Ooookay, let's scrunch up our sleeves and talk accounting for a bit. (Wait! Don't click away!) As mentioned earlier, the White House's newly unveiled budget proposal plans to raise $646 billion in tax revenue between 2012 and 2019 by auctioning off carbon permits under a cap-and-trade regime—about $80 billion per year. But what sorts of assumptions are they making here? What, exactly, are they envisioning for climate policy? On a White House conference call just now with reporters, a handful of senior administration officials unspooled their thinking a bit.

First, the basics: The White House is assuming we'll have a cap-and-trade system up and functioning by 2012, which might be feasible if Congress finalized legislation this year or early next, though we're talking breakneck speed. ("It's an optimistic calendar," one official admitted.) The proposed cap would aim to slash U.S. greenhouse-gas emissions 14 percent below 2005 levels by 2020, with an 83 percent cut by 2050. Officials were quick to note that the conversation on this "was just beginning," but that may not entirely placate green critics, because those targets are actually fairly timid. Indeed, recent climate science suggests we should shoot for a 20 percent cut below 1990 levels by 2020—a far steeper reduction than Obama's contemplating.

On a related note, the White House is expecting the price of carbon will settle at around $20 per ton. That's actually cheaper than the price under Europe's emissions-trading regime (before the financial crisis hit), and it's cheaper than the $28 per ton predicted under last year's Boxer-Lieberman-Warner cap-and-trade bill, which was lambasted by many environmentalists as far too flimsy. Administration officials did, again, caution that this figure was just a "placeholder" and a "fairly conservative number" at that.

The White House is also assuming that all of the carbon permits issued under the cap would be auctioned off, with zero free giveaways for select industries. For a quick primer on why auctioning is a good idea, see this old op-ed by Peter Orszag, the guy who... now runs the White House budget office. Orszag's key point is that handing out free permits to utilities and manufacturers actually does nothing to shield consumers from energy price hikes, since companies wouldn't actually pass on the savings. So, if we want to mitigate any pain from a carbon cap (and we do), it's better for the government to auction off the pollution permits and use that revenue to cut taxes or offer rebates. And that's exactly what Obama's proposal does: Of the revenue that's raised, the vast bulk (about $60 billion per year) will go toward the "Making Work Pay" tax credit (which offsets payroll taxes for about 95 percent of workers), while $15 billion per year gets set aside for various clean-energy technologies, energy efficiency, clean-car development, and so forth.

Now, the officials on the conference call kept emhpasizing that this was all a rough sketch. Congress has yet to write a cap-and-trade bill. That's going to take time. Details will change. The frenzy of climate lobbyists circling 'round the Capitol has yet to start feeding. If the carbon cap ends up being stricter than what the White House is budgeting for, then they'll raise even more revenue, since fewer permits will get issued and the price of carbon will go up. Still, this is the starting point.

--Bradford Plumer