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CLIMATE: Industry-backed cost report sparks debate on Senate emissions bill (03/13/2008)
Darren Samuelsohn, E&ENews PM senior reporter
This story was updated at 5:15 p.m. EDT.
An industry-funded study of Senate global warming legislation predicted deep trouble today for the U.S. economy if the measure becomes law, but critics quickly denounced the analysis as grossly overstating the consequences.
The National Association of Manufacturers and the American Council for Capital Formation are the latest groups to unveil research on a major climate change bill from Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.).
Using a model popular with the Energy Information Administration, the two groups said the Lieberman-Warner measure would shrink economic growth and cause millions of job losses over the next two decades while also raising natural gas and electricity prices. They did not factor in the benefits of U.S. action to address climate change, insisting that U.S. emission curbs would be more than offset by soaring pollution in China, India, South America and Africa.
"It clearly isn't an equal trade," said former Michigan Gov. John Engler (R), now the president of the National Associations of Manufacturers.
The NAM-ACCF findings say that the U.S. economy would grow between now and 2030 but not to the same degree as it would absent the Liebeman-Warner proposal becoming law. More specifically, the bill would shave between 0.8 percent and 1.1 percent off the gross domestic product in 2020 ($151 billion to $210 billion) and between 2.6 percent and 2.7 percent by 2030 ($630 billion to $669 billion).
Industry estimates also show between 1.2 million to 1.8 million job losses in 2020 and 3 million to 4 million job losses by 2030. The report also predicts carbon dioxide prices in a new U.S. cap-and-trade market would range between $54 to $64 per ton in 2020 and between $227 and $271 in 2030.
In a teleconference, Engler defended the study's assumptions. "There'll be people who come forward and say there's no cost at all," he said. "There's almost been a surreal aspect from some of the people and groups on this. I'd just say what we tried to do is not be wildly optimistic or deeply pessimistic. We just tried to be realistic."
'Predictable' findings
Sponsors of the Senate proposal and environmental groups snapped back at the industry study.
"It is no more accurate than the recently discredited CRA analysis," a Lieberman aide said, referring to the recent Charles River & Associates study funded by the electric utility industry's lead trade association, the Edison Electric Institute.
"Both analyses are like a poster in the subway that says 'THIS TRAIN WILL GO OFF THE RAILS' in huge bold type and then, in tiny type at the bottom, 'unless the train has wheels.'"
Tony Kriendler, a spokesman for Environmental Defense, questioned many of the assumptions that NAM and its partner put into the models, including no consideration of provisions that allow industry to bank away extra emission credits and borrow with interest from the credit pool if the costs get too high.
The NAM-led study also took a pessimistic perspective on the future prospects for new coal plants with the capacity to capture and store underground large amounts of carbon dioxide. That assumption caused the model's compliance prices to shoot up.
"These claims are predictable," Kriendler said. "Every major piece of proposed environmental legislation has faced the same charges, and all proved baseless."
Jonathan Banks, climate policy director at the Clean Air Task Force, also raised doubts about the study, saying it did not take into account the potential for more nuclear power plants. It also did not consider the tens and potentially even hundreds of billions of dollars raised through the auction and allocation of emission credits.
"There's a happy medium somewhere, but I don't think they picked it," Banks said. "I think that's the case with all their technology constraints. They are all designed to drive the costs through the roof."
Onward to Pennsylvania
Industry officials say their report could have legs in the presidential election. "We'll be working very hard to publicize the Pennsylvania report" before the Democratic presidential primary on April 22, Engler told reporters.
There are also plans for forums hosted by NAM, the U.S. Chamber of Commerce and the Alliance for Energy and Economic Growth in states with senators that represent critical swing votes on climate change.
The industry meetings, open to anyone who buys a $35 ticket, started yesterday in Manchester, N.H., and will continue March 18 in Fargo, N.D.; March 19 in Billings, Mont.; and April 21 in Columbus, Ohio.
Sen. James Inhofe (R-Okla.), the ranking member of the Senate Environment and Public Works Committee and an outspoken skeptic on the link between man-made emissions and climate change, promised today to use the NAM findings, as well as other industry research, in preparation for a June floor debate on the Lieberman-Warner bill.
"I'm going to be using all these studies," Inhofe said in an interview.
The NAM-ACCF report is only the most recent effort to pinpoint the costs of the Lieberman-Warner bill.
Environmentalists at the Clean Air Task Force reported earlier this year that CO2 prices would be a little beyond $20 per ton in 2020 and about $45 in 2030. The U.S. economy would grow by 2030, but 0.7 percent less than it would absent the legislation.
U.S. EPA will release its own analysis tomorrow. And EIA's John Conti said today the Energy Department's study of the legislation would likely be made public by mid- to late-April.
Click here for a summary of the NAM-ACCF analysis.
Click here for the complete NAM-ACCF analysis.
Click here for the NAM-ACCF PowerPoint presentation.