Following on the heels of estimates by the Congressional Budget Office (CBO) and the Government Accounting Office (GAO), the Energy Information Administration (EIA) has issued its analysis of the potential economic impacts of H.R. 2454, the American Clean Energy and Security Act of 2009 (ACESA).
The EIA analysis centers on the bill’s proposed cap-and-trade program to regulate greenhouse gases, including carbon dioxide, calculating costs across a range of possible scenarios.
Glenn English, CEO of the National Rural Electric Cooperative Association, who has raised concerns about the potential cost to consumers, noted some of the key differences between this estimate and others: “Pointing out the range of possible outcomes and the substantial uncertainty surrounding some of the underlying assumptions enables a more realistic discussion,” English said.
In a best-case (the so-called “Basic Case”) scenario, “key low-emissions technologies, including nuclear, fossil with CCS [carbon capture and storage], and various renewables, are developed and deployed on a large scale in a timeframe consistent with the emissions reduction requirements of ACESA without encountering any major obstacles … [and] … the use of offsets, both domestic and international, is not severely constrained by cost, regulation, or the pace of negotiations with key countries covering key sectors.”
Conversely, in a worst-case scenario, “the use of international offsets is severely limited by cost, regulation, and/or slow progress in reaching international agreements or arrangements covering offsets in key countries and sectors” and “deployment of key technologies, including nuclear, fossil with CCS, and dedicated biomass, cannot expand beyond their Reference Case levels through 2030.”
Consumer-owned rural electric cooperatives, who serve a higher percentage of low-income Americans, have repeatedly urged legislators to provide safeguards to ensure that costs resulting from this legislation are affordable.
Echoing the findings of the Government Accountability Office (GAO), the EIA analysis makes clear that the electric utility industry, and particularly that sector which relies on coal, will be shouldering the burden of “decarbonizing” the economy:
Across the ACESA main cases, the electricity sector accounts for between 80 percent and 88 percent of the total reduction in energy-related CO2 emissions relative to the Reference Case in 2030. Reductions in electricity-sector emissions are primarily achieved by reducing the role of conventional coal-fired generation, which in 2007 provided 50 percent of total U.S. generation, and increasing the use of no- or low-carbon generation technologies that either exist today (e.g. renewables and nuclear) or are under development (fossil with CCS).
EIA found that under a best case scenario, as described above, in 2020 “the reduction in household consumption is $134 (2007 dollars) … with a range of $30 to $362 across all main ACESA cases. In 2030, household consumption is reduced by $339 in the ACESA Basic Case, with a range of $157 to $850 per household across all main ACESA cases.”
"The wide range of possible outcomes underscores the difficulty in predicting the cost of this legislation, and because of this uncertainty, the legislation needs a safety valve to protect consumers," English said.
It is worth noting that a June estimate issued by the Congressional Budget Office used a best-case scenario to project the impact of the legislation on the federal budget and household spending power.
The EIA analysis acknowledges that as the allowance allocations program is phased out, prices are likely to climb in 2030. In 2030, the rise in annual household energy expenditures, which includes transportation fuel and efficiency improvements in buildings, could range between $263 to $1870, with non-transportation costs accounting for about 52% percent of the increase.
