Governor favors mostly free permits for polluters

Gov. Christine Gregoire is moving ahead with plans to regulate greenhouse-gas emissions, but wants to dampen the effect on businesses and the economy by providing most of the pollution permits for free.

The question of issuing free permits for emitting greenhouse gases versus charging for them is one of the biggest confronting states trying to address global warming.

The permits, which would set the amount of greenhouse gases a company could release, are key to a so-called cap-and-trade system that state lawmakers are expected to consider next year as a way to reduce the emissions.

Gregoire's office currently is drafting preliminary legislation that would established the program.

Environmentalists generally want industries to buy the pollution permits. They argue it will help ensure the true cost of greenhouse gases is felt by the biggest polluters, and will keep companies from profiting by selling permits they got for free.

Industry groups, meanwhile, say providing the permits for free would soften the financial blow as the economy tries to shift away from dependence on fossil fuels, the major source of man-made greenhouse gases.

Gregoire appears to be siding more with business on this point.

Forcing companies to buy more of the permits could cause them to shift production to other states, said Janice Adair, a special assistant to Ecology Department Director Jay Manning. And the governor's approach is an acknowledgment of the current economy.

"People are just kind of hanging on right now," Adair said.

The cap-and-trade system would set an overall limit on greenhouse-gas emissions from major sources such as factories, power plants and gasoline starting in 2012. Each polluter would then get pollution permits for its share of the allowed emissions.

If a polluter went over their allowed level, it could cut emissions or buy excess permits from another company. The overall cap would shrink each year, with a goal of getting back to 1990 emission levels by 2020.

The draft version of legislation would give away 90 percent of the pollution permits needed by industries such as cement plants, paper mills and oil refineries.

Electric utilities would get all their permits free, but would have to spend profits from selling permits on efficiency, renewable energy, or helping low-income customers.

The draft bill postpones regulation of gas and diesel until 2015. But then it would require purchase of all the permits for that sector — which is almost sure to translate into higher gasoline prices.

An Association of Washington Business official said his group wants virtually all of the permits to go for free. But Grant Nelson, the association's head of governmental affairs, also questions whether now is the time for new regulations.

"What we shouldn't be doing is embarking on a new program that could further harm our economy," he said.

While environmentalists aren't thrilled at how many permits would go for free, a leading environmental lobbyist said it was good Gregoire was tackling the issue now. "We welcome the fact that the governor is introducing this bill and she sees climate change as worth our time and effort in the face of this economy," said Clifford Traisman, of the Washington Environmental Council.

The proposal could be changed before going to the Legislature, which convenes next month, but the overall approach will stay, Adair said.

Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com