PDF _ RL34489 - Climate Change: Costs and Benefits of S. 2191/S. 3036
15-May-2008; Larry Parker and Brent D. Yacobucci; 79 p.

Abstract: This report examines six studies that project the costs of S. 2191 (S. 3036) to 2030 or 2050. It is difficult to project costs up to the year 2030, much less beyond. The already tenuous assumption that regulatory standards will remain constant becomes more unrealistic, and other unforeseen events loom as critical issues which cannot be modeled. Long-term cost projections are at best speculative, and should be viewed with attentive skepticism. Despite models’ inability to predict the future, cases examined here do provide insights on the costs and benefits of S. 2191.

First, the ultimate cost of S. 2191 would be determined by the response of the economy to the technological challenges presented by the bill. The potential for technology to reduce S. 2191’s costs is not fully analyzed by any of the cases, nor can it be. Technology development is not sufficiently understood currently for models to replicate with confidence. Likewise, it is difficult to determine if available incentives are directed in an optimal manner. The cases suggest that S. 2191’s Carbon Capture and Storage (CCS) bonus allowances would encourage deployment of CCS, accelerating development by 5-10 years.

Second, a considerable amount of low-carbon generating capacity will have to be built under S. 2191 in order to meet the reduction requirement. How much capacity will be necessary depends on new and replacement capacity needs, along with consumer demand response to rising prices and incentives contained in S. 2191.

Third, offsets could be a valuable tool not only to potentially reduce costs, but also to buy time to permit further development of new, more efficient technologies. Cost could be lowered further by greater availability of offsets and international credits and with a broader definition of eligible international credits.

Fourth, the Carbon Market Efficiency Board could have an important effect on the cost of S. 2191 through its power to extend the availability of offsets and international credits. In this sense, the Board’s powers could mesh with the previous insight about the potential effect of offsets on the bill’s overall costs.

Fifth, the Low Carbon Fuel Standard could significantly raise fuel prices and limit supply. The effects will depend on what fuels are included, the emissions reductions achieved by alternatives, and the ability to produce those alternatives. Finally, S. 2191’s climate-related benefit is best considered in a global context and the desire to engage the developing world in the reduction effort. The United States and other developed countries agreed both to reduce their own emissions to help stabilize atmospheric concentrations of greenhouse gases (GHGs) and to take the lead in reducing GHGs when they ratified the United Nations Framework Convention on Climate Change (UNFCCC). This context raises two issues for S. 2191: (1) whether S. 2191’s GHG program would be considered sufficiently credible by developing countries so that schemes for including them in future international agreements become more likely, and (2) whether S. 2191’s reductions meet U.S. commitments under the UNFCCC[read report]

Topics: Climate Change, Legislative

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