Congressional Budget Office
Director’s Blog

Today I testified about the economic effects of legislation aimed at reducing emissions of greenhouse gases, drawing on a report that CBO released a few weeks ago.

Global climate change poses one of the nation’s most significant long-term policy challenges. A strong consensus has developed in the expert community that, if allowed to continue unabated, the accumulation of greenhouse gases in the atmosphere will have extensive, highly uncertain, but potentially serious and costly impacts on regional climates throughout the world. Moreover, the risk of abrupt and even catastrophic changes in climate cannot be ruled out.

Reducing the extent of climate change would entail substantial reductions in U.S. emissions and in emissions from other countries over the coming decades. Achieving such reductions in this country would probably involve some combination of three broad changes: transforming the U.S. economy from one that runs on carbon-dioxide-emitting fossil fuels to one that increasingly relies on nuclear and renewable fuels; accomplishing substantial improvements in energy efficiency; and implementing the large-scale capture and storage of carbon dioxide emissions.

My testimony emphasized several points:

• The economic impact would depend importantly on the design of the policy. Decisions about whether to reduce greenhouse gases primarily through market-based systems (such as taxes or a cap-and-trade program) or primarily through traditional regulatory approaches that specify performance or technology standards would influence the total costs of reducing emissions and the distribution of those costs. The costs would also depend on the stringency of the policy; whether other countries imposed similar policies; the amount of flexibility about when, where, and how emissions would be reduced; and the allocation of allowances if a cap-and-trade system was used.
• Reducing the risk of climate change would come at some cost to the economy. For example, CBO concludes that the cap-and-trade provisions of H.R. 2454, the American Clean Energy and Security Act of 2009, would reduce GDP below what it would otherwise have been—by roughly ¼ to ¾ percent in 2020 and by between 1 and 3½ percent in 2050. By way of comparison, CBO projects that real (that is, inflation-adjusted) GDP will be roughly two and a half times as large in 2050 as it is today, so those changes would be comparatively modest. In the models that CBO reviewed, the long-run cost to households would be smaller than the changes in GDP because consumption falls by less than GDP and because households benefit from more time spent in nonmarket activities. Moreover, these measures of potential costs do not include any benefits of averting climate change.
• Climate legislation would cause permanent shifts in production and employment away from industries that produce carbon-based energy and energy-intensive goods and services and toward industries that produce alternative energy sources and less-energy-intensive goods and services. While those shifts were occurring, total employment would probably be reduced a little compared with what it would have been without such a policy, because labor markets would most likely not adjust as quickly as would the composition of demand for different outputs.
• CBO has estimated the loss in purchasing power that would result from the primary cap-and-trade program in H.R. 2454, incorporating both the higher prices that households would face and the compensation they would receive (primarily through the allocation of allowances or the proceeds from their sale). CBO’s measure omits some channels of influence on households’ well-being that cannot be readily quantified, and it appears that the measure probably understates the true burden to a small degree. As estimated, the loss in purchasing power would be modest and would rise over time as the cap became more stringent, accounting for 0.2 percent of after-tax income in 2020 and 1.2 percent in 2050. Households in the lowest fifth of households when arrayed by income would see gains in purchasing power in both 2020 and 2050, because the compensation they would receive would exceed the costs they would bear. However, households in the middle fifth would see net losses in purchasing power amounting to 0.6 percent of after-tax income in 2020 and 1.1 percent in 2050.

Today CBO released a report that summarizes its analyses of the economic effects of proposed policy changes aimed at reducing emissions of greenhouse gases.

Global climate change poses one of the nation’s most significant long-term policy challenges. A strong consensus has developed in the expert community that, if allowed to continue unabated, the accumulation of greenhouse gases in the atmosphere will have extensive, highly uncertain, but potentially serious and costly impacts on regional climates throughout the world. Moreover, the risk of abrupt and even catastrophic changes in climate cannot be ruled out.

Those expected and possible harms may motivate policy actions to reduce the extent of climate change. However, the cost of doing so could be significant because it would entail substantial reductions in U.S. emissions and in emissions from other countries over the coming decades. Achieving such reductions in this country would probably involve some combination of three broad changes:

• Transforming the U.S. economy from one that runs on carbon-dioxide-emitting fossil fuels to one that   increasingly relies on nuclear and renewable fuels;
• Accomplishing substantial improvements in energy efficiency; and
• Implementing the large-scale capture and storage of carbon dioxide emissions.

CBO’s report makes several points regarding the economic implications of policies that might be chosen to address climate change:

• The economic impact would depend importantly on the design of the policy. Decisions about whether to reduce greenhouse gases primarily through market-based systems (such as taxes or a cap-and-trade program) or primarily through traditional regulatory approaches that specify performance or technology standards would influence the total costs of reducing emissions and the distribution of those costs. The costs would also depend on the stringency of the policy; whether other countries imposed similar policies; the amount of flexibility about when, where, and how emissions would be reduced; and the allocation of allowances if a cap-and-trade system was used.

• Reducing the risk of climate change would come at some cost to the economy. A cap-and-trade system, for example, would lead to higher prices for energy from fossil fuels and for energy-intensive goods, which would in turn provide incentives for households and businesses to use less carbon-based energy and to develop energy sources that emit smaller amounts of carbon dioxide. Changes in the relative prices for energy and energy-intensive goods would also shift income among households at different points in the income distribution and across industries and regions of the country. Policymakers could counteract some of those income losses and shifts by having the government sell emission allowances and use the revenues to compensate certain households or businesses, or by having the government give allowances away to some households or businesses. Even so, some income losses and shifts would occur.

For example, CBO concludes that the cap-and-trade provisions of H.R. 2454, the American Clean Energy and Security Act of 2009, would reduce GDP below what it would otherwise have been—by roughly ¼ to ¾ percent in 2020 and by between 1 and 3½ percent in 2050. By way of comparison, CBO projects that real (that is, inflation-adjusted) GDP will be roughly two and a half times as large in 2050 as it is today, so those changes would be comparatively modest. In the models that CBO reviewed, the long-run cost to households would be smaller than the changes in GDP because consumption falls by less than GDP and because households benefit from more time spent in nonmarket activities. Moreover, these measures of potential costs do not include any benefits of averting climate change.

• Climate legislation would cause permanent shifts in production and employment away from industries that produce carbon-based energy and energy-intensive goods and services and toward industries that produce alternative energy sources and less-energy-intensive goods and services. While those shifts were occurring, total employment would probably be reduced a little compared with what it would have been without such a policy, because labor markets would most likely not adjust as quickly as would the composition of demand for different outputs.

• CBO has estimated the loss in purchasing power that would result from the primary cap-and-trade program in H.R. 2454. CBO’s measure reflects the higher prices that households would face and the compensation they would receive, primarily through the allocation of allowances or the proceeds from their sale. However, the measure omits some channels of influence on households’ well-being that cannot be readily quantified. It appears that CBO’s measure probably understates the true burden to a small degree. As estimated, the loss in purchasing power would be modest and would rise over time as the cap became more stringent, accounting for 0.2 percent of after-tax income in 2020 and 1.2 percent in 2050.

• The distribution of the loss in purchasing power across households depends importantly on policymakers’ decisions about how to allocate the allowances. According to CBO’s calculation, households in the lowest fifth of households when arrayed by income would see gains in purchasing power in both 2020 and 2050, because the compensation they would receive would exceed the costs they would bear. However, households in the middle fifth would see net losses in purchasing power amounting to 0.6 percent of after-tax income in 2020 and 1.1 percent in 2050.

Some legislation considered by the current and previous Congresses has proposed combining cap-and-trade programs with various regulatory standards to reduce greenhouse-gas emissions. Yesterday CBO released an issue brief that describes how regulatory standards can interact with a cap-and-trade program, using examples related to H.R. 2454, the American Clean Energy and Security Act of 2009, which passed the House of Representatives on June 26, 2009.

In some cases, regulatory standards would require producers of greenhouse gases to use specific technologies, such as renewable sources for generating electricity; in others, manufacturers would have to modify the performance of their products, such as commercial furnaces, to use energy more efficiently. Such regulatory standards have been used in the past to meet various environmental goals.

Over the past two decades, however, policymakers have established cap-and-trade and other market-based programs because such programs often provide a more efficient way to reduce pollution than is possible through the imposition of regulatory standards alone. Market-based approaches rely on the interaction between producers and consumers to determine how to meet specific targets for emissions. Because policymakers do not always have enough information to tailor national regulatory standards to local circumstances, for example, or to adjust standards rapidly as market conditions change, regulatory standards do not always ensure that the least expensive solution is brought to bear on an environmental problem. Market-based approaches, in contrast, allow flexibility in the approach to meeting an environmental goal and often can achieve the same result at a lower cost.

As a result, regulatory standards combined with market-based approaches often will increase the cost of meeting an environmental goal. In particular, if standards forced large reductions in emissions in a specific industry or for a particular product that would not result from a cap-and- trade program alone, the standards would reduce the demand for allowances and depress market prices for them. Some lower-cost strategies would then not be pursued because producers would have no incentive to adopt them. The target for emission reductions might be met, but the technology or performance standard might have substituted higher-cost for lower-cost reductions that would have occurred as a result of the cap-and-trade program without the additional standards.

Market-based approaches are effective only to the extent that markets deliver accurate and timely price information and only so long as producers and consumers respond to that information. When the price mechanism falls short and appropriate price signals are not sent or received, the imposition of regulatory standards can be a more cost-effective way than a cap-and-trade program or a tax to change behavior. For example, builders and owners of rental properties might see little need to insulate buildings or install energy-efficient appliances if utility bills are paid by tenants and if the differences in tenants’ costs are not reflected in the rent that could be charged. (Standards also might be desirable if they addressed other national priorities more effectively than market mechanisms could, even if their economic costs were higher.)

This issue brief was prepared by Rob Johansson of CBO’s Microeconomic Analysis Unit.

Today CBO released a brief that discusses how activities with emissions that are not subject to limits in a cap-and-trade program might lower the burden of reducing the concentration of greenhouse gases (GHGs) in the atmosphere. Both existing climate policies, such as the European Union’s Emission Trading System, and policies under consideration, such as the American Clean Energy and Security Act (ACESA) of 2009, which was recently passed by the House of Representatives, have recognized the potential for actions— such as disposing of waste in different ways, changing methods of farming, and reducing deforestation— to “offset” the extent to which the use of fossil fuels must be reduced to meet a chosen target for total GHG emissions.

If such offsets—which can be defined as reductions in GHGs from activities not subject to limits on emissions—are less expensive than reductions from limiting the use of fossil fuels, they can reduce the overall economic cost of meeting a target for emissions. But the difficulty of ensuring that offset activities result in verifiable, permanent and incremental reductions in global emissions raises concerns about whether the specified emissions target will actually be met. Those concerns may be especially acute when, as under ACESA, allowable offsets include actions taken outside of the country setting the target for emissions.

Although experience with offsets is not extensive, preliminary evidence suggests that they can significantly lower the economic cost of a cap-and-trade program, even after accounting for the costs of steps taken to increase confidence that the use of offsets represents true incremental reductions in GHGs. CBO estimates that the average annual savings from offsets could be about 70 percent under ACESA. Of course the intended environmental benefit would be fully realized only if the offsets provided the full reduction in global emissions of GHGs for which they are credited.

Today CBO released a letter describing studies by two teams of experts—one affiliated with the National Bureau of Economic Research (NBER) and one affiliated with Resources for the Future (RFF)—that estimated regional differences in the effects of policies that would increase the prices of fossil fuels in rough proportion to the carbon dioxide emitted when they are combusted, as would occur under a cap-and-trade program.

CBO recently analyzed the effects that the cap-and-trade program for greenhouse-gas emissions specified by the American Clean Energy and Security Act of 2009 (as reported by the House Committee on Energy and Commerce) would have on households at various income levels. That analysis accounts for the effects on households in different income groups of both the increases in prices of goods and services that would result from the cap-and-trade program (the gross cost of the program) and the distribution of the value of emission allowances (which would partly offset the gross cost). However, CBO did not analyze regional differences in these costs and benefits.

Like CBO’s analysis of the American Clean Energy and Security Act of 2009 (ACESA), the analyses by NBER and RFF both assume that prices imposed on emissions ultimately would be borne by households in the form of higher prices for the goods and services that they consume, even if suppliers or intermediate users of fossil fuels initially pay the amounts involved. NBER’s and RFF’s analyses focus on the costs incurred once emissions are priced, and (like CBO’s analysis) they do not address the transition costs of imposing such a price. Although the analyses by CBO, NBER, and RFF consider different carbon dioxide emission prices and examine policies in different years, the qualitative effects on households with different levels of income are similar in the studies; each finds that, measured as a share of annual income, the price increases would impose a larger burden on low-income households than on high-income households.

In contrast to CBO’s analysis, the NBER’s and RFF’s analyses are not specific to ACESA: Most important, they examine methods of returning the allowance value (or tax revenues) to households that differ from the provisions in the legislation. This letter, therefore, addresses only the results concerning the price increases for households at various income levels (that is, the regional analysis of the gross annual cost per household, which CBO estimated to be $890 in its analysis):

• The NBER study finds only small regional differences. In particular, the increase in households’ spending would range from 1.9 percent of annual income in the East South Central region to 1.5 percent in the West North Central region.
• The RFF study also finds only small regional differences, although the differences are somewhat larger for low-income households. Specifically, the increase in households’ spending would range from 1.6 percent of annual income in the Ohio Valley to 1.3 percent in California, New York, and the Northwest. Effects on households in the bottom decile of the income distribution would range from 5.5 percent in the Ohio Valley to 4.0 percent in California.

The American Clean Energy and Security Act (H.R. 2454), recently passed by the House of Representatives, would establish two cap-and-trade programs for greenhouse gas (GHG) emissions. One small program would apply only to hydrofluorocarbons (HFCs) while a much larger program would apply to other types of GHG emissions—practically all emissions from the combustion of fossil fuels plus a fraction of other emissions from industrial and agricultural sources. Under the bill, operators of most sources of emissions would be required to hold an allowance for each ton of GHG they emit, and other entities would be required to hold an allowance for each ton of GHG that will be emitted when the fuel they sell (such as gasoline) is burned or when a product they produce (such as HFCs) escapes into the atmosphere.

By gradually reducing the total number of allowances available every year, the bill would lower the total amount of emissions from the sources it covers. However, the bill would allow those sources to produce emissions in excess of their allowances if they pay for reductions in emissions elsewhere. For example, if an electric utility paid a landowner to reforest a parcel of farmland so that the trees would absorb carbon dioxide, it would receive “offset” credits that it could submit in lieu of allowances, allowing it to produce a larger quantity of emissions than it would have otherwise. The bill would allow covered entities to purchase such offsets from domestic sources and, under certain circumstances, from sources outside of the United States. In CBO’s estimation (CBO’s original cost estimate), covered sources would use significant amounts of offsets and thereby reduce their own emissions substantially less than they would if offsets were not available—which, in turn, would cause the price of allowances to be much lower than otherwise.

The bill also would allow entities to “bank” unused allowances if they chose, carrying them over from year to year until they decided to use them. CBO projects that entities would undertake more emission reductions than necessary in the early years of the program, banking several hundred million tons’ worth of allowances per year to use in later years when emission allowances would become increasingly scarce and hence more valuable.

The figure below shows CBO’s estimate of how U.S. emissions (or output of products that will ultimately result in emissions) would be reduced under the House-passed bill. This estimate incorporates the number of allowances that would be issued under both the GHG and HFC caps, as well as the opportunities to purchase domestic and international offsets and incentives to bank allowances.

Estimated U.S. Emissions under the House-passed Bill

For example, in the absence of any change in policy, CBO projects that in 2020 total U.S. emissions will be about 7,580 million metric tons of carbon dioxide equivalents; emissions by entities that would be covered under the two cap-and-trade programs would account for about 6,550 million tons, more than 85 percent of total U.S. emissions. Under the legislation, covered entities would have access to about 5,200 allowances (the nominal cap in that year less a set-aside of allowances that would become available only if allowance prices in the large program spiked unexpectedly high). By CBO’s estimates, these entities would pay for about 300 million tons of reductions by domestic entities not covered by the cap-and-trade programs, and they would purchase nearly 430 million tons of reductions in foreign countries, for which they would receive credit against 350 million tons worth of domestic emissions. The allowances and offsets together would allow covered entities to emit roughly 5,850 million tons of carbon dioxide equivalents (5,200+300+350), but CBO estimates that the entities would choose to bank allowances for 20 million tons (having already accumulated over 2,000 million tons of banked allowances by 2020). Thus, total emissions of the covered entities in that year would be about 5,830 million tons, 720 million tons (or 11 percent) below the amount anticipated under current law. (That percentage would increase to about 53 percent by 2050.)

If the offsets represented true emission reductions relative to baseline, then total emission reductions spurred by the bill would be 1,450 million tons (6,550-5,830+300+430). However, many observers worry that at least some of the offsets might be difficult to verify or might themselves be “offset” by increases in emissions elsewhere.

Regarding the proposed cap-and-trade program being considered by the House of Representatives, a number of people have inquired as to whether it is correct to say, as is currently being circulated, that “the Congressional Budget Office estimates that cost impacts could be as much as $.77 per gallon for gasoline, $.83 per gallon for jet fuel, and $.88 per gallon for diesel fuel, all ultimately borne by the consumer.”

CBO’s cost estimate for the legislation did not include an estimate of increases in the price of particular products, such as gasoline or diesel fuel.  The numbers being circulated were produced by the American Petroleum Insititute (API).  CBO analysts have been in contact with the API  analyst that produced them to understand how they constructed those numbers.

According to API, it produced those numbers by assuming that there would be no offsets available (see note below), an assumption that we did not make when estimating the cost of the bill.  For the purposes of sensitivity analysis, CBO ’s estimate of an earlier version of the bill (H.R. 2454) reported how the allowance prices would have changed under a variety of different assumptions, including the elimination of offsets as well as changes in other parameters.  Accordingly, CBO indicated that the availability of offsets had a significant effect on the allowance price, reducing it by 70 percent.  Taking the inverse of that reduction, API concluded that, without offsets, our allowance price would have been over three times higher.

API translated allowance prices into the prices of particular products, such as gasoline, using emission coefficients from EPA.  Given those emission coefficients, the $16 and $26 allowance prices that CBO predicted for 2012 and 2019 , respectively, would imply gasoline price increases of $0.14 and $0.23, respectively.   But, under the extreme assumption of no offsets (and correspondingly higher allowance prices of $53 and $87 in 2012 and 2019, respectively), API calculated gasoline price increases of $0.47 in 2012 and $0.77 in 2019.

Because the bill provides for the use of both international and domestic offsets and CBO concluded that firms would be able to make use of such offsets when complying with the provisions of the bill (taking into account available information on both the supply of those offsets and competing demands for them), it is a misrepresentation of our work to say that the  $0.77 per gallon for gasoline, $0.83 per gallon for jet fuel, and $0.88 per gallon for diesel fuel are consistent with our cost estimate for the legislation.

NOTE: API states that it is assuming no international offsets, but the numbers that it presents actually correspond to the case with neither domestic nor international offsets. There was a typo in the initial release of our cost estimate that could have caused confusion about this, but soon after that release the typo was corrected on the web version of the cost estimate.

Last Friday, CBO released an analysis of the average cost per household that would result from the greenhouse-gas (GHG) cap-and-trade program in the American Clean Energy Security Act of 2009 (H.R. 2454). In that analysis, CBO examined the effects of the bill as it would apply in 2020 but described those effects in the context of the current economy: that is, as if the 2020 policy were in effect in 2010. Describing the effects in 2010 allows a more direct comparison of the costs with current household incomes.  The blog entry provides more detail on how CBO derived the estimate of the costs of emission allowances and offsets for 2010.

CBO estimates that the price of an allowance, which would permit one ton of GHG emissions measured in carbon dioxide equivalents, would be $28 in 2020 (measured in 2020 dollars). CBO also estimates that nearly 5 billion allowances would be issued in 2020 (after subtracting allowances set aside for a strategic reserve) and that the costs of international and domestic offsets purchased in 2020 would be $20 billion, yielding a total cost of allowances and offsets of about $160 billion.

CBO modeled the 2020 policy in 2010 by maintaining the same relationship between the total value of allowances and the size of the economy (as measured by gross domestic product) in 2010. On that basis, CBO estimates that the equivalent cost of allowances and offsets would be roughly $105 billion in 2010. CBO projects that GDP in 2010 will be about one-third below the level projected for 2020 and thus the 2020 allowance value is reduced by about one-third so that its value relative to the size of the economy remains the same.  CBO made a similar adjustment to the 2020 estimate of the resource costs associated with the policy.

To measure the impact across households in 2010, CBO used an estimate of the distribution of spending on goods that have carbon dioxide emissions associated with their production or consumption across household income groups in that year. The database for the analysis was constructed by statistically matching income information from the Statistics of Income data from the Internal Revenue Service, households’ characteristics from the Current Population Survey reported by the Bureau of the Census, and data on households’ expenditures from the Consumer Expenditure Survey by the Bureau of Labor Statistics. The data are from 2006, the latest year for which the data from all three sources are available, and thus reflect the patterns of income and consumption in that year. CBO adjusted the data to 2010 levels by the estimated overall growth in population and income.  CBO did not attempt to project how the distribution across household income groups or composition by source of income or expenditures would change between 2006 and 2010.

Yesterday, CBO released an analysis that examines the average cost per household that would result from the greenhouse gas cap-and-trade program in the American Clean Energy and Security Act of 2009 (H.R. 2454, as it was reported by the Committee on Energy and Commerce) and how that cost would be spread among households with different levels of income. The analysis does not include the effects of other aspects of the bill, such as federal efforts to speed the development of new technologies and to increase energy efficiency by specifying standards or subsidizing energy-saving investments.

Reducing emissions to the level required by the cap would be accomplished mainly by stemming demand for carbon-based energy by increasing its price. Those higher prices would, in turn, reduce households’ purchasing power. At the same time, the distribution of emission allowances would improve households’ financial situation. The net financial impact of the program on households in different income brackets would depend in large part on how many allowances were sold (versus given away), how the free allowances were allocated, and how any proceeds from selling allowances were used. That net impact would reflect both the added costs that households experienced because of higher prices and the share of the allowance value that they received in the form of benefit payments, rebates, tax decreases or credits, wages, and returns on their investments.

The incidence of the gains and losses associated with the cap-and-trade program in H.R. 2454 would vary from year to year because the distribution of the allowance value would change over the life of the program. In the initial years of the program, the bulk of allowances would be distributed at no cost to various entities that would be affected by the constraint on emissions. Most of those free allocations would be phased out over time, and by 2035, roughly 70 percent of the allowances would be sold by the federal government, with a large share of revenues returned to households on a per capita basis. This analysis focuses on the effect of the legislation in the year 2020, a point at which the cap would have been in effect for eight years (giving the economy time to adjust) and at which the allocation of allowances would be representative of the situation prior to the phase-down of free allowances. The incidence of gains and losses would be considerably different once the free allocation of allowances had mostly ended. Although the analysis examines the effects of the bill as it would apply in 2020, those effects are described in the context of the current economy—that is, the costs that would result if the policies set for 2020 were in effect in 2010.

On that basis, CBO estimates that the net annual economywide cost of the cap-and-trade program in 2020 would be $22 billion—or 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 program, but it does not include the economic benefits and other benefits of the reduction in greenhouse gas emissions and the associated slowing of climate change. Of the total cost, CBO could not determine the incidence of certain pieces (including both costs and benefits) that represent, on net, about 8 percent of the total.

For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245. Added costs for households in the second lowest quintile would be about $40 that year; in the middle quintile, about $235; and in the fourth quintile, about $340. Overall net costs would average 0.2 percent of households’ after-tax income.

CBO just released a cost estimate for the American Clean Energy and Security Act of 2009 (H.R. 2454), which was recently approved by the House Committee on Energy and Commerce. This legislation would make a number of changes in energy and environmental policies largely aimed at reducing emissions of gases that contribute to global warming. The bill would limit (or cap) the quantity of certain greenhouse gases emitted from facilities that generate electricity and from other industrial activities over the 2012-2050 period.

Under the provisions of the bill, the Environmental Protection Agency (EPA) would establish two separate regulatory initiatives known as cap-and-trade programs—one covering emissions of most types of greenhouse gases and one covering hydrofluorocarbons. Both cap-and-trade programs would set a limit on total emissions for each year and would require regulated entities to hold rights, or allowances, to the emissions permitted under that cap. Some of those allowances would be auctioned by the federal government, and the remainder would be distributed at no charge.

Other major provisions of the legislation would:

• Provide energy tax credits or energy rebates to certain low-income families to offset the impact of higher energy-related prices from the cap-and-trade programs;
• Require certain retail electricity suppliers to provide a minimum percentage of their electricity sales with electricity generated by facilities that use qualifying renewable fuels or energy sources;
• Establish a Carbon Storage Research Corporation to support research and development of technologies related to carbon capture and sequestration;
• Increase, by $25 billion, the aggregate amount of loans Department of Energy is authorized to make to automobile manufacturers and component suppliers under the existing Advanced Technology Vehicle Manufacturing Loan Program;
• Establish a Clean Energy Deployment Administration within the Department of Energy, which would be authorized to provide direct loans, loan guarantees, and letters of credit for clean energy projects;
• Authorize the Department of Transportation to provide individuals with vouchers to acquire new vehicles that achieve greater fuel efficiency than the existing qualifying vehicles owned by the individuals; and
• Authorize appropriations for various programs.

CBO and the Joint Committee on Taxation (JCT) estimate that over the 2010-2019 period enacting this legislation would:

• Increase federal revenues by about $846 billion; and
• Increase direct spending by about $821 billion.

In total, those changes would reduce budget deficits (or increase future surpluses) by about $24 billion over the 2010-2019 period.

In addition, assuming appropriation of the necessary amounts, CBO estimates that implementing H.R. 2454 would increase discretionary spending by about $50 billion over the 2010-2019 period. Most of that funding would stem from spending auction proceeds from various funds established under this legislation. CBO has done extensive work on issues surrounding climate change as I have mentioned in earlier blogs.