U.S. consumers spared big costs in climate bill

NEW YORK Tue Aug 4, 2009 5:07pm EDT

NEW YORK (Reuters) - A new U.S. government study on Tuesday adds to a growing list of experts concluding that climate legislation moving through Congress would have only a modest impact on consumers, adding a bit more than $100 to household costs in 2020.

Under the climate legislation passed by the House of Representatives in June, electricity, heating oil and other bills for average families will rise $114 in 2020 and $288 in 2030, according to the Energy Information Administration, the country's top energy forecaster.

The bill requires energy companies to help consumers lower costs during the early years of the program which would "mute the impact of higher energy prices for households until at least 2025," said Kay Smith, an EIA economist.

Regulating greenhouse gases with a market mechanism, such as the cap and trade program outlined in the bill, is one of President Barack Obama's top goals.

Democratic leaders hope the bill, which would place a cost on polluting greenhouse gases in the United States like carbon dioxide for the first time, will come to a vote by the full Senate in October. That would come before a U.N. meeting in Copenhagen in December in which nearly 200 countries hope to form a successor agreement to the Kyoto Protocol on global warming.

The EIA estimate was in line with earlier projections from the nonpartisan Congressional Budget Office which said average families would pay about $175 extra annually by 2020, and the Environmental Protection Agency, which said families would pay at most an extra $1 per day.

Republican opponents of the bill have calculated household costs would rise $3,100 or more annually on higher prices for energy and other goods. The Chamber of Commerce estimated in April that a cap and trade system would cost households about $1,400 a year by 2020.

MINIMIZING WINDFALL PROFITS

A big part of keeping costs down involves the use of offsets, which would allow polluters like power plants to invest in projects -- like burning gases given off from rotting farm animal waste -- when they determine it's too expensive to cut their own pollution.

The CBO said in a report on Tuesday that offsets could cut the costs of the climate bill passed by the House by 70 percent from 2012 to 2050, though questions linger about whether some of offsets, particularly ones revolving around forestry, actually cut all of the emissions they claim.

At a hearing on Capitol Hill, the Government Accountability Office, an arm of Congress, concluded that "consumers will bear most of the costs of a cap and trade system" as companies pass along their increased energy costs.

The GAO added, however, "These costs could be largely offset depending on how revenues are used."

Under the bill, many of the permits to pollute would be given away at first to local power companies, which would then be required to help lower consumer costs through investments in conservation and by lowering energy bills.

The finance committee is examining whether pollution permits required under the climate change bill should be sold or given away initially and whether some consumers, especially the poor, should be given rebates or new tax breaks.

"We want to make sure we minimize the chance of windfall profits" to companies, Finance Committee Chairman Max Baucus said. Baucus acknowledged the difficulty writing a bill that achieves Democrats' environmental goals while still having enough votes to pass the Senate.

Fellow Democrat Blanche Lincoln drove that point home during the hearing, calling the House-passed bill "deeply flawed" and one that would hurt rural areas like her home state of Arkansas, which rely more heavily on petroleum fuels to drive long distances and grow crops.

But Senator John Kerry, a leading proponent of cap and trade legislation, accused some companies of engaging in "bogus arguments" that inflate the potential costs to consumers. He warned that if Congress fails to pass a climate bill, the Environmental Protection Agency likely would step in with carbon regulations that would be more onerous on companies.

(Additional reporting by Tom Doggett, Ayesha Rascoe and Richard Cowan in Washington; Editing by Marguerita Choy)

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