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The report noted that many in the industry favor free allocations, as a way of reducing the costs of complying with carbon dioxide reductions. But discouraged that approach, warning of potential excessive profits and noting the "overly generous" allocations under the first phases of Europe's trading system. 

With electric power generation responsible for about 40 percent of the nation's carbon dioxide emissions, or about 2.7 billion tons annually, according to the report, the industry has a big stake in the outcome of any legislation.

The issue is not confined to the federal level. In states such as California, which is contemplating a cap-and-trade program to help the state meet the demands of its groundbreaking AB 32, regulators are also wrestling with the subject. California officials are expected to make a recommendation on the allocation question this summer (see Climate Law Update story here).    

Under Lieberman-Warner, credits covering about 45 percent of the emissions would be distributed for free in 2012, according to the report, while another 573 million tons worth would be handed out to distribution companies. Those allowances would then be auctioned off to raise money for energy efficiency programs or to provide customer rebates. The Bingaman-Specter bill, on the other hand, would provide about 80 percent of the allowances for free in 2012.

At a hypothetical value of $10 a ton -- no one really yet knows how much the credits would be worth -- the value of the free credits allocated to the 100 largest utilities under the Lieberman-Warner approach would be about $10.4 billion. That comparable figure under the competing measure would be more than $18 billion.

Restricting the amount of free credits is clearly favored by at least one sponsor of the report, the Natural Resources Defense Council. In a statement accompanying the release of the assessment, Dan Lashof, science director of the environmental group's climate center said (see full text of statement here):

"Billions of dollars in allowances are at stake under the proposals to cap and reduce global warming pollution. The value of pollution allowances should benefit consumers and smart programs that deliver real pollution reductions, not polluters." 

Along with the NRDC, the report was sponsored by Ceres, a coalition of investors and environmental groups, as well as two utilities, Pacific Gas and Electric Company and Public Service Enterprise Group of New Jersey.

The report also shows stark differences between utilities based on whether credits are distributed based on the utility's emissions, or its electricity output. The emissions-based method would "penalize companies that have invested in low- and zero-carbon technologies in advance of the cap-and-trade program," the report noted.

Under an emissions scenario, the Southern Company, described by the Wall Street Journal's online site Environmental Capital as "coal heavy," would get $600 million in credits under the proportions outlined under the Lieberman-Warner bill, as opposed to $734 million if the allowances were doled out based on emissions.

For a company such as Northern California's PG&E, reliant on hydro, nuclear, natural gas and renewable generation, the differences would be even more dramatic. The company would get as little as $2 million to $4 million in allowances under the emissions scenario but receive between $99 million and $174 million if allocations were based on output, according to the report.

On a somewhat different subject, the report made another fairly startling point: Since 1990, overall carbon dioxide emissions from power plants have gone up by 29 percent; but emissions of other pollutants, including sulfur dioxide and nitrogen oxide, have dropped more than 40 percent. The difference, suggested the report's authors, was that the latter two pollutants are regulated under the Clean Air Act, while carbon dioxide has not been.      

 (Photo: Lake Almanor, California, part of PG&E hydroelectric system; Wikipedia)

"Two separate government analyses have now come to the same conclusion," Lieberman said in a statement (see text here).  "Our bill curbs global warming without harming the U.S. economy."

Lieberman said the new study predicted impacts "below even the modest figures" cited by the EPA He said the energy department also found that the bill would benefit wind and solar, as well as carbon capture and storage technology.       

The Environmental Defense Fund, which supports using markets to tackled climate change, also lauded the study's conclusions, as did the Natural Resources Defense Council (see press statements here and here). Environmental Defense recently released its own analysis of Lieberman-Warner, concluding that economic models showed cap-and-trade "consistent with long-term economic growth (see Climate Law Update story here).”

Both environmental groups characterized the economic pull of the legislation as virtually unnoticeable.

"It's like two cars driving different routes from New York to L.A. and predicting one will get there at noon and the other will arrive at 12:45," said Environmental Defense's climate campaign director Steve Cochran in the group's statement. NRDC said bill's impact would be equivalent to a two-month delay in growth.

Environmental Defense also again noted, as it has in the past with other studies, that the document didn't look at the price of doing nothing, including higher insurance costs, damage from droughts and more intense storms.

But not so fast. Inhofe, the ranking minority member of the Senate Environment and Public Works Committee, had his own take on the study, which also foresaw potentially higher prices for coal and natural gas. Inhofe focused the study's predictions of higher energy costs for households, and the consequences for industry. He also said the energy department analysts also based some assumptions on a "massive and unrealistic" boom in the construction of new nuclear plants (see statement here). Said Inhofe:

"Only in Washington could higher energy prices be characterized as not negatively impacting the U.S. economy. If Democrats have their way, Americans will pay significantly more at the pump, in their homes and in many cases, with their jobs, all to accomplish an undetectable impact on the climate."

The EDF's Cochran might have had Inhofe in mind when he declared the debate over:

“Anyone claiming the Lieberman-Warner bill will bring economic doom can now go sit with those still saying climate change is a hoax. It’s time for the Can’t-Do crowd to retire the scare tactics.”

But there's little evidence the two sides will see eye-to-eye anytime soon.

(Photo: Sen. James Inhofe's office)

Environmental groups have previously noted that reports on the economic footprint of efforts to combat global warming have failed to take into account the cost of not acting. Nathaniel Keohane, director of economic policy for Environmental Defense, reiterated that point in the group’s statement:

“It’s important to keep in mind that these forecasting models compare climate policy to a business-as-usual case that doesn’t take the costs of climate change into account. If we fail to take action on global warming, the future will be anything but business as usual. The most expensive policy by far is to do nothing at all.”

Elsewhere, the statistical arm of the U.S. Department of Energy has released data showing that federal subsidies and support to all forms of energy hit $16.6 billion in 2007, more than double the comparable figure from 1999. The document, from the Energy Information Administration, analyzed money going into direct federal spending,  tax incentives, research and development and such programs as the Tennessee Valley Authority and the Bonneville Power Administration.

It found that the percentage of the subsidies and support going to renewable energy rose from 17 percent of the total to 29 percent in 2007, as assistance for natural gas and petroleum declined. About 41 percent of all the subsidies were related to electricity production. The report also noted that despite the increased subsidies energy production in the United States stayed virtually unchanged (access report documents here).

Additionally, the report also found some major differences in the power produced per dollar spent on subsidies. For instance, it showed that by far the highest per-megawatt-hour subsidies went to coal-based synthetic fuels, wind and solar. Synfuels received nearly $30 per MW hour, while solar topped $24 and wind got more than $23. On the other end of the scale, coal, natural gas, biofuels, geothermal and hydroelectric all came in at under $1 per MW hour, while nuclear was at $1.59. The report noted that wholesale electricity costs averaged about $53 a MW hour in 2006.

The report noted, however, that the apparent disparities are driven by the amount of electricity generation across the fuel types. Baseload generation technologies such as coal and nuclear produce nearly 70 percent of the power, a fact that tended to reduce their subsidies and support per unit of electricity. The document also cautioned that it was only a snapshot of a particular time:

“Some electricity sources, such as nuclear, coal, oil, and natural gas, have received varying levels of subsidies and support in the past which may have aided them in reaching their current role in electricity production. The impacts of prior subsidies, some of which may no longer be in effect, are not measured in the current analysis.”

Meanwhile, an industry analysis showed energy efficiency improvements could cut the need for some, but not all, new generation over the next two decades. The study, released by the Electric Power Research Institute and the Edison Electric Institute, reported that electricity demand was expected to rise 30 percent by 2030 (see press statement here).

Cox said the manufacturers’ organization was not trying to dispute evidence that the planet is getting warmer. But he said officials run the risk of creating “economic havoc” in the country, especially in light of what other nations, such as China, are doing to move forward with fossil plants. Burning such fuels, such as coal and oil, produces carbon dioxide and other greenhouse pollutants.

“There’s a limit in how fast we can move our energy mix away from fossil fuels,” Cox said. He said there is already a virtual moratorium on the construction of new coal plants in the United States, a situation he said could easily produce power shortages in a few years.

Critics of the trade association’s economic analysis of global warming legislation have knocked it for, among other alleged shortcomings, looking only at the costs of reducing emissions but not the cost of inaction, potentially leading to unbridled climate change. But Cox, who said society must “wean” itself off of fossil fuels and toward other energy sources such as rewewables, said it will take a viable economy to be able to deal with the problem.

“If you shut down the economy,” Cox said, “that will take people’s minds off global warming quickly.”

 Another group that was apparently pleased with Johnson’s decision was the Heritage Foundation, a conservative think tank. The Los Angeles Times reported that official of the organization said it had spent months sending detailed legal analyses and memos to government officials noting the Supreme Court decision could have widespread impacts on businesses. An EPA spokesman, the paper reported, said Johnson had acted independently.