A new white paper from environmental group Clean Air Watch claims that the 10 most polluting electric power companies collectively could pocket $9 billion annually under the “wrong kind” of cap-and-trade program, that is, one that distributes emissions credit freely through allocation rather than through an auction process.

For instance, Clean Air Watch said, American Electric Power could take in more than $1.5 billion per year. AEP has been among the companies that have argued in favor of handing out global warming emission credits free to companies based on past pollution levels, the group said.

“The very companies that have polluted the upper atmosphere now want to be rewarded,” said Clean Air President Frank O’Donnell.

That’s not correct, said AEP spokeswoman Melissa McHenry. She told NGI that coal-fired utilities will be spending capital to upgrade plants to reduce emissions. “It’s incorrect to say utilities would have a windfall if allowances are allocated,” she said.

If emissions allowances are auctioned, it will only serve to drive up rates paid by customers of regulated utilities, McHenry said. Some in the financial community have advocated for the auctioning of emissions allowances so that they can buy them up and then sell them to utilities for a profit, she said.

But the white paper argues that rather than subsidizing big polluters by handing out free emission credits or allowances based on past pollution levels — as Congress did with the 1990 acid rain program — the government should embrace the polluter pays principle used in other federal environmental laws including Superfund.

Specifically, it recommends that the federal government auction allowances. Polluting companies would have to bid against each other for a portion of the atmosphere they intend to use — within overall limits that reduce carbon dioxide levels. Auction proceeds could be used for socially beneficial programs, which could include help for low-income residents, worker transition assistance or protecting wildlife.

In a foreword to the white paper, National Wildlife Federation CEO Larry J. Schweiger said, “It’s time these companies started getting the bill.”

Schweiger added that “a cap-and-trade program that does not require companies to pay for carbon permits, and instead gives them away for free in perpetuity, would be fundamentally unjust. No-cost licenses to pollute would deprive the public of the resources and revenues with which to aid the economic transition to a low-pollution world, and with which to address the impacts of global warming.”

The white paper is online at Clean Air Watch’s web site, www.cleanairwatch.org.

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