Implementing one of the many congressional proposals to reduce greenhouse gases (GHGs) in the US would cost the country less than one per cent of GDP over a 22 year period, according to a report US Department of Energy researchers released on September 5.
This report responds to a request from Congressmen Tom Udall and Tom Petri for an economic and industry analysis of the greenhouse gas (GHG) emissions regulations specified in H.R.5049, the Keep America Competitive Global Warming Policy Act.
The legislation, introduced March 29, 2006, establishes a market-based emission allowance program to cap GHG emissions at their 2009 projected level and to limit the potential impacts of the bill on energy prices through the sale of additional allowances at a “safety-valve” price. The safety-valve provision, if triggered, implicitly relaxes the emissions cap.
H.R. 5049 specifies guidelines for allocating tradable emission allowances to compensate affected parties, provide transition and low-income assistance, fund research and development programs, and assist with emissions reduction projects in developing countries. Up to 10 percent of the emission allowances are to be allocated for free to the oil, natural gas, and coal industries, which must submit allowances equal to the carbon dioxide (CO2) emissions from their fuel sales. The rest of the allowances are allocated to State governments, the electric power industry, energy-intensive industries, and the U.S. Departments of State, Energy, and Treasury. Although not explicitly stated in the bill, these recipients are presumed to sell the allowances to entities that are required to hold them to cover emissions associated with their activities.
The GHG provisions of the bill were modeled using the National Energy Modeling System and compared to the reference case projections from the Annual Energy Outlook 2006 (AEO2006). Four alternative analysis cases were prepared. The H.R.5049A case assumes the nominal safety-valve price growth matches the Consumer Price Index (CPI) plus an increment of 1 percentage point per year. The H.R.5049B case assumes a 2 percentage point increment to the CPI for the safety-valve escalation rate.
The H.R.5049C is similar to the H.R.5049A case, but assumes 50 percent lower market response to emissions abatement opportunities for the non-CO2 gases than the emissions abatement supply curve for those gases provided by the Environmental Protection Agency (EPA). The No-Safety case simulates a hypothetical version of the bill without its safety-valve provision, using the original EPA-supplied emission abatement curves for non-CO2 gases.
For detailed information on the modeled impacts of H.R.5049, see the following website:
Loading...