WASHINGTON (April 30, 2008) – A new report released today by the Department of Energy’s (DOE) Energy Information Agency (EIA) shows that we can cut U.S. global warming pollution to the levels required by legislation due to be voted on by the Senate in early June while continuing robust economic growth and containing energy costs. This legislation would be a strong start on the emission reductions that experts say are needed to avert costly and dangerous environmental damages, according to policy experts at the Natural Resources Defense Council (NRDC).
“The official government forecasts confirm that solving global warming is affordable,” said Rick Duke, director of NRDC’s Center for Market Innovation. “In fact, by reinvesting the profits from pollution allowances into energy efficiency and new technologies, the Lieberman-Warner bill will be a growth engine for green jobs and global warming solutions.”
Using detailed macroeconomic modeling, the study concludes that the global warming emissions cap proposed by Senators Lieberman and Warner and under S. 2191 would not noticeably affect economic growth. Our economy is slated to expand from $13.13 trillion in 2006, to $20.22 trillion by 2030. If we implement this legislation, DOE estimates that our economy would grow to $20.16 trillion by 2030—a statistically imperceptible difference equivalent to a two-month delay in growth. These economic impacts are smaller than those forecast by the Environmental Protection Agency last month.
DOE’s analysis also demonstrates that impacts on inflation-adjusted energy prices are manageable and small relative to other market drivers. Real gasoline prices at the pump fall from current levels in all scenarios considered by DOE, including the reference case without an emissions cap. Under a cap, prices at the pump are only 17 percent higher than the reference case—far smaller than recent market-driven volatility which has more than doubled prices at the pump in the past five years. Similarly, DOE estimates that the emissions cap would cause electricity rates to fall in a number of regions while overall average national electricity rates would increase by only about 10 percent. Meanwhile, natural gas market prices fall under DOE’s main emission reduction scenario.
This new report confirms the results from the December, 2007 McKinsey report co-sponsored by NRDC, DTE Energy, Environmental Defense, Honeywell, National Grid, PG&E, and Shell that showed a clear path to controlling our global warming emissions without hurting our economy—if we act now (available for download at www.mckinsey.com/clientservice/ccsi/
). Moreover, the McKinsey report underscores that we can reduce energy bills for consumers and businesses through aggressive investment in energy efficiency even if some energy prices increase under an emissions cap.
Three main steps are necessary to eliminate market barriers and ensure the fastest, most cost-effective results in time to make a difference, according to both NRDC and the McKinsey report. Lawmakers first need to create a stable framework that provides investor certainty about required emissions reductions by setting a sensible set of pollution limits as soon as possible. Second, we need to overcome roadblocks and disincentives that artificially impede the profitability of energy and emissions savings. Finally, innovation support such as R&D and commercialization incentives are needed to move proven technologies into the market on a commercial scale. A federal emission cap, such as that proposed in the Lieberman-Warner bill, would accomplish all of these things simultaneously by re-investing most of the revenue from CO2 allowances into efficiency and innovation.