind," he said.

(By Risa Maeda and Nina Chestney; Editing by Anthony Barker)

© Thomson Reuters 2010 All rights reserved.

Source: Reuters

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With the international community failing to agree on how to tackle climate change, Vice President Boediono on Thursday called for more research and action to mitigate and adapt to the new conditions.

“I cannot help but begin my remarks on a rather depressing note,” he said. “It is that we, governments of the world, have responded too slowly and too incoherently to act on the impending problems that will have, and are beginning to have, a serious impact on all of us, our lives and indeed eventually our existence as human beings.”

His statement came at the opening of an international climate change workshop on mitigation and adaptation strategies. The workshop, held at the Vice Presidential Palace in Jakarta, was attended by 25 foreign researchers from the University of Indonesia and the Association of Pacific Rim Universities World Institute (AWI).

Boediono said the Kyoto Protocol was not sufficient nor fully supported as a response to the imminent problems facing the world, while last year’s Copenhagen conference failed to produce the expected results.

“Now the [Kyoto] agreement is about to expire and there is no similar agreement, let alone a better one, in sight to take its place,” he said. “Faced with more immediate problems of dealing with the fallout of the financial and economic crises, the world does not seem to have sufficient will to tackle the longer-term, but by no means less serious, problem of climate change.

“It is for this reason, aside from the more substantive results and recommendations that I hope this workshop will be able to produce, it will also help strengthen our resolve to earnestly deal with the climate-change problem,” he said.

Boediono said he also expected the workshop would provide enlightenment on the consequences of climate change.

“But I must confess that, not being a scientist myself, but as one living my whole life in this tropical and archipelagic part of the world, the effects on our lives here have been very real,” he said. “Our agriculture, our fisheries, our forests, our water supplies have been much affected by the changing rhythms and indeed unpredictability of the weather.”

He said the best strategy for Indonesia was to start taking action to mitigate and adapt to the new conditions.

“But individual countries’ actions do not substitute for global, coordinated efforts,” he said. “The stakes are too great for each and every one of us, and time is running out. Indonesia stands ready to play an active and constructive role in the common endeavor.”

Jim Falk, director of research on climate change at AWI, said two things had to be done in Indonesia.

“We have to be able to cope with far more extreme events, high flooding, sea-level rise, decline in marine [life] and fisheries and much more,” he said.

“And at the same time we have to have in place policies to reduce the impact [of] global warming.” (By Camelia Pasandaran)

Source: JakartaGlobe

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HELSINKI — The climate change debate should be reframed in economic and security terms ahead of a year-end UN summit in Mexico seeking a binding climate deal, the president of the Maldives said Wednesday.

A price tag needs to be put on "the extent to which we destroy the atmosphere, the extent to which we pollute the atmosphere," President Mohamed Nasheed said at a climate change seminar in Helsinki.

Climate change was not about "hugging trees", he said, insisting that beyond the environmental aspects it was central to future security policies, sustainable economics and human rights.

"If we can have a discourse on the feasibility of renewable energy ... I think that would make such a substantial impact on the policy," he said, adding that switching to non-fossil-fuel-based energy sources like wind and solar power made "good economic sense".

His own, low-lying country is one of the most vulnerable to the rising sea levels anticipated as a result of global warming, and in a bid to lead by example the Maldives has pledged to become carbon neutral by 2020.

A climate change summit in Copenhagen last December failed to yield a hoped-for treaty on tackling the carbon emissions blamed for disrupting the climate system, and sparked a fierce international row about who was to blame.

Nasheed said the time for "pointing fingers" was over, stressing that both developing and developed countries needed to act together to regain the momentum lost in the climate change debate since Copenhagen.

"Before we go to Mexico, there has to be more trust built between developing and developed countries," he said, adding the climate change discussion had "no other motive than the survival of our species."

There was "no argument" to support the demands of some developing countries for their emissions not to be limited, he said, adding that reducing emissions was economically responsible and would not stop development.

"We have planetary boundaries, and we cannot go beyond that. We have to find alternative sources of energy," he insisted.

The so-called Copenhagen Accord sets a goal of limiting warming to two degrees Celsius (3.6 degrees Fahrenheit) but does not detail when or how this goal should be achieved, nor does it commit its signatories to binding pledges.

The next UN summit aimed at hashing out a binding deal will be held in the beach resort of Cancun, Mexico, from November 29 to December 10.

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Source: AFP