US climate bill to cost $22 billion a year by 2020, says Congressional Budget Office

A proposed “cap-and-trade” law to cut US greenhouse gas emissions would cost $22 billion a year by 2020, or $175 for every household, the Congressional Budget Office (CBO) said.

The legislation, which the US House may vote on as early as next week, softens the impact on consumers by giving some industries free carbon dioxide permits, also called allowances, and selling others at auction to raise money for tax relief, CBO said.

Without these measures, the price tag would be $110 billion a year, or $890 per household, CBO said in an analysis prepared for Representative Dave Camp, the Michigan lawmaker who leads the Republicans on the House Ways and Means Committee.

“Higher costs would stem from the fact that most economic activity is based on fossil fuels” that produce greenhouse gases when burned, the CBO analysis said. “In most cases, the firms required to hold the allowances would not bear that cost; rather, they would pass it onto their customers in the form of higher prices.”

Under cap-and-trade, the federal government would put a limit on greenhouse gases from most sectors of the US economy. The cap would be divided into billions of permits, each carrying the right to emit the equivalent of one metric ton of carbon dioxide. Regulated firms would have to acquire enough permits to cover their greenhouse gas emissions and surrender them to the Environmental Protection Agency (EPA). Before being surrendered to EPA, the allowances could be bought and sold in a market similar to the emissions-trading system operating in Europe since 2005.