Climate Bill to Cost Average Consumer $175 a Year: CBO

The Washington Post | June 23, 2009
By Steven Mufson

Climate-change legislation would cost the average household $175 a year by 2020, according to the Congressional Budget Office, far below the figure commonly used by GOP critics of the House bill.

The CBO said yesterday that the poorest 20 percent of American households would actually receive a $40 benefit in 2020 from the legislation, which would establish a cap-and-trade system to limit greenhouse gas emissions, while the richest 20 percent of households would see a net cost of $245 a year. The costs would result from higher prices for carbon-based fuels, offset by a complex series of tax breaks and free allowances, new technologies and behavioral changes, and impacts on corporations and their profits.

The CBO, a nonpartisan arm of Congress, said it did not take into account any indirect benefits of slowing climate change, which are substantial but difficult to quantify.

It warned that the costs of the legislation would fall unevenly depending on an individual's employer, investments and behavior. It said that "some regions and industries would experience substantially higher rates of unemployment and job turnover as the program became increasingly stringent." It said that the consumer price index could be 0.7 percent higher in 2020 than it would be otherwise, assuming that business cost increases are passed on to consumers.

House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) said the CBO report shows that his bill is "effective and affordable." Rep. Edward J. Markey (D-Mass.), the bill's lead co-sponsor, said it showed that the cost would be about the same as a postage stamp a day for the average household.

But Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio), said that the CBO analysts "got an unrealistically low number for cost per family because they didn't factor in the millions of American jobs that will move overseas if the United States imposes this tax and our foreign competitors, like China and India, do not. I don't know what color the sky is in a world where that won't happen, but I'm sure you can ask the unicorns."

Questions about the cost of the Waxman-Markey bill have been a focus of controversy. The Environmental Protection Agency has estimated that the bill would only cost U.S. households an average of $98 to $140 a year from 2010 through 2050. But government analysts acknowledged that estimates are highly uncertain and depend on such factors as the price of oil and the pace of innovation on energy efficiency, carbon capture and sequestration, as well as how people and businesses respond to higher fossil-fuel prices.

GOP leaders have tried to portray the proposal as placing a heavy cost on Americans. Boehner has asserted that the bill would raise annual energy costs by $3,128 per household in 2015 and would drive jobs out of the country. He said in an April 2 news release that that figure did not include higher costs for food and consumer goods and services. The conservative Heritage Foundation has asserted that the cost could reach $4,300 a year.

Boehner's office said that it extrapolated its per-household figure from a two-year-old study of a cap-and-trade bill co-sponsored by then-Sen. Barack Obama (D-Ill.). That study, by John M. Reilly, a Massachusetts Institute of Technology professor, said that a cap-and-trade bill could generate $366 billion a year in revenue and that the GOP leader's office said it simply divided that by the number of households expected in 2015.

Afterward, Reilly sent a letter to Boehner accusing him of inflating the cost 10-fold by ignoring the offsetting benefits, such as tax cuts and free allowances, that are part of the current Waxman-Markey bill embraced by President Obama. Reilly said that the measure's cost for a family of four, in today's dollars, starts at about $75 in 2015, rises to nearly $510 by 2025, and then falls to $205 by 2050 as new technology works its way into power plants, building efficiency and automobiles. The average overall cost would be about $340 a year, he said.

"Concern about the cost impacts on middle and low income families needs to be focused on making sure allowance or tax revenue is used to offset cost impacts on these households rather than as an excuse for not proceeding with measures that would help avert dangerous climate change," Reilly said in an April letter.