Senate report: Climate change legislation to raise U.S. fuel tab by $3.6 trillion

Report from Republican senators says "cap and trade" will create burdensome costs for U.S. businesses and consumers.

By Mark B. Solomon

A controversial provision of climate-change legislation currently moving through Congress will raise the cost of fuel for U.S. businesses and consumers by $3.6 trillion from 2015 to 2050, and raise diesel fuel prices by $1.4 trillion during that span, according to a report issued Oct. 21 by two Senate Republicans.

The report, from Sens. Kay Bailey Hutchison (R-Texas) and Christopher S. (Kit) Bond (R-Mo.), said the provision, known as "cap and trade," will increase the cost of motor fuels by 24 cents a gallon by 2020 and by 95 cents per gallon by 2050. The estimates were derived by multiplying the amount of fuel expected to be consumed during that time by the per-gallon increase in fuel prices projected by the National Black Chamber of Commerce, which opposes the provision.

The legislation, co-sponsored by Rep. Henry A. Waxman (D-Calif.) and Edward J. Markey (D-Mass.), is aimed at reducing carbon emissions by 80 percent or more between 2012 and 2050 by imposing a national limit on greenhouse gases. Under "cap and trade," emission limits are set for each industry, and industries are forced to amass credits or allowances equal to their emissions levels (they are allowed to trade these allowances with one another).

Critics say that when the federal government creates a scarce new commodity—in this case, the right to emit carbon—and then mandates that businesses buy it, the costs will inevitably be passed on to users in the form of higher prices.

Transportation interests worry that the industry will be disproportionately affected by the provision because it will receive few credits relative to the amount of carbon it emits. As a result, the transport sector would have to buy credits equal to the differential between the free credits and its level of emissions. This is expected to cost the industry billions of dollars, costs that would be passed on through the supply chain in the form of higher prices, critics warn.

The legislation was narrowly passed by the House of Representatives in June. The Senate will begin debating its own version of the measure sometime this week.

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