How Much Would Cap and Trade Cost?

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TIME’s energy and environment writer Bryan Walsh takes a look:

In a preliminary look at the American Power Act—the climate legislation that has been put forward by Senators John Kerry and Joseph Lieberman—the CBO found that the bill would actually reduce the budget deficit by about $19 billion over the 2011 to 2020 period. The CBO estimates that auctions of carbon allowances under the bill—which requires companies to essentially pay for the right to emit carbon dixoide—would raise government revenue by about $751 billion, more than bill would hike government spending through incentives for nuclear power, tax credits for energy efficiency and research and technology for new energy.


Fred Krupp—the president of the Environmental Defense Fund and a fierce warrior for a carbon cap—told reporters last week that Kerry-Lieberman as it stands now is unlikely to ever reach a vote, and that green groups need to be open to a less ambitious bill, such as one that only caps emissions from power utilities. How much will that cost? The CBO hasn’t done an analysis—because there’s been no bill written—but on his blog Michael Levi of the Council on Foreign Relations has written that a utility-only cap could have fewer sources of revenue because the carbon market itself would be much smaller than with an economy-wide cap. It’d be ironic if, in trying to craft a climate bill that is less ambitious and costs less, the Senate actually produces one that’s a greater drain on the budget. But maybe we shouldn’t be surprised. It is the Senate, after all.

As they say, read the whole thing.