Despite its many flaws, EIA analysis of climate bill finds 23 cents a day cost to families, massive retirement of dirty coal plants and 119 GW of new renewables by 2030 — plus a million barrels a day oil savings

Let’s set aside for the moment that the Energy Information Administration (EIA) doesn’t fully model the House climate and clean energy bill — they utterly ignore a major cost containment provision and the clean energy bank, while underestimating likely efficiency gains.

The EIA analysis, “Energy Market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009,” still finds that the average cost to households from 2012 to 2030 (discounted) is $83! A fact sheet can be found here.

As The Hill wrote in “EIA says costs of climate bill modest at first“:

The move by bill sponsors to give away pollution allowances rather than selling them appears to be a good one; the EIA credits the free distribution of credits with keeping energy costs from rising precipitously….

Electric bills would increase only 3 to 4 percent by 2020 under a carbon cap imposed by the bill.

Reuters reports that EIA finds the clean energy bill would “increase the energy costs of the average family by $142 a year in 2020 and by $583 in 2030,” adding:

The estimate from the U.S. Energy Information Administration is in line with cost impact projections made by the Congressional Budget Office and the Environmental Protection Agency, and contradict claims by energy and business trade groups that consumers would pay thousands of dollars more a year under a government plan to fight global warming.

In fact, the only reason the energy costs rise so much in 2030 compared to 2025 is that the allowance distribution to regulated utilities phases out after 2025.  While the EIA is stuck in a relatively rigid analysis and reporting methodology, in the real world, the increased auction revenues would be given back to consumers, which would again offset their increased energy costs with tax cuts.  So while energy costs might jump post-2050, net impacts on consumers would not.

The EIA projects an allowance price of $32 per metric ton of CO2 equivalent in 2020 — about double what EPA and I project and 50% higher than CBO’s projection.  Very unlikely.

The EIA has historically lowballed the prospects for energy efficiency, and here again they find a total drop in energy use under the climate bill of only about 3% in 2020 (3 quadrillion BTUs) and 6% in 2030 (6.5 quads).  According to the EPA analysis of the bill, Waxman-Markey lowers demand 7 quads in 2020 compared to business as usual, and 10.4 quads in 2030 (see “New EPA analysis of Waxman-Markey: Consumer electric bills 7% lower in 2020 thanks to efficiency “” plus 22 GW of extra coal retirements and no new dirty plants“).  That is similar to what the the American Council for an Energy-Efficient Economy (ACEEE) calculates for the savings from W-M’s efficiency provisions “” 5 quads saved in 2020 and 12.3 quads in 2030 (see “The triumph of energy efficiency: Waxman-Markey could save $3,900 per household and create 650,000 jobs by 2030“).

If EIA had a decent model of energy efficiency, and if they had calculated the tax reduction from returning auction allowances back to consumers, I am quite certain that they would have again found the net cost to American families of close to a postage stamp a day even in 2030.

Even with all its flaws, the “total discounted GDP losses over the 2012 to 2030 time period” are a whopping 0.2%, which is pretty much what every major analysis of climate action finds (“Intro to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar“).

EIA has some interesting findings of the bill’s impact on how we use energy.

Even though they lowball energy efficiency — and don’t even model Obama’s big fuel economy deal in their main case — they find a savings in liquid fuel use in 2030 of some 320 million barrels, nearly 900,000 barrels of oil a day.

EIA finds that under W-M

… new coal bill without CCS beyond those that are already under construction are almost eliminated.  There is also a large increase in coal power plant retirements [and a 60% drop in coal use in power plants] by 2030 from current levels in the ACESA main cases, well above the 1% of existing coal capacity projected to retire in the reference case.

The fact sheet notes:

Nuclear power would expand dramatically without added financial assistance.

Whether that is good news to you or not, it does suggest that the Senate bill doesn’t need to put many nuclear incentives into the bill.

New renewable capacity added from 2007 through 2030 under the bill is 119 GW — 38 GW higher than in the reference case.

Two final points.  First, EIA didn’t even bother trying to model W-M’s strategic reserve, which presumably would have helped lower costs.  My guess is that it was just too darn complicated for them to figure out.  It needs changing.

Second, like EPA (but unlike CBO), the EIA concludes that large numbers of international offsets will be purchased in the early years, which simply defies logic.  Since the EIA lowballs efficiency and fuel switching to natural gas in the bill, they overestimate allowance costs and hence offset purchases.

Mysteriously, the EIA notes:

One recent analysis doubts that even 150 MMT of international offsets will be used by 2020.

They never specify what recent analysis, but it is suspiciously similar to my conclusion here: “I doubt even 150 million tons of offsets will be used by emitters in 2020.”  Since I haven’t seen anyone else use a similar 150 MMT figure, I guess EIA reads my blog, even if they ignore its conclusions.

The bottom line:  Yet another analysis makes clear the House climate and clean energy bill would dramatically reduce greenhouse gas emissions and accelerate the clean energy transition at a very low cost. And this from an independent, nonpartisan agency known for underestimating the potential and overestimating the cost of clean energy.

4 Responses to Despite its many flaws, EIA analysis of climate bill finds 23 cents a day cost to families, massive retirement of dirty coal plants and 119 GW of new renewables by 2030 — plus a million barrels a day oil savings

  1. Matt Dernoga says:

    Agreed on cost being low, however one part of the analysis which I found hard to believe was that there would be 69 GW of CCS electricity in 2030.

  2. David B. Benson says:

    Somewhat off-topic, but it is now clear to me that there will not be enough fossil diesel and biodiesel is unlikely to be able to take up the entire slack. So I found
    which was a little help in seeing if LNG could replace diesel. Can this replacemnt work for big diesel trucks and buses?

  3. Today’s SF Chronicle covers a study estimating a higher cost, which looks easy to refute. Obvious flaws: they don’t seem to discount 2050 costs to find present value, and they claim nuclear makes it cheaper.

    (08-03) 17:58 PDT — Without nuclear power and “clean coal,” the cost of cutting greenhouse gas emissions from the electricity industry could almost double, according to a study released Monday by a Bay Area think tank.

    The study, by the Electric Power Research Institute, argues that the kind of deep cuts sought by federal legislation are achievable, for a reasonable price. But the price will soar without nuclear energy and clean-coal power plants, which trap their carbon dioxide emissions and store the gas underground.

    The institute, which conducts research for electric utility companies, studied cutting greenhouse gas emissions 41 percent by 2030 – a goal of the global warming bill passed by the House of Representatives in June.

    That goal is feasible, the study concludes. But to reach it, the United States will need more renewable power, expanding by four-fold the use of wind and solar power. The country will need to improve its energy efficiency and develop a better grid for distributing electricity.

    But the country also will have to build 45 nuclear reactors and extend the lifespan of those already running. And it will need to build clean coal plants while retrofitting older coal plants to capture their greenhouse gas emissions, according to the study.

    If the country uses all of those technologies, the process of slashing emissions will cost the typical American household a total of $16,000 by the year 2050, or about $400 per year. Take away coal and nuclear power, and the price jumps to $28,400 per household by 2050, or $710 per year, according to the institute.

    Read more:

    Note that, even according to their inflated cost figures, it would cost $310 extra per household per year (less than one dollar per day) to go with genuinely clean energy. I would be quite willing to pay that to avoid leaving my grandchildren a legacy of sequestered C02 and of nuclear waste.

  4. BT Turner says:

    Joe, what do you think of Richard Newell? Will he be able to get EIA’s modeling to be a little more dynamic, and better reflect efficiencies?
    [From CQ]: “Richard G. Newell has been confirmed as administrator at the Energy Department’s Energy Information Administration. Newell has been an energy and environmental economics professor at Duke University, a research associate at the National Bureau of Economic Research and a university fellow at Resources for the Future.”