Cutting greenhouse-gas emissions to near-zero in coming decades will come with a cost that will be borne by all U.S. households and that could cause shifts in certain industry sectors in Utah, according to Anne E. Smith, vice president of consulting firm CRA International.
Speaking at the Economic Development Corp. of Utah's annual meeting on Thursday, Smith said companies emitting greenhouse gases will get involved in "cap and trade" requirements implemented by government entities. The companies also may have to invest heavily in technologies to reduce emissions. Those costs will be passed on to consumers, she said.
Cap-and-trade rules would impose a limit on overall emissions, and emitters would be allowed to buy and sell any excess "allowances" of emissions that they and other companies had. The idea is that high prices to acquire allowances from lower-emitting companies would serve as an incentive to curb emissions, rather than simply buying allowances from other emitters.
But households would take a hit initially in higher energy prices. "That will always happen with any cap-and-trade of greenhouse gas," Smith said.
Higher emissions-related costs for companies will settle into the economy, boosting the costs of goods and services, with households again taking the financial hit.
"I want to be clear: It doesn't mean we have to have a depression or a recession in order to have (emissions) reductions, but there is a cost," Smith said.
While a cap-and-trade bill sponsored by Sen. Joe Lieberman, I-Conn., and Sen. John Warner, R-Va., is "dead," she said, it could be a model for future legislation on greenhouse-gas emissions.
Had that bill been enacted, the average price of electricity in the country would have ballooned 24 percent by 2020, with the rise being 27 percent in Western states. Overall household costs would have jumped $2,000 a year by 2020, with the figure being $1,900 in Western states, she said.
If stringent caps are in place by 2020, Utah's coal operations could close entirely, Smith said. The state has a large potential for carbon sequestration storing gases in the ground instead of releasing them in the air but that technology may not be commercially available, and development of renewable resources could bypass sequestration efforts entirely.
Utah's electricity rates could remain relatively low because of abundant supplies of natural gas and potential renewable resources, but the state could be at an economic disadvantage if ethanol becomes a prominent transportation fuel, she said. Utah would be at an advantage if plug-in hybrid vehicles or hydrogen vehicles become the norm.
Smith urged Utahns to prepare by becoming more energy-efficient and assessing the need for transmission lines to access solar resources in states to the south. She also recommended focusing economic development on sectors that use a lot of electricity taking advantage of Utah's low-cost power and determining transportation fuel alternatives that are best for the state.Even with the best preparation, having greenhouse gas caps "is going to be costly," Smith said. "Nothing I've said will remove the costs. It just positions you differently in this set of markets (coal, electricity and transportation). It's going to affect everyone."