By Richard Cowan
WASHINGTON (Reuters) - Legislation to drastically reduce carbon dioxide pollution blamed for global warming could be voted on by the U.S. House of Representatives as early as NEXT (NXT.LO)week, Majority Leader Steny Hoyer said on Tuesday, as the Senate focused on the plan's tax implications for companies.
Hoyer, speaking to reporters, said he expects the House to wrap up action on the climate change bill, which is a high priority of the Obama administration, either next week or the week of July 6, following a holiday recess.
The House Energy and Commerce Committee approved the bill in May and Hoyer said committee chairman Henry Waxman, chairman of the House Energy and Commerce Committee, was ready to get it moving again.
But first, Waxman must work out problems that other committees, most notably the Agriculture panel. Farm community concerns include how alternative fuels such as ethanol will be treated, as well as land-use issues.
The outlook for the climate bill, which aims to reduce carbon emissions 17 percent by 2020 and 83 percent by 2050, is less certain in the Senate, which is awaiting House passage of a measure before advancing its own legislation.
The Senate Finance Committee on Tuesday zeroed in on how the U.S. tax code might treat pollution permits that companies would receive under a "cap and trade" program Democrats are proposing.
Cap and trade would reduce pollution from utilities, manufacturers and other companies by slowly lowering the number of permits available for emitting carbon dioxide and other greenhouse gases. One permit would allow a company to emit one ton of greenhouse gas emissions.
Companies would be allowed to trade or sell the permits to each other on an as-needed basis.
Under the House bill, 85 percent of the permits initially would be given to industry as "allowances," with the remaining 15 percent sold.
"It may be appropriate to adopt some past practices on tax treatment of allowances," Senate Finance Committee Chairman Max Baucus said at a hearing, referring to a 1995 program aimed at reducing acid rain from sulfur dioxide emissions.
But Baucus said the climate change legislation is much more complex and far-reaching. "The acid rain program applied to fewer than 120 facilities nationwide," he said. "Cap and trade will apply to over 7,000 entities."
The market value of the traded pollution permits could be at least tens of billions of dollars.
"I'm concerned about the fact that speculators from Wall Street, Chicago, and San Francisco have been all too eager to embrace cap and trade," said Senator Charles Grassley, the senior Republican on the tax-writing committee.
"Cap and trade would represent a huge new market that hedge funds and private equity firms are salivating over."
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told the Finance Committee that a carbon tax would be "more transparent, more uniform ... raise more revenue" and be easier to administer than the complex cap and trade regime.
But if Congress is intent on reducing carbon emissions through cap and trade, Hufbauer said the free allowances "should be taxed as income at their value on the date of issue" and treated as "ordinary income, not capital gains."
He also advocated trading the permits on one or more exchanges and prohibiting trading outside those exchanges.
The White House later on Tuesday was expected to release details of a report by the administration's top scientists urging quick action against global warming's effects.
(Additional reporting by Thomas Ferraro; Editing by Bill Trott)
