Cost Estimate: H.R. 2454, American Clean Energy and Security Act of 2009 is a report to Congress by the Congressional Budget Office that estimates how much the climate-change bill recently passed by the House of Representatives — it would limit the amount of and put a price tag on greenhouse gas emissions — would cost.
The American Clean Energy and Security Act of 2009, also known as Waxman-Markey, would "cap" the emissions by U.S. firms of carbon dioxide and other greenhouse gases (GHGs) during the period 2012-2050. These manmade gases that linger in the atmosphere are responsible for global warming; they trap the sun's heat. The resulting climate change imperils the whole globe in the very near future. Not only might it cause droughts, ravage ecosystems, and unleash dangerous human-disease vectors, but it would bring economic disaster for many in the developed and developing worlds. The solution, most scientists agree, is to stop polluting the atmosphere with greenhouse gases. Waxman-Markey is a down payment on that.
Waxman-Markey would have the U.S. government give away or sell "allowances" to regulated economic entities such as coal-mining operations, oil companies, or electric utilities that are directly or indirectly the fathers or grandfathers of GHG emissions. GHG emissions that they and other companies engender would have to be covered, metric ton by metric ton, by allowances. These allowances, once issued by Uncle Sam, would be bought and sold — "traded" — in a national marketplace. The price of the allowances being traded would become the price of carbon (and like) emissions.
Never before have these GHG emissions had a price in the U.S.. Now they will, if Waxman-Markey or the version the U.S. Senate intends to take up in the fall becomes law.
"Cap and trade" under Waxman-Markey — the primary and most controversial of its provisions — is designed to become more and more stringent as the years roll on, between 2012 and 2050, in that the size of the carbon "cap" would shrink over time. Hence, the cost of emitting GHGs, reflected in the price of the allowances, would rise. Regulated firms would buy the allowances on the open market and presumably pass along the allowance costs in the form of higher prices that they charge their customers (and, indirectly, their customers' customers).
Regulated firms would have two options besides allowances. One option would be to find more carbon-efficient ways to do what they do. An electric utility might stop burning coal and start burning natural gas, which puts less carbon in the atmosphere. Though burning natural gas might inherently be more expensive than burning coal, it would require fewer allowances, and the net cost could be lower.
Or, a regulated firm would have the ability under Waxman-Markey to acquire "offset credits" to cover their emissions. The bill would impose limits on these offsets, but within the limits an electric utility, say, might choose to bankroll changes in agricultural and forestry practices on the part of companies and enterprises that are not directly regulated by Waxman-Markey. Greenhouse gases, especially CO2, are effectively "locked up" in trees, plants, and soil. When ill-advised practices such as clearing forests for farmland are engaged in, CO2 can be released. The right sorts of counter-investments can forestall that. When entities regulated by Waxman-Markey make such investments, they can receive offset credits that stand in lieu of carbon allowances.
Buying allowances and making investments will come at a price, and the CBO, in this report, has tired to pinpoint how much the cost of complying with Waxman-Markey would burden the U.S. economy.
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