Cutting carbon may be costly

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By Tom LoBianco

Federal proposals to curb carbon emissions will cost American households an average of $1,600 a year, the chief budget analyst for Congress said Thursday.

Meanwhile, President Obama outlined a budget that would cull $26 billion in revenue by rolling back tax breaks for oil and natural gas producers. He also called for examining alternatives to dumping nuclear waste in the Yucca Mountains located in Senate Majority Leader Harry Reid's home state of Nevada.

The president's budget proposal, and the stark analysis from the Congressional Budget Office, point to the new administration's ambitious drive to make a U-turn on national energy policy and the obstacles in its way.

"I think the president has looked at those and the subsidies and determined that somehow those companies will be able to search for, drill, capture, produce, and bring to market that oil and gas without the subsidies of the American taxpayers," White House spokesman Robert Gibbs said.

The nation's oil and gas producers said Mr. Obama's proposals would result in higher gas prices and fewer jobs, both daunting prospects during the continued economic turmoil.

"This budget is bad news for American consumers and worse news for American jobs," said R. Skip Horvath, president of the Natural Gas Supply Association. "People don't appreciate how big the natural gas industry is in this country. Four million Americans depend on domestic natural gas for their livelihoods - both those who work directly in the industry as well those in secondary jobs, such as steel and concrete, and retail jobs."

Mr. Obama's budget outline calls for $646 billion in revenues from a carbon trading plan, although analyses have been scant because the key details of such a plan - how much companies would have to pay and how much coverage the government would provide for free - have not been hashed out.

Any measure that curbs greenhouse gasses by capping emissions and issuing permits for allowable carbon dioxide - called a cap and trade system - would invariably be passed on to consumers in higher costs, said Douglas W. Elmendorf, director of the Congressional Budget Office.

The CBO analysis released Thursday updates research of previous cap-and-trade proposals and estimates that a 15 percent reduction in greenhouse gasses would cost American families between $700 and $2,200 a year in increased energy and consumer goods prices. The average cost to families would be $1,600, according to the analysis.

The debate over how much a cap-and-trade plan would cost families has continued on Capitol Hill as lawmakers push for broad limits on greenhouse gas emissions.

Industry leaders have lobbied Congress in the past few weeks for free carbon permits under the proposed cap-and-trade system, although Mr. Elmendorf said firms would pass on higher costs to consumers regardless of how carbon allowances are distributed.

"Those firms would not ultimately bear most of the costs of the allowances," Mr. Elmendorf said in his testimony before the Senate Finance Committee. "Instead, they would pass those costs along to their customers [and their customers' customers] in the form of higher prices. Such price increases would stem from the restriction on emissions and in most circumstances would occur regardless of whether the government sold the allowances or gave them away."

Republican and Democrat lawmakers have split on the analysis of a 2007 Massachusetts Institute of Technology study of the costs of a cap and trade plan, but most analyses have settled that the costs of curbing greenhouse gas emissions would be passed along to consumers.