http://www.eia.doe.gov/oiaf/servicerpt/s2191/execsummary.html
Energy Market and Economic Impacts of S. 2191, the Lieberman-Warner Climate Security Act of 2007 (Exec. Summ.)
Energy Information Administration
April 29, 2008
[The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy.]
This report responds to a request from Senators Lieberman and Warner for an analysis of S. 2191, the Lieberman-Warner Climate Security Act of 2007 and a subsequent analysis request from Senators Barasso, Inhofe, and Voinovich. S. 2191 is a complex bill regulating emissions of greenhouse gases (GHG) through market-based mechanisms, energy efficiency programs, and economic incentives.
...Key Findings
...S. 2191 increases energy prices and energy bills for consumers. Relative to the Reference Case, the price of using coal for power generation, including the cost of holding allowances, is between 161 percent and 413 percent higher in 2020 and between 305 percent and 804 percent higher in 2030 in the S. 2191 cases. The price of electricity is between 5 percent and 27 percent higher in 2020 and between 11 percent and 64 percent higher in 2030 in the S. 2191 cases. Under S. 2191, average annual household energy bills, excluding transportation costs, are between $30 and $325 higher in 2020 and $76 to $723 higher in 2030.
...S. 2191 increases the cost of using energy, which reduces real economic output, reduces purchasing power, and lowers aggregate demand for goods and services. The result is that projected real gross domestic product (GDP) generally falls relative to the Reference Case. Adverse economic impacts generally increase over time as higher cost emissions abatement options are required as emissions caps become more stringent while population and economic activity levels continue to grow. Total discounted GDP losses over the 2009 to 2030 time period range from $444 billion (-0.2 percent) to $1,308 billion (-0.6 percent) across the S. 2191 cases (Table ES3). Similarly, the cumulative discounted losses for personal consumption range from $546 billion (-0.2 percent) to $1,425 billion (-0.6 percent). GDP losses in 2030, the last year explicitly modeled in this analysis, range from $27 billion to $163 billion (-0.1 to -0.8 percent) while consumption losses in that year range from $58 billion to $149 billion (-0.4 to -1.1 percent). Economic impacts are largest when it is assumed that key low-emissions technologies including nuclear, fossil with CCS, and various renewables are not developed and deployed in a timeframe consistent with the emissions reduction requirements and international offsets are not available.
...S. 2191 impacts industrial activity, including manufacturing, to greater extent than it affects the overall economy. Industrial shipments in 2030, excluding services, are reduced by $233 billion to $589 billion (-2.9 to -7.4 percent), with the largest impacts occurring in the Limited Alternatives/No International Case.
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http://www.eia.doe.gov/oiaf/servicerpt/s2191/economic.html
Energy Market and Economic Impacts of S. 2191, the Lieberman-Warner Climate Security Act of 2007 (EIA)
Economic Impacts
Implementing the S. 2191 GHG allowance program will affect the economy through two key mechanisms. First, the cost of using energy, particularly fossil fuels and electricity, will be increased by the requirement to lower total emissions and submit allowances for any ongoing emissions. Second, the auctioning of allowances together with the free distribution of allowances to non-emitting sources will generate revenue that will be spent on programs designed to help businesses and consumers reduce their emissions or ameliorate the impacts associated with higher energy prices.5 However, as the share of allowances auctioned and the price of allowances grow over time in the S. 2191 cases, the revenue to the government that could be redistributed also grows, while the economy slows.
...Real GDP and Consumption Impacts
The higher delivered energy prices lower real output for the economy. They reduce energy consumption, but also indirectly reduce real consumer spending for other goods and services due to lower purchasing power. The lower aggregate demand for goods and services results in lower real GDP relative to the Reference Case (Figure 26 and Table 4). Relative to the Reference Case, real GDP in 2030 is $163 (0.8 percent) lower in the Limited Alternatives/No International Case and $27 billion (0.1 percent) lower in the No International Offsets Case. In the S. 2191 Core Case, real GDP is 59 billion (0.3 percent) lower in 2030. Over the entire forecast period, the cumulative present value GDP loss reaches $444 billion in 2000 dollars (0.2 percent) in the S. 2191 Core Case. The Limited Alternatives/No International Case shows the largest real discounted GDP loss between 2009 and 2030, reaching $1.3 trillion (0.6 percent).
While real GDP is a measure of what the economy produces, the composition of GDP may change considerably between the major components: consumption, investment, government, and net exports. Consumer expenditures, one indicator of consumers’ welfare, show larger relative losses compared to GDP. Figure 27 depicts consumption impacts over time and the cumulative discounted percent change in consumption over the 2009 to 2030 period compared to the Reference Case. The cumulative losses of real consumption are between $558 billion (0.4 percent) in the S. 2191 Core Case and $1.4 trillion (0.6 percent) in the Limited Alternatives/No International Case. By 2030, real consumption losses reach $68 billion (0.5 percent) in the S. 2191 Core Case. The Limited Alternatives/No International Case shows the highest consumption loss, reaching $149 billion (1.1 percent) in 2030.
Industrial Impacts
Industrial energy prices increase more than consumer energy prices since 11 percent of the allowance revenue received by industry is aimed at ameliorating energy price impacts for consumers, 9 percent to electricity load-serving entities and 2 percent to natural gas distributors. As a result, industrial impacts show substantial losses. As energy prices increase, the energy-intensive sectors, including food, paper, bulk chemicals, petroleum refining, glass, cement, steel and aluminum, show greater losses compared to the rest of the industrial sectors, reaching 3.6 percent below the Reference Case by 2030 in the S. 2191 Core Case, and 5.0, 5.3, 6.4 and 10.2 percent in the No International Offsets, High Cost, Limited Alternatives, and Limited Alternatives/No International Cases, respectively. Figure 28 highlights manufacturing industries’ impacts across the S. 2191 cases, separately showing the energy-intensive and non-energy-intensive manufacturing industrial sectors.
Figure 29 shows industrial sector (all non-service industries) and employment impacts for the S. 2191 Core, Limited Alternatives, No International Offsets, High Cost, and Limited Alternatives/No International Cases. In the S. 2191 Core Case, industrial output is down by 2.9 percent compared to the Reference Case in 2030 as higher prices and lower demand leads industrial output to fall. Manufacturing employment changes mirror industrial impacts.
Uncertainty
All long-term projections engender considerable uncertainty. It is particularly difficult to foresee how existing technologies might evolve or what new technologies might emerge as market conditions change, particularly when those changes are fairly dramatic. Under S. 2191, this analysis finds energy providers, particularly electricity producers, will increasingly rely on technologies that currently play a relatively small role or have not been built in the United States in many years. Sensitivity analyses suggest that the economic impacts can change significantly under alternative assumptions regarding the cost and availability of new technologies and the availability of offsets.
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http://epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf
EPA Analysis of the Lieberman-Warner Climate Security Act of 2008 S. 2191 in 110th Congress
March 14, 2008
On November 9, 2007 Senators Lieberman (Ind) and Warner (Rep) requested that EPA estimate the economic impacts of the S. 2191, the “Climate Security Act of 2007” (the “Lieberman-Warner Climate Security Act of 2008”). S. 2191 places declining greenhouse gas (GHG) emission caps upstream on petroleum, natural gas, as well as manufacturers of fluorinated gases (F-gases) and N2O and downstream on coal facilities...The analysis was conducted by EPA’s Office of Atmospheric Programs.
The main conclusions are as follows:
The US economy is robust enough to withstand the high oil prices, the credit crises and other similar hurdles. By 2030, GDP and consumption are projected to increase 97% from 2007 levels in the Reference Scenario. By 2050, the projected increase in GDP and consumption from 2007 levels is 215% (see page 3).
However, the US economy cannot elude the adverse impacts of S. 2191. Under S.2191, GDP is modeled to be between 0.9% ($238 billion) and 3.8% ($983 billion) lower in 2030 and between 2.4% ($1,012 billion) and 6.9% ($2,856 billion) lower in 2050 than in the Reference Scenario. Consumption is modeled to be between 0.9% ($180 billion) and 1.4% ($233 billion) lower in 2030 and between 2.1% ($670 billion) and 3.3% ($843 billion) lower in 2050 than in the Reference Scenario. The average annual growth rate of consumption is ~0.08 percentage points lower than the reference case. In 2030 per household average annual consumption is ~$1,375 lower and gasoline prices increase ~$0 .53 per gallon. In 2050 per household average annual consumption is ~$4,377 lower and gasoline prices increase ~$1.40 per gallon. Electricity prices are projected to increase 44% in 2030 and 26% in 2050 (see page 3).
...Key Results & Insights
...Under S.2191, GDP is modeled to be between 0.9% ($238 billion) and 3.8% ($983 billion) lower in 2030 and between 2.4% ($1,012 billion) and 6.9% ($2,856 billion) lower in 2050 than in the Reference Scenario. Consumption is modeled to be between 0.9% ($180 billion) and 1.4% ($233 billion) lower in 2030 and between 2.1% ($670 billion) and 3.3% ($843 billion) lower in 2050 than in the Reference Scenario.
The average annual growth rate of consumption is ~0.08 percentage points lower than the reference case. In 2030 per household average annual consumption is ~$1 ,375 lower and gasoline prices increase ~$0 .53 per gallon . In 2050 per household average annual consumption is ~$4,377 lower and gasoline prices increase ~$1.40 per gallon.
Electricity prices are projected to increase 44% in 2030 and 26% in 2050, assuming the cost of allowances can partially be passed on to consumers (as is the case in a full auction). If allowances are given directly to power companies, the cost of those allowances would not be passed on to consumers in regulated electricity markets, so electricity price increases would be smaller in much of the country. (p. 3).
...If international credits are not allowed (or are more expensive than U.S. GHG allowances), and domestic offsets are still limited to 15%, then allowance prices increase by 34% compared to the bill as written.
If domestic offsets and international credits are not allowed, and the caps must be met solely through emissions reductions in covered sectors, then allowance price increases by 93% compared to the bill as written.
(p.6).
...Fuel Prices (ADAGE)
...S. 2191 electricity prices are 44% higher than in the Reference Scenario in 2030 and 26% higher in 2050, reflecting a shift in fuel mix from coal to gas in the earlier years, the adoption of carbon capture and storage technology in la ter years, and the in creased prices the consumers of coal and gas face due to th e price of allowances.
...Electricity prices in the S. 2191 case under alternative reference assumptions are 35% higher in 2030 and 28% higher in 2050 than the Alternative Reference Scenario prices.
• With assumptions that limit the growth of nuclear, biomass, or carbon capture and storage technologies, meeting the cap becomes more expensive, resulting in larger reductions in demand and increases in the costs of traditional fossil fuels as generators must purchase additional allowances. If all three technologies are constrained, electricity prices in 2030 are 79% higher and 2050 prices are 98% higher than the reference scenario prices.
(p. 57).
...The cost of the carbon content increases the price of gasoline by 21%, increases the price of oil by 47%, increases the price of natural gas by 57%, increases the price of coal by 360%, and increases the price of coal used with CCS by 36%.
(p. 58 - "Results: Scenario 2 - S. 2191 Fuel Price Adders for 2030 ( ADAGE)").
...[SEE ALSO:] Appendix 4: Additional Information
(pp. 153-164).
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