A just released Charles Rivers Associates International and Coalition for Affordable American Energy report demonstrates that the proposed climate provisions within the Obama Administration's proposed FY 2010 budget will have profound negative impacts on energy availability, energy costs, and overal economic health of the country.

The Coalition for Affordable American Energy (CAAE) is made up of over 200 American businesses, industry associations, and Chambers of Commerce. Specifically, the report notes,

Impact on the Economy of the Climate Provision in the Obama Administration FY 2010 Budget Proposal

•  The planned carbon caps will reduce carbon emissions by restricting the use of conventional energy. CO₂ prices are expected to raise from $29/tonne in 2015 to as high as $116/tonne in 2030.
• RisingCO₂ costs will force energy costs to rise precipitously. Natural gas costs are forecast to rise by 39% ($4.70) by 2020 and then by 56% ($7.20 per MMBtu) by 2025 relative to the EIAs Annual Energy Outlook reference case. Motor fuels will rise by 48 cents per gallon in 2020 and then by 74 cents per gallon relative to baseline levels. Electricity costs will increase by 27% (3.6 cents/kWh) in 2020 and by 44% (5.8 cents/kWh) in 2025.
• Net job losses -- inclusive of those jobs created by increased funding of renewable energy -- will rise to 800,000 in 2015, then more than double by 2020, to 1.9 million, and rocket to approximately 3.2 million by 2025.
• Annual household purchasing power will decline rapidly by $1,020 in 2015, by $1,381 in 2020, and then plummet to $2,127 by 2030 (after accounting for promised rebates from the sale of carbon credits).

The report continues by noting that the U.S. energy sector will suffer substantial setbacks as it is reorganized to meet legislative and regulatory requirements.

• Natural gas demand will expand by 3.0 Tcf relative to baseline levels, driving costs of gas up by 56% (7.20/MMBtu) by 2025. Demand will then drop to 1.5 Tcf by 2030 to account for increasingly stringent emissions caps.
• Domestic gas production will be heavily impacted by increased costs  and strict regulations. Therefore, growing demand will need to be primarily met by a 160% (2.0 Tcf) rise in gas imports. 
• Increased domestic costs will place U.S.-based refineries at a competitive disadvantage and energy production will be driven offshore.

Impact on the Economy of the Climate Provision in the Obama Administration's FY 2010 Budget Proposal

Readers can download the full report on the U.S. Chamber of Commerce website.

GAO Report on DOE Restructuring of FutureGenA February 2009 GAO report on the Department of Energy, FutureGen project describes how the decision to restructure the project in 2008 was based on inaccurate cost estimates.

While the initial $950 million estimated price was based in constant 2004 dollars, the later $1.8 billion estimate was a life cycle cost out to 2017 with inflation accounted for

If the same estimate process were used, the increased cost of the project would be $1.3 billion (not $1.8 billion), an increase of 370 million (+39%). Given the rising costs of steel, cement, labor, and the faltering economic conditions, the 39% price increase appears far more reasonable.

From the "Results in Brief" section of the report,

DOE did not use sufficient information to support its decision to restructure FutureGen. According to our recent work and best practices, a decision to terminate or significantly restructure an ongoing program should be informed by timely and sufficient information on the costs, benefits, and risks of such a decision. DOE did not prepare a comprehensive analysis of the costs, benefits, and risks of its decision to replace the original FutureGen with the restructured program. DOE made its decision based, in large part, on its conclusion that construction and material costs for the original program would continue escalating substantially in the indefinite future and that life-cycle costs were likely to double. However, according to economic forecasting organizations, such as DOE’s Energy Information Administration, significant cost escalations for building power plants, in general, do not typically continue in the long run. Also, DOE reached this conclusion by comparing its cost estimate for the original FutureGen ($950 million in constant 2004 dollars) with the Alliance’s 2006 estimated life-cycle costs for the program through 2017 (about $1.8 billion, considering inflation). In explaining his decision to restructure FutureGen, the Secretary of Energy noted that the projected program cost had “nearly doubled,” from $950 million to $1.8 billion. However, that assertion did not take into account a major difference between the two estimates: one was based on constant dollars and the other on inflated dollars. Our analysis indicates that the Alliance’s estimate in constant 2005 dollars would be approximately $1.3 billion—an increase of about $370 million, or about 39 percent, over DOE’s estimate, not a near doubling of costs. As DOE’s restructuring decision was not based on a comprehensive analysis of the associated costs, benefits, and risks, DOE has no assurance that the restructured program is the best option to accomplish the goal of promoting the accelerated and widespread commercial advancement of CCS. In contrast to the restructuring decision, FE identified and analyzed 13 other options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement. While FE did not consider all of these options to be viable, it either recommended or noted several of them for consideration, each with potential savings from $30 million to $55 million.

Canadian Centre for Policy Studies: Eight Arguments against a Carbon TaxIn this Canadian Centre for Policy Studies report (released Sept. 2008), David Murrell reviews a list of reasons why he believes a proposed carbon tax would be damaging to the Canadian economy.

After describing the basics of the proposed carbon tax, Murrell provides eight reasons he believes the carbon tax will not achieve its stated goals:

1. A carbon tax ignores the macroeconomic reality of a possible recession/stagflation
2. In a world of high energy prices, a carbon tax is not necessary for energy-use
   reduction
3. A domestic carbon tax in Canada will be inconsistent with emerging international
   efforts to reduce GHG emissions
4. The plan lacks coherence
5. The carbon tax will further disadvantage Canadian exporters (both manufacturing
   and non-manufacturing)
6. The carbon tax will not be a substitute for cap-and-trade, but an addition to it
7. A carbon tax will discriminate against energy producing provinces, and rural areas
8. The carbon tax plan as proposed by the Liberal Party is really two plans in one: a tax
   on carbon consumption and a plan to make the federal personal income tax more
   progressive