Comments on the Lieberman-Warner Climate Security Act and Lieberman-Warner proposed legislation

Abstract

The Lieberman-Warner Climate Security Act (hereafter LW or “the Act”) aims to cover 87% of total U.S. greenhouse gas (GHG) emissions.2 It aims to reduce the emissions of those gases by 4% below year 2005 levels in 2012 and by 17% below 2005 levels in 2020. The Act would impose a cap-and-trade mechanism on most energy-using activities. The number of emissions allowances would be limited in order to keep total emissions in each year below the predetermined cap. The interaction of buyers and sellers of emissions allowances would determine a market price per ton of CO2 equivalent. The Act allows emitters to trade, save, and borrow allowances, so that the most cost-effective GHG emissions reductions can be made where and when they are available. The American Council for Capital Formation and the National Association of Manufacturers (ACCF/NAM) recently issued a report3 that projects some of the economic effects of implementing LW. Both effects on the U.S. economy and effects on individual states are projected. The analysis was conducted by Science Applications International Corporation using the National Energy Modeling System (NEMS). NEMS is a set of interlinked computer models that project energy supply and demand and key macroeconomic outcomes such as gross domestic product and employment. Many assumptions are required as inputs into NEMS. The assumptions driving the ACCF/NAM results were provided by ACCF and NAM. They were not chosen by the consultants who ran the model. Two sets of assumptions were used to generate two set of projections: a “Low Cost” scenario and a “High Cost” scenario.