Senate climate legislation unveiled last week would spark a decade of multibillion-dollar investments to help overhaul how the nation produces and consumes energy, adding 200,000 jobs per year in the construction of new power plants and through greater demand for biofuels, according to a nonpartisan study released today.
The Peterson Institute for International Economics said in its 18-page report that the bill from Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) creates the new jobs between 2011 and 2020 because of its mandatory limits on greenhouse gases, which will prompt $41.1 billion in investments per year as the nation shifts away from traditional fossil fuels like coal and oil and toward new nuclear power and renewables.
That is $22.5 billion more than what the country would otherwise be spending on new electricity sector investments. But the economic boom could be short-lived. After 2025, as energy prices increase and certain industry-friendly provisions of the legislation phase out, employment gains would be "clawed back" to their current, business-as-usual projections.
The Peterson Institute study marks the first comprehensive review of the Senate proposal since its release last week. Trevor Houser, a visiting fellow at the center and the report's lead author, said his work differs from other analysis due out next month from U.S. EPA and EIA because it factors in how the Senate legislation would affect the U.S. economy at its current 10 percent unemployment rate, and by considering investments needed for an aging U.S. power system.
According to the report, the Kerry-Lieberman bill would prompt a significant reshuffle in U.S. energy supplies thanks to its greenhouse gas caps and many other complimentary policies, including stronger vehicle efficiency and renewable energy standards.
For starters, fossil fuels would fall from 84 percent of the current U.S. energy supply down to 70 percent in 2030. By contrast, renewables and nuclear energy would soar by 2030 from their current 8 percent rates for U.S. energy consumption, to 14 percent and 16 percent, respectively.
Compared with business-as-usual scenarios, the Senate proposal would prompt 24 gigawatts of new renewable power generation over the next 20 years, with the majority in wind (58 percent), followed by biomass (23 percent) and solar (13 percent). By 2030, the report said renewables would account for 18 percent of all power generation capacity, up from 12 percent today, and 21 percent of all electricity production, up from 10 percent today.
The bill would spawn 68 gigawatts of new nuclear power production due to $36 billion in loan guarantees and a 10 percent investment tax credit for plants that are in operation by 2025. That means nuclear power would account for 15 percent of power generation capacity by 2030, compared to 10 percent today. And it also would push nuclear power to account for 30 percent of the entire country's electricity generation in 2030, up from 20 percent today.
Carbon capture and sequestration technologies also would get a boost from the Senate bill because of provisions that give the low-carbon option extra bonus allowances as industry ramps up its use. According to the report, the nation would see 72 gigawatts of new CCS capacity installed between 2008 and 2030, with 53.7 gigawatts on coal-fired power plants and 18.3 gigawatts on natural gas plants. Natural gas also would have another 40 gigawatts deployed by 2030 because it emits less carbon than coal.
Transportation, energy efficiency
On the transportation end, the Peterson Institute report said that a combination of improved efficiency upgrades and fuel switching to ethanol, biodiesel, natural gas and electricity would help reduce U.S. oil imports by 33 percent to 40 percent below current levels and 9 to 19 percent below business-as-usual levels by 2030.
U.S spending on imported oil also would fall by $51 billion to $93 billion per year, which cuts global oil prices and reduces oil producer revenues by $263 billion to $436 billion annually by 2030.
Like other studies, the Peterson Institute report found that the Senate climate bill would increase the prices of fossil fuels for energy consumers and business. Households would see an average 3 percent increase in their electricity rates and a 5 percent increase in gasoline prices (11 to 24 cents per gallon) between 2011 and 2030. Home hearing oil prices would also average about 13 cents more per gallon compared to business as usual between 2011 and 2020, and 25 cents more between 2021 and 2030.
But according to the analysis, the Senate climate bill could mitigate the higher energy prices through energy efficiency improvements and emission allowances that are recycled back to consumers. Depending on vehicle efficiency upgrades, the study found that the Senate legislation could lead to between a $136 increase and a $35 decrease in average household annual energy expenses.
The Peterson study predicts carbon prices will start at $16.47 per ton in 2013, growing to $55.44 per ton in 2030. That will reduce greenhouse gases from covered industrial sources -- power plants, transportation, major manufacturers -- by 22 percent below 2005 levels by 2020 and 42 percent by 2030.
Better energy efficiency and incentives for non-fossil fuel energy sources also would curb traditional air pollutants and lead to savings in water consumption. Toxic mercury emissions would fall 43 percent below business as usual by 2030, while nitrogen oxides drop 34 percent and sulfur dioxide by 6 percent. Water savings are projected at 11.7 billion gallons per year through 2030, which is nearly 2 times the nation's annual consumption of bottled water.
Prospects for the Kerry-Lieberman legislation remain unclear. Majority Leader Harry Reid (D-Nev.) said earlier this week he will huddle next month with key committee leaders and the entire 59-member Senate Democratic caucus to determine what type of energy and climate bill has the votes to pass off the floor this year.
Kerry welcomed the Peterson Institute's findings.
"What greater incentive for action is needed than creating jobs and reducing our foreign oil dependency? This nonpartisan, hard-headed study by an institute committed to fiscal truth-telling should be an economic and security wakeup call," he said.
The Peterson Institute's study is the first it has done on any specific piece of Capitol Hill climate legislation. The group is funded in part by the Doris Duke Charitable Foundation. More studies are planned on the state-by-state implications of the legislation, as well as how lower oil production revenue influences the economies and politics for the Organization of Petroleum Exporting Countries and non-OPEC countries.
Click here for the economic study of the Kerry-Lieberman climate bill.
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