Posted by: Steven M. Taber | June 15, 2010

Although EPA Says Kerry-Lieberman Costs Will Be "Modest," Analysis Does Not Include Benefits

Noticeably absent in the 74 page EPA Analysis of the American Power Act (also known as “Kerry-Lieberman”), issued on June 15, 2010, is any discussion of the benefits the Act will create.  According to the EPA:

The APA cost estimates do not account for the benefits of avoiding the effects of climate change (or, stated from a different perspective, the no-policy scenario does not include estimates of the costs of climate change induced damages).

There is a more than a little head-scratching going on as to why this might be, since one would think that we Americans wold want our Congresspeople to have a clear understanding of both the the downside and the upside of the legislation.  Even without the benefits factored in the average cost to households of the APA would be between $79 and $146, which includes higher prices for energy consumption and other goods and services, as well as “impacts on wages and returns to capital.”  This puts in the same ballpark as the Waxman-Markey legislation passed last summer by the U.S. house, which came in at a cost of between $80 and $111 per household.

At the time EPA issued its analysis of the Waxman-Markey bill, the Institute for Policy Integrity conducted a benefits analysis and “found that the Waxman-Markey bill would generate between $750 billion and $1 trillion in benefits between 2012 and 2050, dwarfing the costs of the bill.”

Revealing the benefits of the APA might have had more of an impact on the Democrats and “Green-Leaning” Republicans in an attempt to garner their votes for the APA.  Interestingly, although Kerry and Lieberman have attempted to downplay Waxman-Markey’s economy-wide cap-and-trade, the EPA concluded that

While there are important differences between the American Power Act (APA) and H.R. 2454  . . . , the modeled impacts of the APA are very similar to those of H.R. 2454.

  • Estimated allowances prices under the two bills differ on the order of 0-1%
  • The percentage reduction represented by the emissions caps are identical beginning in 2013.
  • Both bills allow for 2 billion tons of offsets in each year.
  • Both bills contain provisions to prevent emissions leakage ad to address competitiveness concerns.
  • The Cost Containment Reserve provisions of the APA provide a greater level of price certainty than do provisions in H.R. 2454’s Strategic Reserve Allowance Program by, among other things, allocating a greater share of allowances to the reserve.  This higher level of price certainty comes at a slightly higher cost to the APA over H.R. 2454.
  • The APA’s approach to cover GHGs from the transportation fuels and refined products sectors does not impact allowance prices.

Since cost has been the opposition’s main argument against any type of climate change legislation, it would stand to reason that the benefits should also be taken into account as well.

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