CBO: Climate bill will impose ‘some cost’ to the economy


Climate legislation designed to slash greenhouse gas emissions will have little effect on overall employment but could hit particular industries hard, the Congressional Budget Office (CBO) director told a Senate panel Wednesday.

Douglas Elmendorf, CBO director, said the development of new technologies and the growth of renewable energy to replace fossil fuels will largely offset jobs losses elsewhere.

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But industries that produce or use fossil fuels like coal “intensively” could see their employment levels decline due to a cap on carbon.

“The shifts will be significant,” Elmendorf said.

Elmendorf reviewed a previously released CBO report at the Senate Energy and Natural Resources Committee hearing, where both Democrats and Republicans indicated wariness over components of the measure introduced by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.), as well as similar legislation that passed the House.

Elmendorf also testified that addressing climate change will come at “some cost to the economy.” The cap-and-trade provisions in the House climate bill would reduce gross domestic product by roughly one-quarter of a percent to three-quarters of a percent in 2020 and from 1 percent to 3.5 percent in 2050.

The CBO projects the gross domestic product overall to be two and a half times larger, “so those changes will be comparatively modest,” Elmendorf said.

But one difficulty for the climate change bill authors as they try to develop a coalition of support is that the legislation will impact some regions differently.

Sens. Mary Landrieu (D-La.), John Barrasso (R-Wyo.), Jim Bunning (R-Ky.) and Sam Brownback (R-Kan.) said climate legislation could hurt their states.

Brownback said a utility in Kansas City has estimated energy prices could increase 44 percent under the bill.

Elmendorf noted that farmers in Kansas could be hurt by change in climate due to greenhouse gases in the atmosphere and noted that supporters of the legislation equate it with an insurance policy against the worst-case scenarios.

Meanwhile, Landrieu said the bill could raise the costs for oil refiners in her state to such an extent as to force them to close, their product be replaced by gasoline imports.

Richard Newell, the administrator of the Energy Information Administration, which tracks energy data and provides energy cost estimates, said one potential benefit of the climate bill is an up to 24 percent reduction in crude oil imports.

Throughout the hearing, the witnesses called to explain the potential costs of the climate bill cautioned that there was a large amount of speculation in their projections.

“Long-term cost projections are at best speculative, and should be viewed with attentive skepticism,” said Larry Parker of the Congressional Research Service, an organization that was asked to review the various cost estimates that have been released by governmental agencies and the private sector.

“The finer and more detailed the estimate presented, the greater the skepticism should be.”
Some senators expressed frustration about the lack of a clear outlook.

“Limitations and caveats and constraints are routinely noted,” said Sen. Lisa Murkowski (R-Alaska), the panel’s ranking member. “I do not mean to criticize these reports, but instead the underlying legislation.”

Several other senators raised concerns about the proposed Senate climate bill.

Sen. John McCain (Ariz.), one of only a few Republicans whom Democrats hold out hope of convincing to support their climate bill, said the current version needs to do more to encourage the development of nuclear power.

McCain, who has sponsored climate legislation in the past, also said he opposed a carbon tariff on goods from countries without a carbon cap. The tariff was one key to a broad climate compromise sketched out in a New York Times op-ed written by Sens. Kerry and Lindsey Graham (R-S.C.), a McCain friend and ally, as was additional support for the nuclear industry.

The tariff is also considered a necessary addition for attracting Democrats from Midwestern states who worry the climate bill will force companies in their states to shift jobs overseas.

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McCain called the tariff protectionism.

Sen. Maria Cantwell (D-Wash.), meanwhile, criticized the provision that would allow companies to meet their emission reduction targets by investing in overseas projects that remove carbon dioxide from the atmosphere or otherwise reduce CO2 and other greenhouse gas emissions.
Cantwell said that the offset program could result in the transfer of $1.4 trillion to other countries.

But according to Reid Harvey, the chief of the climate economics branch at the Environmental Protection Agency, the costs of complying with the carbon caps could be 89 percent higher without an international offset program.