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Cheap at Twice the Price: EPA’s New Analysis of House Climate Bill

Dan Lashof

Posted June 23, 2009 in Solving Global Warming

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With the American Clean Energy and Security Act (ACES) poised for an historic vote in the House of Representatives on Friday, the Environmental Protection Agency released a new analysis of the costs of implementing the legislation. This analysis finds that the bill would be even more affordable than indicated by EPA's preliminary analysis released in April. Highlights include:

  • The overall cost of implementing the bill will average $80-$111 per household per year--less than $10 per month. EPA's preliminary analysis had estimated $98-$140 per household per year.
  • Allowance prices will be only $13 per ton in 2015, rising to $16 per ton in 2020. EPA's preliminary analysis had estimated $13-17 in 2015 and $17-22 in 2020.
  • A 10 year delay in the availability of international offsets would only increase allowance prices by 3 percent. This is an important new finding because EPA's preliminary analysis had been criticized as overly optimistic about the prospects for quickly scaling up the offsets program.
  • Household electricity and natural gas expenditures are reduced by 7% in 2020 due to the energy efficiency and consumer protection provisions of the legislation. This is consistent with the conclusion of NRDC's analysis which shows that the legislation will reduce consumer's electricity bills in most states.

EPA's analysis, along with the CBO estimates released on Monday, totally discredit opposition claims about the high cost of this critical legislation. And neither EPA nor CBO attempt to account for the economic benefits of reduced environmental damage stemming from the pollution reduction achieved by ACES and the international leadership it would enable for President Obama.  

This is a bargain that we truly can't afford to pass up.

updated 6/24 at 11:34 with added fourth bullet and link

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Comments

Red DesertJun 24 2009 12:45 AM

Some of the reductions in cost seem to be tied to reductions in emissions targets.

Should we really support a climate bill that increases use of fossil fuels?

" even if the emissions limits go into effect, the U.S. would use more carbon-dioxide-heavy coal in 2020 than it did in 2005"
"Under House energy bill, coal won't be going away"
http://www.latimes.com/news/nationworld/nation/la-na-coal22-2009jun22,0,6722721.story


"These goals are preserving coal-related jobs, facilitating growing coal production and keeping electricity rates affordable in regions where most of the electricity is coal-fired. The compromise we have now achieved is a major step toward meeting these goals"
"Compromise protects jobs, utility ratepayers" Rep Rick Boucher, D-VA

http://thehill.com/op-eds/compromise-protects-jobs-utility-ratepayers-2009-05-20.html

Imagine that, a climate bill that "facilitates growing coal production."

Christine GianniniJun 24 2009 01:03 AM

I agree with Red Desert that we should not be passing new bills that move us as a country in the wrong direction. A polluting industry like coal needs to be phased out. Money should go not toward supporting jobs in coal, but to jobs in the green technology that we want to replace coal. Tax incentives and rebates should be given to consumers to move their homes and businesses into greener sources of electricity and heat, thus supporting the new jobs, and coal workers should be subsidized while they train for these new jobs. We don't want to maintain the present conditions through subsidies; we want to use our money and energy to move beyond coal.

Dr. James SingmasterJun 24 2009 01:10 AM

I have commented today #1 on GreenInc blog, June 24, of NYTimes concerning posting about Obama pushing the useless climate bill explaining what it does not do that has to be done. NRDC continues thinking that just getting emissions from power plants and vehicles under control is just about all that will be needed. If we get a 30% reduction in individual vehicle emissions over the next ten years, we are likely to have that offset by having 30% more vehicles.
But the big problem that NRDC and all other environmental groups are totally unaware of is the energy overload that rising temperatures attest to. Most of the energy comes from releasing trapped chemical energy in burning fossil fuels and from releasing trapped atomic energy in nuclear reactors.
I urge NRDC staff and readers here to check out that comment on GreenInc Blog for more.
I would like to see if Mr. Lashof or other at NRDC will comment here especially about the energy overload. I wonder if they have checked out the New Scientist report mentioned in my GreenInc comment
Dr. J. Singmaster

Dr. James SingmasterJun 24 2009 01:19 AM

I made a mistake on date of GreenInc blog posting above as it was June 23. Also concerning Christine's comment here, I have added several other points about the "Clean Coal" fraud on my Greeninc comment especially pointing to the coal ash mess that R. Perks posted here on June 18. Dr. J. Singmaster

Dr. James SingmasterJun 24 2009 01:30 AM

Back again for another goof as my comment is #22 on the Obama posting. J. Singmaster

Christine GianniniJun 24 2009 06:36 AM

You make good points in the post on the Green Inc blog, especially regarding the need to clean up current messes to reduce the burdens already in the atmosphere. There are also issues of carbon dioxide absorbed by the oceans making waters unlivable. And we need to be careful of the impacts of new technologies on wildlife - e.g., the placement of windmills on ridgetops has resulted in mortality of migrating raptors here in the Northwest, who migrate primarily along the ridges and run into these towers. Tower placement needs to be determined by best science, as well as time of day they function and speed, as these factors can be adjusted to possibly reduce bird mortality. There are unknown effects on ocean species of such towers placed off coastlines and this was brought up at today's meeting of the International Whaling Commission in Madeira. If enough of us write to Obama and our representatives to address the 44 new coal ash sites and the use of pyrolysis, hopefully we can get them to amend the bill before it is final.

Dr. Robert K. MusilJun 24 2009 10:54 AM

Lashof is right on the mark. The pro-environmental option on Friday is in favor of a bill that reduces GHG emissions and represents a political victory for us collectively.

The choice is between Waxman-Markey and nothing, between major victory and major defeat. To oppose this bill is a bit like saying it does not matter if Al Gore of John Kerry had beaten George W. Bush.

Passage of a bill like this is the first step of many I called for in my book Hope for a Heated Planet (Rutgers, 2009). We'll still have plenty of chances and ways to defeat coal.

Thanks, Dr. Lashof, for a cogent column.

Dan LashofJun 24 2009 11:24 AM

Thanks for the comments. Please take a look at the EPA analysis linked from my original post. It shows that the House bill will transform our energy system to rely on clean energy sources and energy efficiency. In fact, it shows that conventional coal plants will be phased out. To be sure, this phase out occurs much more slowly than I would like, but as Bob Musil indicates, if the House bill fails the result will be further delay in the transformation we desperately need.

Red DesertJun 24 2009 01:34 PM

Wasn't the bill weakened again yesterday?

Waxman caved to Ag Committee Chair Collin Peterson. ("For whatever reason, people are willing to pay two or three times as much for something that says 'organic' or 'local'. Far be it from me to understand what that's about, but that's reality. And if people are dumb enough to pay that much then hallelujah.") Indirect effects (opening new land--releasing more net carbon) of crop production for ethanol won't be counted for five years and that the Ag Dept, not EPA, will be running the agriculture offsets. That means offsets on Forest Service lands, too, I suppose.

Do I have that right?

Most of those ag offsets are for no-till farming. I imagine Monsanto is lobbying for them. You plant a cover crop, kill the cover crop with herbicide, and then plant a herbicide resistant (GMO) crop. These are the kinds of crops, row crops, that are already heavily subsidized and some might call it another case of farmers farming the government rather than farming the land. But I'd ask, more importantly, do we really know what we are doing?

Many, if not most, of these crops are already farmed this way. Is this going to push more production on marginal land leading to actually more, not less GHG emissions? What is going to be the additional impact on water quality? Wouldn't letting the land go fallow be a much better way to sequester carbon? Once in place, these are not things that will be easy for farmers or others to give up down the line. Now I know that they aren’t all going to American row-crops, but two billion tons of offsets is a lot--something like a third of total US GHG emissions. Correct me if I'm wrong.

I realize vote counting is important, but the important thing is whether the legislation is effective at reducing GHG emissions, not whether it can be passed. At a certain point it becomes a political bill, not environmental legislation. Credible folks worry whether this bill will be effective, especially when the new power plant performance standards went out the window and lots of subsidies got shoveled to coal. Some even suggest jettisoning the cap and trade portions and keeping the efficiency and renewable energy parts.

And, yes, we are all on the same side here.

Dr. James SingmasterJun 24 2009 03:33 PM

The ash problems and the energy overload problems can not be overcome with any fraudulent claims from coal and power industries that stick all the environmental messes from mining and the suddenly recognized ash messes on the public. First step to phase out coal would be 20-30% SIN tax on sales to develop a CCC program for recovering all the SINNED upon lands. It is time to get the total costs for using coal balanced with such a tax that could develop quite a few thousand jobs for coal workers, who get displaced with phasing out coal. Much healthier and safer jobs than coal mining that will also with planting of quite a few thousands trees daily get some carbon dioxide removed from being a GHG.
Christine: Newer windmills put up recently in the SF Bay delta near Rio Vista are claimed to have much lower bird problems and to be 15 times more efficient than older ones. Dr. J. Singmaster

Jeff SutterJun 24 2009 03:54 PM

There's a lot of discussion about how to create changes to energy infrastructure that will result in a reduction of CO2 emissions but existing plans are hard to support because their cost is arbitrary. It occurs to me that there is a sufficiently well defined threat from rising sea levels to drive a program funded equivalent to what it would cost to provide for economic loss and relocation for people living close to the water that will be harmed first by everyone's pollution. Rather than being held and invested by insurance companies to be paid when the problem comes, the funds would be used to prevent the problem in the first place.

My understanding of the UN Climate Change report is that there's an even chance that the sea level will rise 240 inches over the next 100 years. And that the nature of the threat (landed ice melting in Greenland and West Antarctica) is that rises will be from unpredictable catastrophic occurrences. Actuarial firms are established for the purpose of evaluating risks such as these and monetising them in the form of insurance fees.

If you charge the cost of insurance for home and businesses relocation, and infrastructure replacement in coastal areas at-risk to providers and users of fossil fuel the proceeds could easily scale with what it takes to limit emissions and prevent the problem from happening. Spending would be automatic depending on the effectiveness of the programs – and over time as reductions met expectations, spending would be scaled back. In the mean time, people with limited and fixed incomes would have their conversion to more energy efficient modes subsidized as necessary.

When we’d come to a place where we could demonstrate that the reductions we made were measurable – it would be time to make importers lagging behind the US pay the insurance-based fee for the coastal areas they are threatening and to reward importers doing better than the US with a subsidy equivalent to the increase in insurance that would be necessary if the import was produced in the US. The beauty of this approach is that it is directly linked to the threat we are facing - the loss of all of the most valuable property in the US and everything that's built on it.

Tom ConlonJun 25 2009 03:12 AM

Mr. Sutter is right. Many of us (including NRDC's David Goldstein) have tried hard to get the valuation industry (actuaries, appraisers, etc.) to pay attention to the science and begin to internalize these risks/costs in their models. Some are beginning to do so, but still only tentatively. Rest assured, this is social behavior we are dealing with, so -- like stock markets -- when the signs become too powerful to ignore the changes will happen, and then rather quickly.

Meanwhile, back to Dan Lashof's point, the ACES bill is a bargain... even if you are just a gambler visiting this planet, and not planning to leave any offspring behind.

Red DesertJun 25 2009 02:36 PM

I started looking at the new EPA analysis of ACES cited in the post. These are first observations (feedback or corrections welcome)

The lower cost in the new analysis is due to the reduced ambitions of the bill (p. 4). Costs to consumers, up to 2030, are negligible (p5) The major factor constraining the cost of allowances are international offsets. Without those offsets, costs increase 89%.(p.13)

Change in energy through 2050(p. 11)
US petroleum use is constant, with the bill or without the bill. I'm guessing this means that increases in transportation miles will be taken up by efficiencies, but petroleum use and the greenhouse gas emissions from petroleum products remain pretty much at today's levels.

Use of natural gas decreases somewhat after 2030 under the bill; without the bill use grows somewhat

Coal without the bill grows somewhat, with the bill, it declines significantly; and is largely replaced by nuclear energy. CCS covers just a fraction of the coal, say 10% of coal in 2020, 40% (of much lower amounts of coal burned) in 2050.

Efficiency measures and renewable cover new demand in the coming decades. Together, they are about equal to nuclear energy (economy wide, measured in BTU’s) I note that the anticipated demand in coming decades is fairly flat and is possibly optimistic.

Emissions reductions:

Most of the reductions come from the electricity sector and from offsets, especially international offsets. (p.12). Reductions from trans & manufacturing is relatively small. The reductions are significant but look to remain significantly above the caps given in the bill, and that remains true from 2010 to 2050. I'm not sure about "Covered GHG Emissions (Net of Offsets)" in the graph.

Could you say this bill subsidizes coal out of our energy portfolio; renewables, nuclear and efficiency into the energy portfolio? The bill bends over backwards to insulate consumers from cost. California has done really well growing its economy while reducing per capita energy use. One study—it pops up quickly in a Google search—shows that the strongest measured correlation on demand in California is price. It’s often said that Californians pay higher rates, but folks don’t pay rates, they pay bills. And because they use lower amounts of energy, they have lower bills.

Dr. James SingmasterJun 25 2009 07:45 PM

Again the ACES and various comments here show no recognition that ACES will do little because it does not have any program to remove one molecule of carbon dioxide from the 35% and rapidly growing overload of it already in the biosphere nor to remove one erg of energy from its rapidly growing overload. In the Greeninc comment mention in my comment above, I cite the New Scientist posting on June 21 concerning sea level rise as authors point to the momentum of the present energy and GHG levels carrying on until 4,000 AD with sea levels up 80 ft.. Curbing emmissions means still allowing more GHGs to be adding to the overloads. Does anyone believe that just curbing will reduce effects of global warming? We can take action as I have outlined by using the pyrolysis process on our waste messes.
Dr. J. Singmaster

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