THE INFLUENCE GAME: Firms exact climate price

WASHINGTON – Utilities, steelmakers and oil industry lobbyists have tried to ease the pain of President Barack Obama's push to curb global warming, and they've gotten an early return on the millions of dollars they've spent influencing Congress.

Lawmakers determined to get a deal on climate change are going along with valuable concessions to polluters. It's part of the political trading necessary when powerful industries are involved.

The firms, many of which depend on coal — the biggest source of heat-trapping gases — hold heavy sway on Capitol Hill, where they have spent millions working to change policy and contributing to politicians' campaigns. They have a long history of halting environmental initiatives that threaten their profits, and their stance on the climate change measure — a key element of Obama's agenda — can't be ignored.

They'll accept a costly new "cap and trade" system that would set a ceiling on greenhouse gas emissions and essentially tax them, then allow companies to either reduce their pollution or buy credits from firms that have met the targets. But only if Congress makes it worth their while — by giving them at least some of those permits for free.

The companies, backed by many sympathetic lawmakers whose support will be crucial to a final agreement, say they're not looking to help themselves but instead trying to cushion the blow to their customers, workers and communities of complying with a costly new emissions limit.

"Utilities will end up paying a king's ransom to comply with this statute whether they are allocated credits or not," said Scott Segal, a lobbyist whose clients include power producers Duke Energy and Southern Company as well as oil refiners. "It's a way to give them the wherewithal to achieve the objective of the statute."

But some environmentalists portray the lobbying as legislative blackmail.

"They've basically said, 'You want to pass something? Write us a check,'" said Frank O'Donnell of Clean Air Watch. "They know that investing a few thousand bucks now (on lobbying and campaign donations) could mean literally tens of billions of dollars later."

The "check" would come in the form of free permits to emit greenhouse gases. The allowances would be hugely valuable in the cap and trade system, where firms would essentially buy and sell pollution permits to meet emissions limits.

Obama has proposed auctioning off the allowances to companies that emit heat-trapping gases, an approach his administration projects would raise $646 billion over the next 10 years that would then be used in large part to help families afford higher energy prices.

But the key House architects of the climate change plan, Democratic Reps. Henry A. Waxman of California and Ed Markey of Massachusetts, are working on legislation that's expected to give some of the permits away for free — at least initially.

That already represents a major win for industry, and has touched off a scramble by various players to grab a portion of the allowances. The lobbying has picked up in recent days, with a committee vote on the legislation expected before Memorial Day.

Striking a bargain on doling out the credits "will help us in the transition for consumers, rate-payers and various industries, especially as we work out the regional consequences of the legislation," Waxman said. "We're not using allocations just because people would like some revenue, we're doing it for very legitimate purposes."

Members of Congress — particularly those from oil- and coal-producing states in the South and Midwest that could have the hardest time meeting new emissions limits — have a powerful incentive to heed the lobbyists' calls: The fear that their constituents could otherwise be hit by steep electricity price increases or job losses at companies most profoundly affected by the changes.

"It would be impossible for me to vote for a bill like this if I couldn't get this kind of assistance in the early years," said Rep. Mike Doyle, D-Pa., whose Pittsburgh-area district is heavily dependent on coal. "If we're not going to help them out, we're not going to have a bill."

He backs a plan, being pushed by electric utilities with support from a coalition of big corporations and environmental groups called the United States Climate Action Partnership, that would give most of the free allowances to power distribution companies. They're asking for 40 percent to be given to those firms, the proceeds of which they say would be passed on to consumers who would otherwise see no relief from price hikes.

Obama's plan to sell the credits and return some of the money to households would do nothing for commercial or industrial electricity users.

"The last thing any utility CEO wants is to have compliance costs that are higher than necessary, to have customers have higher prices than necessary, and for them to all get angry at the utilities," said Dan Riedinger, a spokesman for the Edison Electric Institute, a trade group for shareholder-owned electric utilities that has been outspoken in lobbying for free permits.

Power producers such as Duke also want to get their hands on some credits, an approach that many economists argue would bring a windfall to their shareholders with little or no consumer benefit.

Big manufacturers that rely heavily on fossil fuels and face foreign competition, such as steelmakers and aluminum giant Alcoa Inc. among others, are pushing to get about 15 percent of the permits. Those would be designed, proponents say, to soften the blow of higher energy prices for the companies and ease pressure to move production to countries without strict emissions limits.

Oil refiners also want to get in on the action, arguing that they should qualify for a chunk of the permits that go to other energy-dependent manufacturers who face competition.

"Our message is that we expect to be treated fairly," said Kyle Isakower, director of policy analysis at the American Petroleum Institute. "Any industry that's receiving allocations has a valuable commodity. We're certainly very concerned with equity."