A Quick Look at the Senate Bill's Economic Impacts

On Friday EPA released its first cut assessment of the economic impacts of the Clean Energy Jobs and American Power Act of 2009 (S. 1733), the Senate‘s response to the House climate and energy bill passed in June.  Senator Boxer (D-CA), Chairman of the Environment and Public Works Committee, unveiled the analysis along with new details of the bill she is co-sponsoring with Senator Kerry (D-MA).

The bottom line: EPA anticipates that the Senate and House bills will yield very similar results in terms of overall costs, allowance prices, and emissions.   Some differences in key provisions could raise the price tag of the Senate bill by up to 1% over its House counterpart.  As for greenhouse gas (GHG) emissions, the tighter 2020 target in the Senate bill -- requiring a 20% reduction in emissions compared to 2005 levels, as opposed to 17% in the House bill -- would reduce cumulative GHG emissions through 2050 by about 1% more than the House version. 

EPA did not conduct a full set of new model runs, but instead drew on its own recent modeling analyses of the House bill and other recent climate bills, plus some short-hand modeling using a “reduced form” version of one of its economy-wide models.  EPA has conducted modeling analyses of five climate bills since 2005, encompassing nearly 50 modeling scenarios in all.  According to the assessment, existing modeling results are “instructive in highlighting the magnitude and direction of impacts and the way they may change under different conditions.”   Indeed, modeling exercises from a variety of governmental, academic, and private sources have shown repeatedly that the availability of offsets, rapid deployment of zero- and low-carbon energy technologies, and return of allowance value to consumers are key drivers in mitigating the costs of climate policy.

In its June analysis of the House bill, EPA projected costs of $88 to $111 per year for each family, or about 23-29 cents per day in 2020 and 76 cents to one dollar per day in 2030.  While the bills overlap in many ways, some key differences between them could increase these costs up to 1% in the Senate version.  EPA also speculates that these differences may net themselves out in the end, since they will both raise and lower the cost of the Senate bill.  Below is a summary of the way the EPA breaks down the anticipated changes on allowance price and cost in the Senate bill compared to the House bill:Comparison of key provisions in the Senate and House bills

In addition, changes in energy efficiency provisions and a smaller CCS bonus pool are expected to slightly increase allowance prices under the Senate bill.  Differences in coverage, treatment of energy-intensive, trade-exposed industries, and provisions concerning transportation and offsets in agriculture and forestry are negligible and are not expected to have an impact.

Liwayway Adkins is the Senior Fellow for Economics