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Climate-energy bill cost for consumers: up to $146 a year

A stalled climate-energy bill in the Senate got a boost this week from federal regulators who reported it would not be too costly, then from President Obama.

A stalled climate-energy bill in the Senate got a boost this week from federal regulators who reported it would not be too costly, then from President Obama.

“The transition to clean energy has the potential to grow our economy and create millions of jobs – but only if we accelerate that transition,” Mr. Obama said in his Oval Office speech Tuesday night. He touted a “strong and comprehensive energy and climate bill – a bill that finally makes clean energy the profitable kind of energy for America’s businesses.”

That’s been the billion-dollar question surrounding climate legislation: How much will it cost?

The Environmental Protection Agency answered that question earlier Tuesday in a much-anticipated economic analysis. The climate-energy legislation that’s sponsored by Sens. John Kerry (D) of Massachusetts and Joseph Lieberman (I) of Connecticut would have a “relatively modest [economic] impact” on the US public, the EPA’s models showed.

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The bill, which includes a market-based “cap and trade” mechanism to put a price on carbon emissions from US smokestack emitters, would hike energy costs for both businesses and consumers. But with rebates for consumers in the plan, as well as other factors, the overall cost to American households would be $79 to $146 annually, the EPA found.

The American Power Act would have “a relatively modest impact on US consumers,” assuming that the “bulk of revenues from the program are returned to households lump-sum,” the study’s authors wrote.

The EPA also found that the cost to polluting businesses, such as coal-fired utilities, would not be too onerous. The cost to them to purchase allowances from the government for each ton of emissions was projected to be $16 to $17 per metric ton of greenhouse gases by 2013 and $23 to $24 per ton by 2020.

The climate-energy legislation passed last year by the House has roughly the same estimated costs. Both bills would reduce greenhouse-gas emissions by about the same amount starting in 2013.

“This definitive analysis proves that the American Power Act will decrease energy bills for families and protect consumers while offering the most effective cost containment measures of any previous climate legislation,” Senators Kerry and Lieberman said in a joint statement.

The study’s authors noted that the analysis did not take into account any positive contributions from avoiding the effects of climate change – only the legislation’s costs to the economy.

Some have tried to assess such impacts. In a study of energy-climate legislation last year, the nonpartisan Institute for Policy Integrity found that the House bill would generate between $750 billion and $1 trillion in total benefits between 2012 and 2050.

“It looks like, when we finish crunching the numbers, we expect the benefits of the Senate bill will be similar to the House bill last year,” says J. Scott Holladay, an economic fellow at the institute, which is a think tank based at the New York University School of Law. Benefits, he says, are based on the “social cost of carbon.” Econometric models have produced estimates of $50 to $100 per ton of avoided carbon emissions – savings from reductions in anticipated sea-level rise, agricultural damage, and other damages.

But whether outrage over the oil spill and news that greening US energy might not cost so much after all will dislodge the stuck bill is hard to know, some say.

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“I don’t think the president’s speech or the EPA numbers have changed the political lineup” of Senate votes, says David Pumphrey, deputy director of the Energy and National Security Program at the Center for Strategic and International Studies in Washington.

Others agree with him.

“We reiterate weak odds for climate legislation and weaker odds for an energy-only bill without 1) explicit support by Senator Lindsey Graham (R) of S.C.; 2) explicit support by coal state Democrats; and 3) a drilling deal that offshore energy proponents and environmentalists can both accept,” wrote Kevin Book, an energy analyst with ClearView Energy Partners, in an e-letter analysis. “All three are currently missing.”

One possibility is that Congress will “stampede” to pass drilling-safety legislation this year, rather than an climate-energy bill, he notes. Also, another cost estimate is expected in the coming weeks from the Energy Information Administration, which could be less favorable.

Others say, however, that the EPA and presidential boost together are important.

“… President Obama made it clear that he plans to put a clean energy future ahead of the interests of Big Oil,” said Peter Lehner, executive director of the Natural Resources Defense Council, in a statement. “The Senate should move clean energy and climate legislation this summer.”

The president is expected to meet next week with key legislators in the Senate on steps to move the bill ahead, Reuters reported Wednesday.