the possible costs of cap and trade
Last week a landmark climate bill, American Clean Energy and Security Act of 2009, passed the U.S. House of Representatives. The climate legislation aims to cap and reduce emissions by 17 percent of 2005 levels by 2020, and by 83 percent by 2050. Totaling 1,200 pages, the bill includes a cap-and-trade provision that puts a price on green house gas emissions, affecting almost all sectors of the U.S. economy. If the bill passes, everything from the way buildings are designed, products manufactured, and electricity generated will change. An additional mandate in the bill requires 15 percent of electricity in the U.S. to be generated by renewable energy by 2020.
The bill passed by a slim margin in the House (219 – 212) and still faces an uphill battle in the Senate. One potential hitch, the House bill includes tariffs imposed on the importation of goods from nations not matching U.S. carbon restrictions. The tariffs would greatly affect the price of goods imported from China and India, and thus may be removed in the Senate version to avoid provoking a trade war.
Those who oppose the bill insist that consumers will suffer due to a higher cost of energy and goods. According to the Congressional Budget Office (CBO), the bill will create an annual economy wide cost of $22 billion, or $175 per household. The Obama administration and other supporters of the bill insist it will spur the growth of new ‘green jobs’ and that rise in energy cost will be modest. The legislation mandates that if 60 percent of permits are given to the business community as planned, those businesses must pass the savings along to consumers.
Personally I don’t care if the new law does result in modestly higher prices. If I have to pay $175 more a year in 2020 for a greener country so be it. That additional cost will help bring the price of traditional energy in-line with that of sustainable sources. Carbon emissions do carry a downstream cost, and it’s about time we assigned it a dollar value.
Are you or your business concerned by the affects of the new legislation?
