If the House Energy and Commerce Committees climate change bill becomes law, the federal government would raise $973 billion between 2010 to 2019, according to the Congressional Budget Office (CBO) and Congressional Joint Committee on Taxation.
According to an analysis released late Friday, $846 billion would come from the measure’s cap-and-trade system to reduce greenhouse gas emissions and $127 billion would be generated from a plan to reduce hydrofluorocarbons emissions, or HCFs. President Obama’s original proposal would have generated $650 billion between 2012 and 2019.
The bill that passed out of committee last month would result in $821 billion in direct federal spending on clean energy projects and tax cuts from 2010 to 2019, according to the analysis. CBO’s estimates are based on the bill going into effect at the end of 2009.
The government’s direct spending money would mostly come from revenue raised by auctioning off or giving away free allowances under the cap-and-trade program. Under the plan, entities would be required to hold allowances for each ton of carbon they emit each year with the number of available allowances decreasing over time. CBO counts allowances given away or sold as revenue to the federal government because recipients of free allowances could sell them or use them to avoid incurring the cost of compliance. These entities include electric utilities, oil companies, large industrial sources, and other heavy emitters.
CBO estimates that allowances for greenhouse gas emissions would start at $15 in 2010 and increase to $26 in 2019.
According to the analysis, covered entities would receive 4.627 billion allowances in 2012 and as few as 1.035 billion allowances in 2050. During the first year that cap-and-trade becomes effective, 29.6 percent of the emissions allowances would initially be auctioned off. By 2022, the percentage of allowances auctioned would be 18.4 percent and gradually increase to about 70 percent in 2031 and remain at that level through 2050.
The House bill would increase the amount of available allowances in 2014 and 2016 to account for certain covered entities that would not be required to comply until these years.
Based on information from the Environmental Protection Agency, CBO estimates that about 7,400 facilities would be affected by cap-and-trade programs.
Beginning in 2012, all electricity generators would be required to submit allowances for greenhouse gas emissions from their sites, with the exception of emissions from the combustion of liquid fuels, coke, and renewable biomass.
In 2012, any facility or entity that produces or imports petroleum or coal-based liquids, petroleum coke, or natural gas liquids would be required to submit allowances for emissions that would result from the combustion of those fuels—if emissions exceed 25,000 tons per year.
Beginning in 2014, industrial facilities that manufacture products or burn fossil fuels would be required to submit allowances for all greenhouse gas emissions from their sites—with the exception of emissions from the combustion of various types of liquid fuels, coke, and renewable biomass — if they emit more than 25,000 tons of carbon per year.
Beginning in 2012, producers and importers of HFCs, as well as importers of products containing HFCs would be required to submit to the Environmental Protection Agency an allowance for each carbon dioxide-equivalent ton of HFC they emit.
CBO estimates that the HFC allowances would cost $2 in 2012 and $20 by 2019 and the number of allowances would decrease over time.
Because electricity costs would increase from the enactment of the legislation, low-income earners would receive rebates from the federal government to offset higher energy prices. The Joint Committee on Taxation estimates the rebate program would cost $83 billion over the 2009-2019 time frame and CBO estimates it would cost $61 billion.
In 2012, CBO estimates that the energy rebate would range from $161 for a single person to $359 for a five-person household. Single people with no children would be ineligible if their income exceeded $23,000, while families with at least two children would be ineligible if their income exceeded $42,000.
By 2019, rebate amounts would rise by roughly 75 percent, according to the analysis.
To force the transition to a low-carbon economy, the legislation would implement a Renewable Electricity Standard and require utilities to purchase a certain percentage of their electricity from renewable energy sources by 2020. Utilities that could not meet the requirement could pay a alternative compliance fee to their state government, which CBO estimates would collectively amount to no more than $500 million between 2012 and 2019.
Approximately 21 public and 105 private utilities would be subject to the renewable standard, according to CBO. The agency predicts electricity generated from renewable sources on a national level to be greater than the amount that would be required by the standard in the first five years that the mandate is in effect.
Therefore, CBO expects the costs associated with this mandate to be small during the first five years.