Obama energy policies will hike prices by 20%

posted at 3:24 pm on August 4, 2009 by Ed Morrissey

Barack Obama recently claimed — incorrectly — that he had yet to sign a bill that raised taxes, but the worst burdens will avoid the clear label of taxation.  A new study by the Energy Information Administration, an arm of the Department of Energy, determines that the cap-and-trade bill passed by the House in June would hike energy costs to consumers by 20% by 2025.  It also finds that the bill would not actually reduce so-called greenhouse-gas emissions in the near term:

Electricity prices would rise 20 percent by 2030 under climate legislation being considered in Congress, according to a draft study by a U.S. energy agency.

The report, to be issued by the Energy Information Administration, also says that polluting companies would initially meet most greenhouse gas reduction targets by sponsoring forestry and agriculture projects rather than cutting their own emissions. Even with the development of technologies designed to capture carbon dioxide from coal-fired power plants, gas and nuclear-fueled power generation will take market share, the report says.

The measure, passed by the House and under consideration by the Senate, is likely to increase electricity prices to 12 cents per kilowatt hour in 2030, or 20 percent higher than the cost if there is no climate law, using 2007 dollars. Before 2025, the price would go up 3 to 4 percent, the study says.

The EIA is an independent agency within the Energy Department which analyzes energy issues without advocating administration policy.

Bear in mind that the EIA is estimating direct costs to the consumer,  not the entire economic impact of cap-and-trade.  The direct costs to each family will hit $204 per family each year until 2020 and then rapidly increase to $522 per household by 2030.  The CBO analysis shows that the costs would be at $175 annually per household — in direct costs.

However, energy costs get folded into every product and service provided in the marketplace.  Energy cost increases magnify through the distribution chain, forcing prices higher and higher at each step.  When manufacturers have to pay higher prices for their energy, their product prices go up, as does the markup at the distributor and the retailer.  We saw this dynamic during the rapid increase in gasoline prices in 2007-8, as food prices especially escalated due to the cost of trucking produce and groceries to markets.

Several estimates of the total impact of cap-and-trade have been published, with some estimates as high as $3200 per year per household.  The EIA also notes that the bill will exert a negative influence on the economy, reducing the GDP from 2012 to 2030 by 0.2% as energy costs curtail production.  It will cost jobs, not create them, and slow or reverse improvements in the American standard of living.  In short, it’s a recipe for economic stagnation and misery, in service to a climate-change model that has increasingly been exposed as erroneous and ill-considered.  Voters can reasonably ask why they’re being asked to shoulder this kind of pain for a nonexistent cause.

Related Posts:

Breaking on Hot Air


Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.


Trackback URL


Comment pages: 1 2

Questions: Do all of the homes owned by those who voted for crap & tax have solar panels? Do they drive fuel-efficient cars? Have they changed the light bulbs in only their homes but in their congressional offices?

madmonkphotog on August 4, 2009 at 6:01 PM

Hey Alden Pyle, I am not a racist, I’m a realist. You can accuse me and others who believe Mr. O., is running our country of being racists. Come on, put some money up to see how well our economy is doing in 2012. And guess what, you want be able to blame Bush then, will you?

locwilliam on August 4, 2009 at 6:02 PM

Ah, come on. We can afford it.

TinMan13 on August 4, 2009 at 6:03 PM

The measure, passed by the House and under consideration by the Senate, is likely to increase electricity prices to 12 cents per kilowatt hour in 2030, or 20 percent higher than the cost if there is no climate law, using 2007 dollars.

According to this analysis, a 20% increase brings the price of electricity to 12 cents per kWh, so the increase would be 2 cents/kWh.

This value seems low. I have heard analysts saying that there would be no incentive to switch from coal unless CO2 allowances were $35/ton CO2, or $0.0175/lb CO2. Since l2 lb coal generates 44 lb CO2, this works out to $0.0175*44/12 = $0.0642 per pound coal. If the heating value of coal is assumed to be 12,000 Btu/lb or 3.52 kWh/lb, this comes out to $0.0642 / 3.52 = $0.0182/kWh, IF the coal is converted to electricity at 100% efficiency!

But let’s face it–no energy conversion process is 100% efficient, and coal-fired power plants generally run about 30% to 40% efficient (power produced / heat content). Dividing by the efficiency results in a cost of 4.5 to 6.0 cents per kwH of electricity, or 45 to 60% above current prices.

So if the Crap and Raid (your wallet) law raised your electric bill by half of its current cost, what would that cost YOU per year? Probably more than $200 per year, for those not living in a tent…

Steve Z on August 4, 2009 at 6:15 PM

Steve Z on August 4, 2009 at 6:15 PM

Thanks for saving me the effort of going through the math for those who couldn’t to it for themselves.

chemman on August 4, 2009 at 6:32 PM

Read my lying lips: will not raise your taxes by one dime. F*^ng liar should be impeached. Giving Carter a run for his money as THE WORST PRESIDENT EVAH.

redfoxbluestate on August 4, 2009 at 6:45 PM

20%?? Gee! Ehat’s really conservative! What price electricity when all those coal and nuclear plants are taken off line while we wait several decades for wind and solar to become practical?

Friendly21 on August 4, 2009 at 8:56 PM

I can not remember the year but it was maybe ten years back, that I used the the platform of the Communist Party USA political goals in a lesson that I taught in my Economics class. I had found the politcal goals on their web site, but it does not seem to be there now per se but evidenced in the currently stated goals. One of those was the destruction of large corporations by forcing them to pay for cleaning up the environment to the extent that they ceased to be able to exist. Once that occured they envisioned that the larger corporations would be replaced with smaller local manufacturing, which is consistent with communist communes and cooperatives which are easy to control and have little polictical wieght. This cap and trade is just a more refined and global effort to achieve those goals. It is no secret that the communist are thrilled that they have a president that is making all their dreams not only reachable, but probable.

Franklyn on August 5, 2009 at 5:12 AM

But what about those free vouchers for gas you promised the little folks bambi?

bluegrass on August 5, 2009 at 8:34 AM

this is an impt question to ask your congress idjits at a townhall.

call those jerks in washington everyday. call their DC offices & their local offices.

kelley in virginia on August 5, 2009 at 8:51 AM

Barack Obama recently claimed — incorrectly — that he had yet to sign a bill that raised taxes, but the worst burdens will avoid the clear label of taxation.

Apparently there a lot of people who haven’t realized that when his lips are moving, he’s lying. There’s a name for them. It’s called gullible.

TrickyDick on August 5, 2009 at 1:44 PM

Comment pages: 1 2