Abstract: This report examines seven studies that project the costs of H.R. 2454 to 2030 or beyond. It is
difficult (and some would consider it unwise) to project costs up to the year 2030, much less
beyond. The already tenuous assumption that current regulatory standards will remain constant
becomes more unrealistic as time goes forward, and other unforeseen events (such as
technological breakthroughs) loom as critical issues which cannot be modeled. Hence, long-term
cost projections are at best speculative, and should be viewed with attentive skepticism. The
finer and more detailed the estimate presented, the greater the skepticism should be. In the words
of the late Dr. Lincoln Moses, the first Administrator of the Energy Information Administration:
“There are no facts about the future.”
But if models cannot reliably predict the future, they can indicate the sensitivity of a program’s
provisions to varying economic, technological, and behavioral assumptions that may assist
policymakers in designing a greenhouse gas reduction strategy. The various cases examined here
do provide some important insights on the costs and benefits of H.R. 2454 and its many
provisions.
• If enacted, the ultimate cost of H.R. 2454 would be determined by the response
of the economy to the technological challenges presented by the bill.
• The allocation of allowance value under H.R. 2454 will determine who
ultimately bears the cost of the program.
• The cases generally indicate that the availability of offsets (particularly
international offsets) is potentially the key factor in determining the cost of H.R.
2454.
• The interplay between nuclear power, renewables, natural gas, and coal-fired
capacity with carbon capture and storage technology among the cases emphasizes
the need for a low-carbon source of electric generating capacity in the mid- to
long-term. A considerable amount of low-carbon generation will have to be built
under H.R. 2454 in order to meet the emission reduction requirement.
• Attempts to estimate household effects (or other fine-grained analyses) are
fraught with numerous difficulties that reflect more on the philosophies and
assumptions of the cases reviewed than on any credible future effect.
Finally, H.R. 2454’s climate-related environmental benefit should be considered in a global
context and the desire to engage the developing world in the reduction effort. When the United
States and other developed countries ratified the 1992 United Nations Framework Convention on
Climate Change (UNFCCC), they agreed both to reduce their own emissions to help stabilize
atmospheric concentrations of greenhouse gases and to take the lead in reducing greenhouse
gases. This global scope raises two issues for H.R. 2454: (1) whether the bill’s greenhouse gas
reduction program and other provisions would be considered sufficiently credible by developing
countries so that schemes for including them in future international agreements become more
likely, and (2) whether the bill’s reductions meet U.S. commitments to stabilization of
atmospheric greenhouse gas concentrations under the UNFCCC, and whether those reductions
occur in a timely fashion so that global concentrations are stabilized at an acceptable level. [read report]
Topics: Climate Change, Economics & Trade
