Tags: cap | and | trade | costs

Cap-and-Trade May Cost Households $3,900 a Year

Wednesday, 22 Apr 2009 10:31 AM

By Dave Eberhart

Figuring out the real cost to each U.S. household of a cap-and-trade policy has turned out to be as convoluted as a Philadelphia lawyer’s tax return.

An MIT study first indicated that between 2015 and 2050, cap-and-trade would annually raise an average of $366 billion in revenues, which when divided by 117 million households equaled a hefty $3,128 per household, according to a report in the Weekly Standard.

However, don’t take that figure to the bank just yet.

Apparently, since the MIT accounting first hit the newswires, a fog of uncertainly has settled on the basic arithmetic.

According to the Standard, which delved into this murky controversy in depth, the originator of the $3,128 figure has done some backtracking.

MIT professor John Reilly admitted that his original estimate of cap-and-trade’s cost was inaccurate. The annual cost would be $800 per household, he amended, putting the error off to a “boneheaded mistake in an excel spread sheet.”

More delving by the Standard, however, indicated that Reilly’s figure was still off base. The bottom line cap-and-trade per household cost reportedly is now pegged at more than $3,900 per year.

You see, the $800 paid annually per household is merely the cost to the economy [that] involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [green house gases], Reilly explained.

“So that might involve spending money on insulating your home, or buying a more expensive hybrid vehicle to drive, or electric utilities substituting gas (or wind, nuclear, or solar) instead of coal in power generation, or industry investing in more efficient motors or production processes, etc. – with all of these things ending up reflected in the costs of goods and services in the economy,” the academician added.

That said, Professor Reilly now estimates that “the amount of tax collected” through companies would equal $3,128 per household.

But wait one more New York minute.

Consider that those costs do get passed to consumers and income earners in one way or another – but, by the same token, those costs have nothing to do with the “real cost” to the economy.

In other words, Reilly assumes that the $3,128 will be “returned” to each household.

Without that key assumption, Reilly instructed the Standard, “the cost would then be the estimate favored by the Republicans [$3,128] plus the cost I estimate [$800].”

Ergo, the figure cited in the headline, above – something over $3,900 per household.

Incredibly, there’s much more, but that’s it in a nutshell. Now, are we all clear on this?

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