Posted by: Matt Dempsey Matt_Dempsey@inhofe.senate.gov (202)224-9797

 

 

  

EPW Policy Beat: Rebate Response

 

 

One convenient way some supporters of cap-and-trade dismiss the huge cost on families imposed by cap-and-trade is with the “rebate response.”  The rebate response goes something like this: 1) We know cap-and-trade will raise energy prices—after all, that’s the whole point of cap-and-trade; 2) We’re not going to say for certain how much it will cost a family of four (though CBO’s estimate—undisputed thus far—is about $3,000 per year per family);  3) We are confident we can keep consumers whole by doling out carbon rebates; and 4) We are confident of this because a study by MIT says cap-and-trade will raise hundreds of billions of dollars in revenue, enabling the government to cut an approximately $4,500 rebate check to a generic family of four. 

What to make of this? 

·         First, though it is asserted with certainty that $4,500 will be returned to consumers, MIT was postulating only the “potential” CO2 revenues from an auction and the “potential” tax reimbursement for a family of four—in other words, there is nothing certain here.  See page 25 of the study here: Moreover, MIT estimates a range of reimbursements to consumers of $1,630 to $4,560 in 2015 and $2520 to $5190 in 2050—amounts, it’s important to note, that are contingent upon the type of bill ultimately passed by Congress. Link to MIT Study  

·         Second, the $4,500 assertion assumes that Congress will use all of the revenues collected from an auction for rebates.  However, various climate bills—Lieberman-Warner, to name just one—divide up the revenue pie for, among other things, energy efficiency programs and research and development for renewable and clean energy technologies.  The Senate Majority Leader has even suggested using auction revenues to fund health care legislation.  

 ·         Third, the Congressional Budget Office has repeatedly claimed that government cannot entirely protect consumers from higher energy prices.  “Designing programs that affect low-income households could be challenging: No program could address all the region- and household-specific circumstances that could affect families’ cost.”   

·         Fourth, why are cap-and-trade proponents devising methods to neutralize higher energy prices?  This undermines the purpose and ultimate effectiveness of cap-and-trade.  As CBO has stated, “Price increases would be essential to the success of a cap-trade program because they would be the most important mechanism through which businesses and households would be encouraged to make investments and behavioral changes to reduce CO2.”  Link to CBO Testimony  

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