Climate Progress: An insider's view of climate science, politics, and solutions

The EPA has just published a “Preliminary Analysis“ of the Waxman-Markey Discussion Draft aka “The American Clean Energy and Security Act of 2009.”  The analysis finds:

• The Waxman-Markey draft would drive the clean energy transformation of the U.S. economy. Major investments in energy efficiency would mean that energy consumption levels that would be reached in 2015 without the policy are not reached until the middle of the century with the policy, reflecting more energy efficient manufacturing, residential, and transportation sectors.
• Renewable energy penetration accelerates by 150% percent over the next two decades, and would be expected to grow even faster under the draft bill’s renewable electricity standard, which has not been modeled yet due to time limitations.
• [The bill would] create strong demand for a domestic manufacturing market for these next generation technologies that will enable American workers to serve in a central role in our clean energy transformation; and
• [It would] play a critical role in the American economic recovery and job growth – from retooling shuttered manufacturing plants to make wind turbines, to using equipment and expertise in drilling for oil to develop clean energy from underground geothermal sources, to tapping into American ingenuity to engineer coal-fired power plants that do not contribute to climate change.

Dan Weiss, Senior Fellow and Director of Climate Strategy, at American Progress says:

The EPA analysis confirms that the American Clean Energy and Security Act will create jobs in the clean energy industry, benefit consumers, slash oil use, and cut pollution. This analysis disproves the false claims made by doomsayers who want to continue our existing energy policies.

UPDATE:  Winner of the ass-backwards headline of the year award, is E&E News PM (subs. req’d) for “House bill would pinch economy — EPA.”

Significantly, the net cost to the country and the consumer is extremely low, which is consistent with other analyses (see “Intro to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar“).  The EPA finds:

The energy price impacts reflect the price of emission allowances that provide the incentives to invest in clean energy technologies and lower energy consumption. In the two models used to analyze the core scenario for the discussion draft, allowance prices are estimated to be $13-$17 per metric ton carbon dioxide equivalent (tCO2e) in 2015 and $17-$22/tCO2e in 2020. These increase over time, which provides the long-term price signal to inform investments in long-lived energy capital.

So in 2020, the total CO2-eq trading is about $100 billion a year, well under 1% of GDP in that year.  And, of course, that is not a “cost” to the country since the overwhelming majority of that money drives clean energy investment or is returned to the taxpayer.

Assuming that the bulk of the revenues from the program are returned to households, the cap-and-trade policy has a relatively modest impact on U.S. consumers. EPA’s analysis shows that consumption is reduced by 0.020.11% in 2015 and 0.17-0.19% in 2020 and 0.37-0.39% in 2030, relative to the no policy case. However, EPA’s analysis shows that household consumption under the policy still increases by 9-10% percent between 2010 and 2015, by 18-19% between 2010 and 2020, and by 36-40% by 2030. In comparison to the no policy case, the 5 and 10 year consumption growth under the WM Draft is only 0.1 and 0.2 percentage points lower for 2015 and 2020, respectively. This estimate reflects the assumption made in this analysis that most revenues from the program would be returned to consumers in a lump-sum rebate, enabling consumers to decide how best to use the value created in the program. Returning the revenues in this fashion could make the median household, and those living at lower ends of the income distribution, better off than they would be without the program. However, a policy that failed to return these revenues to consumers would lead to substantially larger losses in consumption.

Indeed, if you combine returning the vast majority of the revenues — which is what Obama has said he wants to do — with the aggressive energy efficiency provisions in the bill, then the overwhelming majority of Americans can achieve an overall reduction in their combined energy and tax bills.

And in return, Waxman-Markey would jumpstart the transition to a clean energy economy that creates millions of green jobs, sharply reduces urban air pollution, and puts us on a path to avert catastrophic climate impacts.

The time to act is now.

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This entry was posted by Joe on Tuesday, April 21st, 2009 at 3:10 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.