EIA: Lieberman-Warner bill could raise gas prices

Climate change legislation headed for debate on the US Senate floor in early June would significantly reduce domestic greenhouse gas emissions but also could dramatically increase natural gas prices, the US Energy Information Administration said Apr. 29.

Electricity generation would account for “the vast majority” of GHG emissions cuts under S. 2191, which Sens. Joseph I. Lieberman (I-Conn.) and John W. Warner (R-Va.) introduced on Oct. 18, 2007, according to EIA. New nuclear, renewable, and fossil fuel plants with carbon capture and sequestration would be the key compliance technologies through 2030 in most cases, it said in its analysis.

But EIA also warned that if such technologies are not used, electricity generators probably would use more gas to offset reductions in coal-fired generation, “resulting in markedly higher delivered prices of natural gas.”

The bill would raise electricity costs by 5-27% by 2020 and 11-64% by 2030, EIA said. The projected real US gross domestic product would be reduced as real economic output, purchasing power, and aggregate demand for goods and services dropped in response to higher energy prices, it said. Total discounted gross domestic product losses from 2009 through 2030 range from $444 billion to $1,308 billion under the base cases in the analysis, EIA said.

It said that manufacturing and other industrial activity would feel a bigger impact than the general economy. By 2030, industrial shipments excluding services could be reduced by $233-589 billion if S. 2191 becomes law, it predicted.

Sponsors respond

But EIA’s analysis shows that the economic impact of the bill would be virtually identical to growth in S. 2191’s absence, Lieberman and Warner said in a joint statement. The cost to US businesses of tradable allowances to emit greenhouse gases came in below figures which the US Environmental Protection Agency projected last month, they indicated.

“Two separate government analyses have now come to the same conclusion. Our bill curbs global warming without harming the US economy,” Lieberman said.

Sen. James M. Inhofe (R-Okla.), the Environment and Public Works Committee’s ranking minority member, disagreed. “The EIA analysis projected unacceptable increases in Americans’ average annual household energy bill [of] up to $325 in 2020 and $723 by 2030, and this does not factor in transportation-related costs,” he said.

“Further, EIA’s gloomy economic analysis is contingent upon the US building more than two-and-a-half times as many nuclear plants as are now operating—an increase so massive and unrealistic as to be fictional. EIA also found that Lieberman-Warner would result in a 9.5% drop in manufacturing output by 2030,” Inhofe continued.

The report showed that S. 2191 would have an adverse economic impact, agreed Sen. Pete V. Domenici (R-NM), the Energy and Natural Resources Committee’s ranking minority member. “Four out of four major economic studies agree: Lieberman-Warner will increase energy costs and decrease economic growth. At a time when Americans are increasingly concerned with the rising costs of energy and the state of the economy, it is rather shocking that Congress would seriously consider measures which will send us on the wrong track on both,” he said Apr. 29.