Gov’t Study: New Energy Bill Will Raise Energy Costs Just $175 Per Year

A government study predicts new clean air legislation will cost the average American household just $175 per year. (image: romanedirisinghe via flickr.com)

The New York Times Greenwire reported on Monday that climate legislation pending in the House is predicted to cost an average of about $175 per household per year by 2020, according to a just-released study by the Congressional Budget Office (CBO). The price tag would be somewhat larger for wealthier Americans, while the poorest could expect to get a small dividend. The study and per-household calculation refer only to the cap and trade portion – known as the Waxman-Markey Bill– of overall pending energy legislation.  The HEAT Zone reported on the Waxman-Markey bill earlier this month.

That bill calls for a 17 percent reduction in carbon dioxide and other greenhouse gases by 2020 and an 83 percent reduction by mid-century. Carbon dioxide, produced from burning fossil fuels, especially coal, is the leading manmade greenhouse gas linked to global warming. The reductions would be made by issuing permits to major pollution sources, such as coal burning power plants, setting a steadily declining limit or “cap.”  About 85 percent of the permits would be given away, but others would be sold by the government and the proceeds used to help people meet higher energy costs. That assistance is supposed to offset the expected higher cost of energy in general.

The CBO report estimates that will work out to about $22 billion a year by 2020, or an average cost per household of $175 after various cost-saving measures. The poorest households actually would save $40 a year while those in the highest income category would face a net increase of $245 a year, the report estimates.

The study findings were welcomed by House Democrats, especially Rep. Edward Markey, D-Mass., who had previously compared the cost to “a postage stamp a day” and not the economic catastrophe suggested by the bill’s opponents.

The findings contrast sharply with cost projections as high as $3,100 per household posited by many Republicans who have blasted the proposed climate legislation as economically devastating to average Americans. The CBO study, they point out, acknowledges that people will face higher energy costs.

The website newser.com reported on Tuesday that the overall annual cost of compliance before any offsets, credits or rebates was projected by CBO to be $110 billion in 2020, or about $890 per household. But the report said $85 billion would flow back to U.S. households in the form of direct relief and indirectly through allocations to businesses and governments, with a net benefit of $2.7 billion.

But a spokesperson for Rep. Dave Camp of Michigan, the ranking Republican on the Ways and Means Committee who had requested the report, said it “ignores the transitional costs, the negative impact of jobs and earnings during the transitional period” before 2020.