Minimizing the Pain of
Federal Climate Legislation
Jennifer Kefer
Senior Climate Advisor
Center on Budget and Policy Priorities
www.cbpp.org
Minimizing the Pain
• Economic effects of climate change legislation
• Guiding principles for consumer relief
• Consumer relief in American Clean Energy and Security
Act (HR 2454)
• Next steps
Climate Legislation Has Costs
• Effective legislation will increase the cost of basic goods
• Low-income households will be disproportionately
burdened by this increase
• Well-designed legislation can offset these costs
Gross Costs as Share of
After-Tax Income
Source: Congressional Budget Office, based on 2020 program provisions applied
to 2010 income levels
High-Income Households Fare
Better than Middle-Income
Households
Net Impact of House Bill as a Percentage of After-Tax Income,
by Income Group
Source: Congressional Budget Office, based on 2020 program provisions
applied to 2010 income levels
Guiding Principles for
Consumer Relief
1. Protect the most vulnerable households
2. Use mechanisms that reach all or nearly all eligible
households
3. Minimize red tape
4. Preserve economic incentives to reduce energy use
efficiently
5. Do not focus solely on utility bills
Do Not Focus Solely on
Utility Bills
Distribution of Cost Increase by Product for Bottom Quintile
Source: CBPP calculations based on Consumer Expenditure Survey and CBO
methodology
Direct Consumer Assistance
in House Bill
Proceeds from the sale of 15 percent of the allowances
offset higher costs for low-income households through two
delivery mechanisms:
1. Energy Rebate
2. Earned Income Tax Credit Expansion for Childless
Workers
How Does the House Bill
Measure Up?
1. Protect the most vulnerable households
√ Fully protects average low-income households
– Insufficient relief for those with above-average costs
– Limited protection for moderate-income households
2. Reach all or nearly all eligible households
√ Multiple mechanisms increase enrollment
3. Minimize red tape
√ Relies on existing delivery mechanisms
How Does the House Bill
Measure Up?
4. Do not focus solely on utility bills
√ Includes direct consumer relief
– Allocates a large portion of allowances to utilities
5. Preserve economic incentives
– Utility relief blunts price signal
√ Size of rebate not tied to energy consumption
How to Improve
in the Senate
• Preserve 15 percent for consumer relief.
• Provide designated funding for the Low-Income
Home Energy Assistance Program (LIHEAP).
• Provide administrative funds to help states with the
costs of operating the program.
• Redirect a portion of the allocation to LDC business
customers and extend well-targeted direct consumer relief
to moderate-income families.
High-Income Households Fare Better
than Middle-Income Households
Net Impact of House Bill as a Percentage of After-Tax Income,
by Income Group
Source: Congressional Budget Office, based on 2020 program provisions
applied to 2010 income levels
Next Steps
• House passage (June 2009)
• Environment and Public Works committee
• Finance Committee
• Copenhagen
Jennifer Kefer
Senior Climate Advisor
Center on Budget and Policy Priorities
Phone: 202-408-1080
E-mail: kefer@cbpp.org
www.cbpp.org