White House Official Boosts Cap and Trade Revenue Estimate

White House Official Boosts Cap and Trade Revenue Estimate. By Corey Boles and Martin Vaughan
Mar 18, 2009

WASHINGTON -- A top White House economic adviser told Senate staff a proposed cap and trade system could raise "two-to-three times" the administration's existing $646 billion revenue estimate, according to five people at the meeting.

This could mean the cap and trade system could actually generate between roughly $1.3 trillion and $1.9 trillion between fiscal years 2012 and 2019.

Jason Furman, deputy director of the National Economic Council, offered the estimate at a Feb. 26 meeting on Capitol Hill with a bipartisan group of staffers, most of whom are attached to the Senate Finance Committee, according to five Senate aides who attended the meeting. They spoke on condition they wouldn't be identified by name.

The meeting was held in the Finance Committee's hearing room in the Dirksen Office Building, the day the administration released its budget framework. According to those who were present, there were between 50 and 60 staff of both parties, including some staff of House lawmakers.

A White House official wouldn't confirm Mr. Furman's comments, but said excess revenues from any cap and trade bill that passes Congress will be used to compensate vulnerable families, communities and businesses.

The administration has said the proposal could raise more revenue than its current estimate, but hasn't specified how much more.

In its budget, the administration said it expects a cap and trade system would raise $645.7 billion in the eight years to fiscal year 2019.

The cap and trade proposal is aimed at lowering carbon emissions into the atmosphere by companies by requiring them to purchase credits for the level of pollution they contribute.

Mr. Furman told the Senate meeting the administration expected to generate considerably more than that estimate. According to those present, he was initially reluctant to quantify how much more in revenues the cap and trade system could generate.

Only after being pushed to do so, did Mr. Furman provide a revised range, these people said.

The public forecast was based on the carbon-dioxide credits that would be issued through the new system being priced at $20 each. Each credit allows for one ton of carbon dioxide to be emitted.

According to the budget, the administration would use $120 billion of the scheme's revenues to fund clean energy technology. The balance of $525.7 billion would pay for a tax cut targeted to middle class Americans, a centerpiece of the Obama budget.

The Obama administration has said its Making Work Pay tax credit will compensate most working Americans for the likely rise in utility costs they could expect to face after a cap and trade system goes into place. That tax credit is worth $800 per year to a household of two earners with combined annual income below $250,000.

A 2007 study from the Massachusetts Institute of Technology found various cap-and-trade scenarios would raise between $130 billion and $370 billion per year by 2015.

One of the largest targets of cap and trade will be utility companies - especially those that burn coal and are among the worst polluters. It is widely seen that these companies would pass increased costs they incur on to their customers.

A footnote in the budget framework released by the administration in February stated that "all additional net proceeds will be used to further compensate the public."

This would imply the administration intends to increase support for people facing higher costs as a result of the cap and trade scheme.

Last week, Sen. Ron Wyden (D., Ore.), a member of the finance committee, said he had been informed by a White House official that the administration planned to do more to provide financial assistance to low-income households that would be most adversely impacted by higher utility costs.

Sen. Wyden said details of how this assistance would be structured were still being worked out.