The Energy Information Administration and the Environmental Protection Agency have each recently released detailed analyses of the Bingaman-Specter greenhouse gas cap-and-trade legislation (S. 1766). The legislation would establish a mandatory emission trading program to reduce U.S. greenhouse gas emissions. The analyses, requested by Bingaman and Specter, reached similar conclusions about impacts the bill would have on greenhouse gas emissions, energy production, energy use and prices. As previous EIA and EPA analyses have shown, the United States can substantially lower its greenhouse gas emissions without damaging the economy.
Sen. Bingaman: "The EIA and EPA reports both show that a well-designed climate program can reduce emissions at a low-cost to our economy. Both studies conclude that our climate change legislation would dramatically transform technologies to spur carbon capture and sequestration, greatly lowering emissions from coal-fired power plants. I hope these analyses inform the debate on global warming in a positive manner and I look forward to working closely with Sens. Boxer, Lieberman, Warner and others to resolve differences between the major bills and pass climate legislation this year."
Sen. Specter: "I am pleased that the Energy Information Administration (EIA) and the Environmental Protection Agency (EPA) have completed their analyses on the Low Carbon Economy Act. While we are still reviewing the reports' details, the conclusions show that the tough choices we made in the legislation are effective in both reducing greenhouse gases and protecting the U.S. economy. The reports will enhance the Senate's debate on climate change, and I look forward to working with my colleagues to move forward on climate change legislation."
Sen. Murkowski: "These analyses show that the Bingaman-Specter bill will cut total emissions, while protecting the economy, keeping costs to consumers low and achieving reductions to deal with climate change. This bill protects both the environment and workers. I am hopeful that these reports help spur new interest in passing this legislation."
Key Findings from EIA and EPA on the Bingaman-Specter Low Carbon Economy Act of 2007':
Total greenhouse gas emissions in 2030 fall from 9.1 to 9.7 billion metric tons CO2 in the "business-as-usual" case to 6.9 to 7.3 billion metric tons under S.1766 -- a 24 to 26 percent decrease.
Impacts on economic growth are modest. By 2030, cumulative GDP losses range from -0.02 to -0.07 percent across the different scenarios analyzed by EIA and EPA.
Energy price impacts are modest as well. According to the EIA, increases in average delivered prices in 2030 range from 12 to 13 percent for natural gas, 7 to 10 percent for petroleum and 8 to 10 percent for electricity.
The electric power sector accounts for the vast majority of emission reductions. The sector accounts for between roughly 80 and 90 percent of the 2030 reduction in energy-related CO2 emissions. Additionally, the EPA analysis shows full de-carbonization of the electricity sector by 2050.
Although no new coal-to-liquids plants are built, and conventional coal power plants are economically unattractive to build, coal use continues to grow in most of the scenarios analyzed, as allowance incentives drive the development of new coal power plants with carbon capture and storage (CCS). New coal capacity with CCS ranges from approximately 100 to 300 gigawatts by 2030.
Renewables and nuclear capacity grow substantially as well. Renewable capacity increases under the various scenarios range from 11 gigawatts to 72 gigawatts, while the number of new nuclear plants built ranges from 15 to 100.
Allowance prices start at approximately $8 per metric ton of CO2 in 2012 and rise to $25 by 2030. The two analyses differ in their projections of when the allowance price is "capped" by the Technology Accelerator Payment (TAP). In the EPA's core scenario, the allowance price triggers the Technology Accelerator Payment (TAP) in 2030, while in EIA's core scenario the TAP is triggered in 2017. However, in both the EIA's and EPA's "high tech" scenario, improvements in low- and non-carbon technologies delay triggering the TAP until 2027 and 2039, respectively. The differences in findings illustrate the overall uncertainties associated with allowance prices and underscore the importance of a robust cost containment mechanism in providing an upper limit on overall economic costs.
Auction revenues and TAP payments are projected to provide significant funds to invest in technology research development and deployment, adaptation to climate impacts, and mitigation of cost burdens on low income families.
While the targets under Lieberman-McCain "Climate Stewardship and Innovation Act of 2007," (S. 280), imply larger overall emission reductions than S. 1766, EPA found that heavy reliance on international offsets under the former proposal results in similar levels of domestic greenhouse gas emissions under both bills.