Climate Policy Memo #3: Cost of the American Clean Energy and Security Act of 2009 Found to Be Small According to Government Analyses
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Economic analysis by its nature is better suited to providing insights and not absolute predictions of the future and when these insights are confirmed by more than one analysis, the results are typically considered more credible. With this in mind, two recent government analyses that looked at the costs of the cap and trade portion of the American Clean Energy and Security Act of 2009 (ACES) have found that the likely impact of this portion of the bill would be fairly small. Taking into account the included cost containment provisions and that much of the revenue raised by the bill would be returned in some fashion to households, both EPA and CBO suggest that household impacts would be less than $200 per year.
The following table and bullets are intended to provide a short summary of key results from these two analyses.
Key Results from EPA and CBO Analyses of American Clean Energy and Security Act1
|Allowance Price ($/tCO2e)|
|Annual Household Cost ($)||EPA|
|Annual Economy-wide Cost (billions of $)*||EPA|
*EPA and CBO compute net economy-wide costs using different methodologies. EPA’s cost estimates reflect the change in GDP from business-as-usual levels and are computed using general equilibrium models. CBO’s cost estimate includes international offsets, production cost of domestic offsets, resource costs, and allowance value going overseas, and does not capture the entire impact on GDP nor certain general equilibrium effects.
1 EPA’s recent analysis of ACES can be found at http://www.epa.gov/climatechange/economics/pdfs/HR2454_Analysis.pdf  and CBO’s recent analysis can be found at http://www.cbo.gov/ftpdocs/103xx/doc10327/06-19-CapTradeCosts.htm .
2 EIA’s analysis of gasoline price movements is available at http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp .
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