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Critics of the Democratic cap-and-trade proposal have many complaints about the plan, but their biggest is cost. They say it will cost so much that it will be a significant burden on a typical American family.
The latest variation of this comes in a chain e-mail that contends the cap-and-trade plan will require more energy-efficient homes (a claim we rated Pants on Fire ). The e-mail says, "The Congressional Budget Office -- supposedly non-partisan -- estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded."
We've spent a lot of time looking into claims about how much the cap-and-trade plan could cost families, and one thing's for certain: There's no consensus. The Environmental Protection Agency says it could cost as little as $80 per year while the conservative Heritage Foundation says it could cost as much as $1,241 annually in higher energy bills.
We've explained the pros and cons of the various estimates in those previous items, so here we're going to look into the chain e-mail's claim that the CBO estimates cap-and-trade will cost a family of four $6,800 a year.
The bill in question is called the American Clean Energy and Security Act of 2009. It is sponsored by Henry Waxman of California and Edward Markey of Massachusetts, and aims to reduce carbon emissions 17 percent by 2020 and 83 percent by 2050. Companies, particularly utilities, would have to either buy pollution credits or adopt cleaner technology.
Critics say that either way, the cost of energy will go up, and that cost will be passed on to the consumer.
The CBO is a key player because it is a widely respected nonpartisan branch of Congress that calculates cost estimates. In June 2009, the CBO released an analysis of the House bill, saying that the economywide cost of the cap-and-trade program in 2020 would be $22 billion -- or about $175 per household. The individual cost would vary depending on your wealth. Low-income consumers could expect to save $40 a year because of credits from utilities, while high-income consumers would see a net cost for energy of $235 to $340 annually. It's also important to note that the costs are expected to vary year to year because of the way the law would be phased in. The CBO chose 2020 as a milestone for its analysis because it's a point at which the program would have been in effect for eight years, giving the economy and polluters time to adjust. But had the CBO chosen a later date, the cost per family may have been higher because the government would gradually be charging polluters more.
We traced the $6,800 estimate back to a report from the Heritage Foundation, a conservative think tank that has been very critical of the cap-and-trade plan. In the report, the group criticizes the CBO for failing to consider the harm that the cap-and-trade plan could do to the economy. The conservative group says the law could cause companies to produce less, which would reduce the GDP in 2020 by $161 billion in 2009 dollars. By 2035, it would be $650 billion lower, which works out to about $6,800 per family of four per year.
So the chain e-mail has taken the estimate from a conservative think tank and falsely attributed it to the CBO, a nonpartisan branch of Congress. There are many legitimate questions that can be raised about the cost of cap-and-trade, but it's simply incorrect to say the CBO came up with the $6,800 figure. We find this claim False.
Congressional Budget Office, Cap and Trade Costs , June 19, 2009
Congressional Budget Office, Greenhouse gas report , Sept. 17, 2009
Heritage Foundation, CBO Grossly Underestimates Cost of Cap and Trade , June 24, 2009
Wall Street Journal editorial, The Cap and Tax Fiction , June 26, 2009
Heritage Foundation, Change in GDP Due to Waxman-Markey , accessed Nov. 26, 2009
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