From Reuters:

In the latest obstacle to proposed U.S. climate legislation, key lawmakers on Thursday urged Senate Democrats to change distribution plans for carbon permits to offer more protection for coal-dependent utilities.

Isn't the point of all of this to make coal dependent utilities uncomfortable?  Read on...

The lawmakers said the allocation scheme in the current Senate bill does not apportion permits in an equitable manner...

OK, I'll buy that...

...and will result in higher electricity rates for consumers in regions that rely mostly on coal for power generation.

Yep.

The 14 lawmakers who signed the letter mostly hail from heavy coal using states, including Senators Tom Harkin, of Iowa, Byron Dorgan, of North Dakota, and Robert Byrd of West Virginia. Senate Democrats are trying to craft a bill that could receive enough support to be approved by the chamber.

"We believe it is essential that we strive to formulate legislation that equitably distributes transition assistance across individuals, as well as states and regions and economic sectors," the Democratic Senators said in a letter to Senate Majority Leader Harry Reid.

Nodding...

The bill passed by the Senate Environment and Public Works Committee would require polluters to get permits for the greenhouse gases they release into the atmosphere.

Still nodding...

Initially, industries would receive most of the permits for free, with local electric distribution companies allocated 30 percent of the free permits. The current formula for divying up those permits would probably lead to higher costs for utilities in more sparsely populated areas where coal use is prevalent.

Nope, lost me.  No matter the initial allocation, the end result will be higher electricity prices for coal fired electricity consumers.  The initial allocation just determines the revenue distribution after the market (trade) reallocates permits based on the marginal cost of abatement.  In the end, we still have less carbon, higher carbon prices and higher electricity prices...no matter who benefits or loses from the permit giveaway.  So while politically savvy, the economic argument for distributing permits to keep electricity costs low is the exact opposite of savvy. 


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