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Will the Climate Change Bill Cost Just a Postage Stamp?

Shikha Dalmia
June 29, 2009, 10:12am

The advocates of the climate change monstrosity that just passed the House - and is now headed to the Senate -- allege that the bill won't break the bank of Americans.  To back their claims they point to a Congressional Budget Office study that estimated that in 2020 the bill's cost works out to about $175 a year for an average household. This translates into an extra postage stamp every day, the bill's author, Edward Markey (D-Mass), has been crowing. (My colleague, Anthony Randazoo, blogged the state-by-state breakdown of this estimate here.)

The CBO is a non-partisan entity that is held in high regard so its analysis has to be taken seriously. But Markey's sound-bite - that is being repeated ad nauseam by global warming alarmists - ignores this VERY important caveat: The $175 figure is based on the year 2020 - a year that the CBO itself acknowledges is not representative of the true costs of the program. Why? Because that year the government will still be handing a bulk of the carbon credits for free to power plants, utilities and other big emitters. Energy consumers won't feel the true pinch till about 2035 when these free allowances are phased out and the program starts forcing utilities etc. to buy about 70% of their credits. That's 16 years from now when President Obama (and Congressional backers of the bill) will be safely out of office, making millions of dollars giving speeches, and, in his spare time, basking in the sun room of his taxpayer-subsidized solar powered home.

Be that as it may, here is what CBO really says on page 3 of its report:

"This analysis focuses on the effect of the legislation in the year 2020, a point at which the cap would have been in effect for eight years (giving the economy time to adjust) and at which point the allocation of allowances would be representative of the situation prior to the phase-down of free allowances. The incidence of gains and losses would be considerably different once the free allocation of allowances has mostly ended. (Emphasis added)."

The true impact of the bill is a subject of fierce debate with: the Heritage Foundation estimating that it will cost a household about $4,300 annually; an MIT study putting this number at $3,100; and a previous CBO study of a similar bill at $1,600.

My own hunch?

The actual costs are likely unknowable because it is impossible to quantify opportunity costs of what could have! should have! would have! been had the resources being expended to appease the climate avatars been deployed in more productive segments of the economy.

The only thing certain is that they will be much higher than what meets the naked eye.


Shikha Dalmia is Senior Analyst


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