Did the White House just allow a massive climate change windfall?

I see that the Obama administration is indicating some flexibility on its climate change plans. Specifically, it might be willing to delay forcing businesses affected by a future cap and trade system to pay for carbon permits. Instead, an auction system would be phased in over time.

I used to think to accept anything less than a 100 percent auction of carbon permits was scandalous. As FP noted in September:

Cap-and-trade systems work by putting a ceiling on carbon emissions, and then allocating permits that give companies the right to pollute a given amount. From an environmental standpoint, it doesn’t much matter how you initially distribute the permits, as long as the cap is stringent enough. But most economists think that, unless you first auction these off in a transparent process, you’re basically enabling a massive corporate giveaway, raising the likelihood that well-connected corporations or industries will get sweetheart deals, and failing to capture revenue that can pay for other priorities.

I was disabused of this notion today by Stuart Eizenstat, a former diplomat who negotiated the Kyoto Protocol on behalf of the Climate administration. Eizenstat and I served on a panel this morning at the Carbon TradeEx America conference, a really interesting meeting devoted to exploring the future direction of climate change and its impact on policy, business, and, of course, the environment.

Eizenstat, who testifies frequently on Capitol Hill, was adamant that 100 percent auction was a nonstarter in Congress. There was no way, he said, that corporations would sign on to a climate change regime if they weren’t given enough time to adjust to the costs they would incur.

That said, I wonder why the White House would want to signal flexibility this early in the game. Would it be tactically smarter to play your cards closer to your chest in the hopes of getting a better deal from industry in the end? Or is it wiser to try and get business on board from the beginning, so that the opposition doesn’t have time to coalesce and build? Readers, what do you think?

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