When the House Energy and Commerce Committee approved a climate bill last month to reduce greenhouse-gas emissions, Republicans - and a few Democrats - predicted that it would impose huge costs on the American economy.
According to the Congressional Budget Office, they were right.
The CBO, the official, nonpartisan scorekeeper of Congress, has determined in a new analysis that the so-called “cap-and-trade” system in the bill would cost American corporations, public utilities and the oil and gas industry $846 billion over 10 years. The bill is the centerpiece of President Obama’s energy strategy.
Most of that money - all but $24 billion - would flow back out from the government coffers in the form of rebates of various kinds to affected industries, local power companies and refineries, among others.
Between $61 billion and $83 billion would be returned to lower-income families in particular, according to the CBO and the congressional Joint Committee on Taxation, though that number is subject to revision when the House Ways and Means Committee gets its chance to alter the measure’s tax provisions this summer.
The government would also collect an additional $127 billion in a separate program to cut hydrofluorocarbon emissions.
The CBO report was a sharp reminder that the greenhouse-gas-reduction plan crafted by House Energy and Commerce Chairman Henry A. Waxman, California Democrat, and fellow Democrat Rep. Edward J. Markey of Massachusetts would require an expensive, complex government program to achieve its goals.
Under their plan, declining federal greenhouse-gas limits would be coupled with a mandate on affected companies to buy annual emissions permits, or allowances, from the government or through the marketplace. The companies could exceed their pollution target by buying additional allowances or purchasing “offset” credits from approved forestry and conservation projects. Companies that cut their emissions faster than required can save their excess allowances for future years, or sell them.
Mr. Markey on Monday touted the net $24 billion in net deficit reduction over the next decade that CBO analysts have projected for the cap-and-trade plan. He told the Associated Press that the report shows the bill “will get our planet out of the red, while helping to put our budget back in the black.”
Opponents seized on the massive price tag as well.
American Petroleum Institute President Jack Gerard said the projected costs of the emissions allowances will mean increases of as much as 77 cents a gallon for gasoline, and diesel fuel increases of 88 cents per gallon.
“This is what happens when market-based regulation is abandoned in favor of picking winners and losers,” Mr. Gerard said. “Putting most of the burden on one sector also helps explain why the legislation promises to be a job-killer.”
Rep. Dave Camp of Michigan, the ranking Republican on the House Ways and Means Committee, said the numbers show Democrats are abandoning Mr. Obama’s pledge not to raise taxes on the middle class. Rebates to offset higher energy costs for consumers, according to the CBO, would top out at $359 a year for families making no more than $42,000 a year.
“Increasing Americans’ fuel and utility bills in this recession is not only bad policy, but it completely ignores the hardships millions of Americans are already facing,” Mr. Camp said.
Republicans and industry opponents see the report as an argument they can use to rally moderate Democrats to vote against the bill on the House floor. But defeating the legislation in the heavily Democratic House is still considered to be an uphill climb.