Cap-and-trade won't cause 'appreciable negative effects' on economy, RTI finds

Updated Dec. 11, 2009 at 8:05 a.m.

Cap-and-trade won't cause 'appreciable negative effects' on economy, RTI finds

On The Web

Site Search

Get the latest news alerts: Follow LTW at Twitter.

By Rick Smith, Local Tech Wire editor

RESEARCH TRIANGLE PARK, N.C. – Amidst the often rancorous debate about global warming, cap-and-trade for energy and the use of so-called “green energy,” one continuing question is: What will changes in energy policy cost individual consumers?

Martin Ross, an economist at RTI international, provides some answers in a new analysis of a “Blueprint for Legislation Action” from a group known as the U.S. Climate Change Partnership which includes Duke Energy.

Annual costs for each American household if the USCAP plan, which focuses primarily on cap-and-trade, is implemented:

• $57 in 2015

• $89 in 2020

• $269 in 2030

Cap-and-trade legislation, which has already passed in the U.S. House, would permit companies to purchase credits for carbon emissions from other users who fall short of permissible use levels.

Ross noted that the study provides consumers with some benchmarks on which to discuss the impact of the global energy debate, especially given the release of his findings as the global warming conference continues in Copenhagen and the U.S. Environmental Agency’s announced plans to regulate greenhouse gases if Congress doesn’t pass cap-and-trade legislation.

“Over the last couple of years, people have definitely been focused on what the effects would be on households,” Martin told Local Tech Wire and WRAL.com. While the Environmental Protection Agency and the Congressional Business Office have discussed the economic impact of energy legislation, Ross said “Groups working on the business aspect of this for dollars per household.”

In the report, USCAP concludes that depending on the region in which people live, “U.S. families are projected to see very low to moderate increases in their electricity and natural gas bills” when compared to a scenario under which no legislation is passed. “During the transition to a low-carbon economy,” the report adds, “price increases will be dampened by the allocation of allowances value to local distribution companies [i.e. gas and electric utilities in the House bill] and the realization of energy efficient opportunities.”

Using an economic model at RTI that has also been utilized by the EPA, Ross estimates that through 2030 household purchasing power is expected to increase by 70 percent while energy-related emissions are reduced.

In his analysis, climate legislation as proposed by USCAP would cause slight changes in the U.S. Gross Domestic product.

"This analysis, similar with others, indicates that moderate action to address greenhouse gas emissions can be implemented without appreciable negative effects on our nation's economic growth," he explained.

However, Ross said one finding did surprise him.

“I was a little surprised, I have to say, that delaying some of the offset availability has as much of an effect on the costs,” he said. “I had not expected that a short delay would do that much to the bigger picture.”

The USCAP says that if “all offset sources” are delayed, allowance prices for the “trades” of emissions would increase by 26 percent.

At a White House meeting on Wednesday, Duke Chief Executive Officer Jim Rogers called for quick passage of energy legislation.

"This country needs major investments in new energy technologies, including clean coal, advanced nuclear, wind, solar, smart grid and energy efficiency," Rogers said. "The sooner we pass climate change legislation, the more rapidly Duke Energy and other electric utilities can make these investments and create jobs."

In a 20-page summary of its Legislative Blueprint, USCAP concluded:

1. “A well designed climate policy is compatible with robust economic growth of about 2.7 percent per year.”

2. “USCAP modeling results are comparable to several recent analyses” of recently passed cap-and-trade legislation passed in the House of Representatives.

3. “All studies show that households are better off in the future … even with an aggressive climate policy.”

4. “Growth in employment and the economy continues” under various pricing models

5. [Carbon] “offsets are essential for cost containment and limits or delays in the development of either a domestic or international offsets program will very likely increase program costs.”

6. “Complimentary policies can drive emission reductions.”

7. “USCAP modeling results indicate that a wholesale ‘dash to [natural] gas’ is unlikely to occur.”

In addition to Duke Energy, other USCAP members includeAlcoa, BP, Caterpillar, ConocoPhillips, John Deere, DuPont, Ford, GE, GM, The Nature Conservancy, Pepsico, Siemens, the World Resources Institute and Xerox.

Tags: Green Energy, RTI

Editor's Blog

The latest blog posts from our WRAL Tech Wire and WRAL editors. Read more articles…

WRAL Tech Wire