Depending on who you ask, the cost of a cap-and-trade program varies widely.
The conservative National Association of Manufacturers (NAM) released a study in March predicting that by 2020 a cap-and-trade program would be responsible for an electricity price hike of between 28 and 33 percent and gas price increases of 20 to 69 percent per gallon. And that would be in addition to losses of 1.2 million to 1.8 million jobs.
"Sobering" is how John Engler, NAM's president, described the report, adding that he believes "the environmental impact of climate change is still under scientific analysis."
But among scientists, there really is no debate. The vast majority say that climate change is happening and that the burning of fossil fuels is the culprit, according to the Intergovernmental Panel on Climate Change. If nothing is done during the next 10 years to reduce emissions, sea levels will rise, storms and droughts will intensify and mass migration will occur, throwing the world into chaos.
Cap-and-trade proponents say NAM's predictions are deceptive and politically motivated.
Sen. Barbara Boxer (D., Calif.), chairwoman of the committee drafting the Lieberman-Warner cap-and-trade legislation, said the bill would impose no cost on the federal government, a finding the Congressional Budget Office agrees with. And instead of costing U.S. jobs, she said, a cap-and-trade program would create a new "green" economy, increasing jobs and wages in the United States. "At the end of the day, this bill will be a boom to the economy," she said.
Investment in new technologies will boost manufacturing in areas like Ohio as companies are given incentives to produce everything from wind turbines to solar panels, Boxer said. Both Democratic presidential candidates have pledged to invest billions in the development of clean and renewable energy technologies. Republican presidential candidate Sen. John McCain also has voiced support for cap and trade, but it's unclear how much he would invest in new energy technologies.
The market price of a ton of carbon in Europe in mid-April was about 25 euros ($40), and most expect the price of carbon in the United States to be in the ballpark of the European price. Sen. Arlen Specter (R., Pa.) has proposed capping the price of carbon at $12 a ton for heavy manufacturing industries like steel, but it's unclear whether that amendment will be included in the final bill.
One analyst said steel producers should invest in carbon capture technology, which would allow companies to pollute at their current levels but trap the carbon as it comes off the smokestack and bury it.
Meanwhile, analysts are keeping an eye on the battle between some individual states and the federal government. States like California and Maryland, impatient with the pace of progress in Washington, are pushing to regulate greenhouse gas emissions from vehicles independent of the federal government.
Maryland's Global Warming Solutions Act, which would have mandated a 25-percent reduction in carbon dioxide emissions by 2020 and set a goal of a 90-percent cut by 2050, died in early April when the state House Economic Matters Committee voted 18-2 against the measure. But with environmentalists and their supporters vowing to revive the effort next year, steelmakers operating in the state could face a significant increase in costs. Russian steelmaker OAO Severstal, which agreed to buy the Sparrows Point, Md., operations of ArcelorMittal for $810 million, would face additional production costs of between $25 and $55 per ton of carbon at the plant, according to a recent estimate by Charles Bradford, analyst at Bradford Research/Soleil Securities Inc., New York (AMM, April 11).
Despite a victory by environmentalists at the Supreme Court last year, the federal EPA has stalled on regulating greenhouse gas emissions under the Clean Air Act.