Point Carbon estimates carbon costs of yet-to-be-released Senate climate bill

Point Carbon, a market analysis firm, estimates that carbon prices will average around $31 a ton during the first phase of KGL climate legislation, which has yet to be released.

The $31 a ton is the average estimated price between 2013 and 2020 and is only a few dollars more than carbon costs are expected to reach by 2020 under House passed climate legislation.

How can Point Carbon forecast the costs of legislation that doesn't exist? The price reflects the “presumed carbon market architecture from involved stakeholders and discussions with sources close to the bill,” the firm said in news release. Here's the firm's Web site.

For context, the projected carbon price from the Senate climate legislation equates to an additional 27 cents a gallon for gasoline.

The House climate bill, sponsored by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.), would impose an economy-wide cap and trade program to cut greenhouse gas emissions.

The KGL bill, so-called for its Senate authors John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joseph Lieberman (I-Conn.), would create a cap-and-trade system for electric utilities and later for large manufacturers.

The transportation sector, however, would pay a “linked fee” tied to the carbon market price.

“If the market were to include only the power sector under the cap, Point Carbon finds prices would fall to $15 per ton of CO2 [equivalent] on average, as the cost of reductions is lowest in the power sector. The team also finds that the power sector alone could reduce emissions enough for the US to meet its 2020 pledge at a cost of $18 on average over 2013-2020.”