While most people understand the urgency of climate change, one of the top concerns many working families have with a cap-and-trade system is added costs for energy.
During the House debate on the cap-and-trade program included in the American Clean Energy and Security Act (ACES), which passed in June, Republicans exploited this concern by inaccurately citing an MIT study that showed that some consumers could expect higher energy costs under a cap-and-trade system. While the MIT study actually reported a price rise of around $31 for most customers, the Republicans in blasting the climate change legislation claimed the report estimated prices would go up by more than $3,000 annually.
Bad math and fear-mongering aside, the impact of the cap-and-trade program on the cost of electricity, natural gas and home heating oil remains a real concern for working families.
Concerns about higher prices of energy come from the fact that under the cap-and-trade system the emission of greenhouse gas pollution will be regulated by requiring polluters to hold a permit, or an allowance, for each ton of carbon pollution emitted. Allowances will be purchased for between $10 now and $13.60 in 2016, according to an Environmental Protection Agency (EPA) estimate.
Charging this extra fee, some claim, will trickle down to households and smaller businesses in the form of higher prices.
To resolve these concerns, ACES provides substantial aid to states and local energy distribution companies (LDCs) specifically for the purpose of investments in renewable energy and offsetting the costs to businesses and households of higher energy prices associated with the program, according to new analysis by the World Resources Institute (WRI) and the Georgetown Climate Center (GCC),
According to the language of the bill, by 2016, when all of its programs are put in place, some 49 percent of those allowances will be distributed to states and LDCs for free. Those entities will be able then to put those allowances on the market for sale to bigger polluters. The goal of this provision of the program will be to fund the speed up of the transition to renewable energy sources with less or even no greenhouse gas emissions and to create an offset for higher energy prices, according to the WRI/GCC analysis.
In fact, the total value of those allowances to states and consumers for these purpose is projected to be more than $36 billion by 2016, with roughly more than 80 percent of that earmarked for ‘residential, commercial, and industrial energy consumers through states and LDCs for cost relief and energy efficiency,’ according to the report.
According to the authors of the report, oversight of how these funds are managed and used for cost relief will be worked out between state and local public energy commissions and the EPA. While public oversight and equitable distribution of allowances is mandated in the bill, ‘the [state and local public energy commissions] have a lot of discretion in how they do it, but the EPA has to sign off on these plans,’ said Gabriel Pacyniak of the GCC.
By 2028, as states and local energy distributors shift more to renewable resources, free allowances made available for cost relief will begin to be phased out. By 2032, consumer cost relief programs will shift entirely to federal sources, the report revealed.
More significantly, cost relief and investments in renewable energy sources will be funded entirely by the cap-and-trade system itself rather than by traditional federal revenue sources. The program will not add to the deficit or national debt.
On the contrary, by creating a market for greenhouse gas emission allowances, a new clean energy sector will emerge. The program will create millions of ‘green’ jobs, by some estimates. And within just a few decades, supporters of the bill say, we will see a reversal of the devastation to the environment caused by greenhouse gas emissions.