Cabinet Officials Back Push for Cap-and-Trade Proposal

This story appears in the April 27 print edition of Transport Topics.

A trio of Obama administration cabinet-level officials last week rejected claims that the carbon emissions cap-and-trade bill would result in massive U.S. job losses and large increases in consumer utility and fuel bills.

“The ‘no, we can’t’ crowd will spin out doomsday scenarios about runaway costs,” said U.S. Environmental Protection Agency Administrator Lisa Jackson. “But EPA’s available economic modeling indicates that the investment Americans would make to implement the cap-and-trade program of the American Clean Energy and Security Act would be modest compared to the benefits that science and plain common sense tell us a comprehensive energy and climate policy will deliver.”

Jackson, Energy Secretary Steven Chu and Transportation Secretary Ray LaHood were among more than 50 witnesses testifying last week during a four-day hearing by the House Energy and Commerce Committee. The proposal calls for a host of energy independence and greenhouse gases reduction initiatives, including a cap-and-trade program.

Chu told the committee that the United States faces “two dangers” — failing to take action on climate change and failing to lead in creating new clean-energy jobs.

“The administration believes a gradual, market-based cap on carbon pollution would be a significant step for restoring American leadership in deployment of clean-energy technology,” Chu said. “We can neither let our planet get too hot nor let our economy grow cold. We must get off the sidelines of the clean-energy race and play to win.”

“Aggressive action to reduce the impacts of climate change is needed, and the U.S. must be a leader in the global effort to reduce greenhouse gas emissions,” LaHood told the committee.

But several members of the panel, most of them Republicans, predicted a cap-and-trade program would be costly not only for business, but for consumers as well.

“Cap-and-trade, cap-and-tax will simply kick American families when they are down,” said Rep. Fred Upton (R-Mich.).

“This is the largest assault on democracy and freedom in this country that I’ve ever experienced,” said Rep. John Shimkus (R-Ill.). “I’ve lived through some tough times in Congress — impeachment, two wars, terrorist attacks — I fear this more than all of the above activities that have happened.”

The 640-page draft legislation calls for promoting such renewable energy sources as wind, biomass, solar and geothermal. Under the proposal, by 2025, these alternative sources would total 25% of all electrical energy.

It also would seek to lower carbon dioxide emissions to 20% below 2005 levels by 2020 and more than 80% by 2050, through a cap-and-trade system.

Under the program, carbon emitters would receive tradable federal permits called “allow-ances” for each ton of pollution emitted into the atmosphere. Entities that emit fewer than 25,000 tons per year of carbon dioxide equivalent would not be considered large enough emitters to be covered by the program.

EPA estimated that the cost of the allowances would range from $13 to $17 per metric ton CO2 equivalent in 2015 and from $17 to $22 in 2020.

Several Republicans called for a separate hearing to flesh out the details of the cap-and-trade allowances system under consideration.

Jackson said an EPA economic analysis discounted claims that a cap-and-trade system would cause millions of job losses in the United States and cause utility and energy bills to skyrocket.

“The impact on the economy is modest, in general,” Jackson said. “The impact on the average household, over a year, would be from $98 to $140.”

However, some of that increase would be returned to consumers with a rebate that would return 40% of the money raised from cap-and-trade allowances.

Rep. Henry Waxman (D-Calif.), who introduced the legislation with Rep. Edward Markey (D-Mass.), said the proposal would spur clean-energy development and not be a drag on the economy.

“Some have said that true energy reform will undermine our economy,” Waxman said. “They argue that there is a fundamental conflict between economic growth and clean energy.”

“That is a false choice,” he added. “Our economic future and clean energy are inextricably intertwined. The economy that will grow the fastest in this century will be the one that makes the greatest investments in new energy technologies.”