UPDATE 1-FACTBOX-Comparison of U.S. plans to cap carbon

Thu Dec 17, 2009 8:36pm GMT

(Adds new sections about key supporters and risks)

Dec 17 (Reuters) - A "cap and dividend" bill introduced in the U.S. Senate last week would reduce the role of Wall Street in carbon markets by returning money raised from emissions credit auctions to the public.

It stands in contrast to the climate bill stalled in the Senate that would likely have a "cap and trade" market at its heart more open to trading of emissions permits by companies and investors.

Senate Majority Leader Harry Reid hopes climate legislation could be taken up by the full Senate in early spring.

Below are some of the differences between the two market plans. Cap and trade is represented as "C&T" while the other is "C&D".

STATUS OF THE BILLS

* A climate bill with C&T passed narrowly in the House of Representatives in June, known as Waxman-Markey after its sponsors. In the Senate, Democrat John Kerry, Republican Lindsey Graham, and independent Joe Lieberman, are working on compromise legislation that builds on the House bill, but they have not decided on they method to price carbon. They are casting the bill as one that would create jobs

* The C&D bill was introduced last week by Senators Maria Cantwell, a Democrat, and Susan Collins, a Republican. It comes late in the game as many lawmakers are already committed to C&T. It would also have to be passed in the House.

KEY SUPPORTERS

* The Obama administration, many Democrats in Congress and major environmental groups support C&T, saying it is the most efficient way to cut emissions.

* The C&D bill has not been out long enough to garner as much attention.

HOW THE BILLS ARE BEING TOUTED - JOBS AND CHECKS

* Kerry, Graham and Lieberman are touting the compromise bill, which would likely contain C&T, as legislation that will add jobs in clean energy like nuclear and solar and wind power.

* C&D would result in tax-free monthly checks sent to every American and averaging $1,100 a year for a family of four.

RISKS

* C&T opponents do not want Washington to establish what could become a trillion-dollar carbon market after recent massive mismanagement in the banking industry and lack of government oversight.

* C&D opponents say the system does not give companies enough flexibility to convert to renewable energy like wind and solar or buy offsets.

COMPLEXITY OF THE BILLS

* C&T bill, known as Kerry-Boxer in the Senate, is over 1,000 pages.

* C&D came in at under 40 pages.

TARGETS OF THE 2 PLANS

* C&T targets big polluters, such as power plants, oil refineries, and makers of glass, cement and chemicals. Transportation sources would also be targeted.

* C&D only targets producers and importers of fossil fuels such as coal mining companies and oil importers.

HOW THEY WOULD WORK

* C&T would initially auction 25 percent of the permits to pollute and distribute the rest of the permits to polluters. The proceeds would go to state regulators to invest in cutting power bills or to develop energy efficiency programs.

Companies and investors would be allowed to sell the permits in a market to polluters that need the credits to meet an ever-declining emissions cap. The market gives companies the option of cutting their own output of greenhouse gases or buying credits representing emissions cuts.

* C&D would institute monthly auctions in which companies covered by the legislation would have to buy permits to pollute. Most of the proceeds would go to the public, while 25 percent would go to the development of clean energy.

EMISSIONS TARGETS

* C&T backers are focusing on a 17 percent cut by 2020 under 2005 levels, with much stronger cuts by 2050.

* C&D backers want a reduction of 20 percent by 2020 under 2005 levels and stronger cuts by 2050.

(Reporting by Timothy Gardner; Editing by David Gregorio)

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