Disputes rage over US cap-and-trade cost

As the US government prepares to vote on a groundbreaking cap-and-trade bill, the Congressional Budget Office (CBO) has drastically undercut Republican estimates of how much it would cost the average American household.

In an analysis of the cost of a cap-and-trade programme, the CBO said the price of such a scheme in 2020 would be $22bn (£13bn), which equates to about $175 per household.

"That figure includes the cost of restructuring the production and use of energy, and of payments made to foreign entities under the programme, but it does not include the economic benefits and other advantages of the reduction in greenhouse gas emissions and the associated slowing of climate change," the Office said in its analysis.

This figure contrasts with the $3,100 suggested by house Republican leader John Boehner. Boehner said that he arrived at this figure by analysing an estimate from MIT, made during the 110th Congress. "We took MIT's own number – $366bn – and divided that by the number of US households," Boehner said in April.

The CBO estimate assumes a cost of $110bn, which it said equates to $890 per household, but that is a gross cost. It then factored in elements such as low-income rebate and tax credit, and allocation of allowances to the residential customers of local distribution companies.

The difference between the Republican and CBO figures is at least partly down to the change in legislation. Boehner's analysis was looking at a bill from the last Congress, sponsored by then-Senator Obama. The CBO was focused on the legislation in question – the Waxman-Markey Clean Energy Bill – which includes sweeteners such as 15 per cent of the allowance value being used to provide energy rebates and tax credits to households.

The CBO chose 2020 as its analysis year because it believes this would have allowed a reasonable period for the economy to have absorbed cap-and-trade legislation.

As the voting for the bill draws near, opinion over it is dividing along predictable lines. Industry organisations and the Republican party are opposed to it. The American Farm Bureau Federation is urging all House members to vote against it, citing concerns over farm income. Americans for Tax Reform is also rallying its supporters against the legislation.

Activist groups such as Al Gore's Repower America, the Environmental Defense Fund, and the Natural Resources Defense Council are urging members to support the bill. However, not all environmental groups are entirely happy with it. The Center for Biological Diversity said the cuts are too little, too late.