Climate costs: What's in a number? - June 22, 2009
It seems that everybody has a set of numbers to explain how climate legislation moving through the US House of Representatives could impact the economy, but it's the official Congressional Budget Office score that really counts. That document came out Friday, estimating net costs of the program at $22 billion annually, which translates to an average impact of $175 dollars per household.
It's a remarkably low number, ringing in around 48 cents per day (supporters of the legislation say it would cost households little more than a daily postage stamp). And it turns out even that is misleading: If you divide households up by income into five groups, the lowest quintile would actually save $40 annually while the second-lowest quintile would spend only $40 extra each year; for everybody else (those who can afford it most), the cost comes in between $235 and $340.
CBO director Douglas Elmendorf kindly provides a quick summary of how his organization arrived at these figures in his blog. Notably, although CBO's model is able to capture some savings (gross costs are higher than $22 billion), Elmendorf admits that the model doesn't pick up all of them.
Capturing future benefits from things like energy efficiency regulations of unknown stringency is difficult indeed, but the American Council for an Energy-Efficient Economy gave it a go. Their numbers suggest that households could save $750 annually by 2020 and $3,900 annually by 2030. In either case, these more than offsets the costs to consumers laid out in the CBO report, which is of course why they (the $3,900 estimate in particular) have become enormously popular among Democratic leaders pushing the bill.
How accurate such numbers are in real terms is anybody's guess. Clearly some of them may be overly optimistic, but they would seem to suggest that the nightmarish scenarios put forth by groups like the Heritage Foundation, which sees a $9.4 trillion loss in gross domestic product, are a tad pessimistic.
A second thread of debate focuses on the bill itself and whether it would accomplish its goals. Some environmental groups are warning that Democrats have already compromised too much, effectively sending a warning to lawmakers who are currently trying to broker a compromise with agricultural Democrats and some moderate Republicans.
At one point last week, it appeared that the bill might come up for a vote before the full House this week. That no longer appears to be the case, which pushes the debate into July. Whether this signals a setback is not clear; just a few short months ago, many thought the goal was to get a bill in 2010.
Comments
This post has been featured at THEWEEK.com as Best Opinion - http://www.theweek.com/article/index/97934/The_cost_of_capandtrade
Posted by: Harold | June 23, 2009 09:40 PM
no comments, just trying to contact and old friend...
Posted by: will shoutis | July 26, 2009 08:39 PM