'Cap and Trade' to Hurt America in the Wallet Says U.S. Agency

May 7, 2009
A 15% reduction in carbon emissions would cost the average U.S. household roughly $1,600.

A proposed U.S. market to trade rights to emit greenhouse gases would adversely affect both consumers and producers at a time of national economic distress, according to testimony from the Congressional Budget Office.

"Under a cap-and-trade program, consumers would ultimately bear most of the costs of emission reductions," said Douglas Elmendorf, director of the Congressional Budget Office, in testimony to the Senate Finance Committee. "Higher prices for energy-intensive goods and services would lead to a variety of consequences for different industries, regions of the country, and income groups," he said.

Nevertheless, the CBO director said, "policymakers can significantly affect the distribution of costs associated with a cap-and-trade program, depending on how they decide to distribute the value of the allowance."

The non-partisan CBO, which provides federal economic and budgetary analysis to Congress, estimated that a 15% reduction in carbon emissions would cost the average U.S. household roughly $1,600.

The cap-and-trade system in which industries would buy rights to emit the gases from industries that use less energy has been championed by President Barack Obama, is contained in a bill now before Congress. The bill aims to cut U.S. carbon emissions by 20% from their 2005 levels by 2020, and dramatically boost reliance on renewable energy. Obama argues that with the future of the planet at stake, the U.S. must now take the lead on global warming after years of denial under the former administration of George W. Bush. His administration wants the bill approved by the end of the year, ahead of the president's planned trip to Copenhagen for a UN climate change conference in December.

The bill has more support in the House than in the Senate, where its goals face opposition not only from most Republicans but also from key Democrats from industrial states.

Meanwhile, a study on May 6 from the independent Pew Center on Global Climate Change found that cap and trade would have only a modest impact on the competitiveness of energy-intensive U.S. industries. Manufacturing industries with high levels of energy use would lose an average 1% of their production to imports from countries where greenhouse gas emissions are not penalized, the report published by the Pew report said.

The estimate was based on an assumption that a ton of carbon dioxide, the main greenhouse gas contributing to global warming, would sell for $15.

Copyright Agence France-Presse, 2009

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