February 27, 2009 at 3:32 pm

Autos help, carbon limits tied

Obama budget pays for more efficient U.S. car fleet using emissions 'cap and trade' program.

Copies of President Barack Obama's budget proposal are prepared for sale Thursday in Washington, D.C. (Stephen Crowley / New York Times)

WASHINGTON -- The 2010 budget that President Obama outlined Thursday promises a 10-year, $150 billion effort that could help domestic carmakers produce fuel-efficient cars. But the money is tied to a plan to limit carbon emissions that opponents say could cripple the industry.

The money will help "build more efficient cars and trucks right here in America," Obama said Thursday.

To pay for the effort -- as well as for a middle-class tax cut -- Obama's budget would collect more than $600 billion in revenue from a "cap and trade" emissions program.

Robert Nabors, the administration's deputy budget director, told reporters Thursday that the two are linked: no cap and trade, no $150 billion for energy. While many details are yet to be determined, the plan raises the possibility that the industry's supporters may have to accept more short-term pain if they want the promise of long-term assistance.

One of the industry's most prominent backers, Sen. Carl Levin, D-Detroit, said he needs to see more information before he can judge the proposal.

It's one of a handful of items in the budget outline with big implications for Michigan. Obama would spend $475 billion in the first year of a multiyear Great Lakes renewal plan. And he includes a $250 billion set-aside in case, as he says is likely, he needs additional money to stabilize the financial system. Some of that money could provide additional aid to the auto industry, said Peter Orszag, the administration's budget director.

The energy plan matches a campaign promise from Obama, who told a campaign audience in Lansing last August, "I want the fuel-efficient cars of tomorrow to be built ... right here in the state of Michigan." In that speech, Obama set a goal of having 150 million plug-in hybrid vehicles on the road in six years.

But the budget outline explicitly ties that to passing a cap and trade plan. Such a plan could be difficult to push through Congress this year, as Republicans are likely to oppose it, as could some Democrats, including Michigan lawmakers.

The government would auction permits to emit carbon, which could then be traded among companies. By reducing the number of permits over time, the plan would cap, and then cut, such emissions.

Cap and trade would "devastate jobs in manufacturing states like Michigan," said Rep. Mike Rogers, R-Brighton. House GOP leader John Boehner of Ohio said it would "increase taxes on all Americans who drive a car, who have a job, who turn on a light switch, pure and simple."

Sens. Levin and Debbie Stabenow, D-Lansing, opposed a cap and trade proposal last year by Sens. Joe Lieberman and John Warner, and they're among a group of 10 or so Senate Democrats who will likely require significant concessions to the auto industry and other interests before they would vote for such a bill.

Thursday, Levin called the Obama proposal "promising, but we need to make sure that any program implemented also spurs international efforts and does not unnecessarily hurt our economy or cause us to lose even more jobs."

Still, the auto industry has said it could support a carbon trading plan. All three domestic carmakers are members of USCAP, a coalition of business and environmental groups that favors a cap and trade program; the group praised Obama's call for such a program in his Tuesday speech to Congress.

Michigan lawmakers praised the proposed $475 million for Great Lakes restoration, which the Obama administration said was the first installment of a 10-year, $5 billion effort Obama proposed during the campaign. The plan will address invasive species, pollution from "nonpoint sources" such as runoff from farm fields, and cleanup of sediment contaminated with toxic materials.

You can reach Gordon Trowbridge at (202) 662-8738.