A carbon-emissions limit will raise energy prices unevenly

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Kevin Bullis at Technology Review (published by MIT) writes on the inequalities of cap-and-trade plans and increased prices for consumers and producers:

The budget includes $78.7 billion in projected revenues from the cap-and-trade system in its first year, 2012, and $525.7 billion total by 2019. According to Point Carbon, an energy-market analysis firm based in Olso, Norway, these numbers are based on the assumption that credits for a ton of carbon dioxide will sell for $13.70 in 2012 and $16.50 by 2020. These estimates are in line with carbon credits issued in Europe, says Veronique Bugnion, a managing director at Point Carbon. The 2012 price for carbon dioxide emissions will increase gasoline prices by 6 percent compared to current prices, she says. Average electricity prices will increase by 6.8 percent–perhaps more. According to calculations by Gilbert Metcalf, an economist at Tufts University, the average electricity price increase would be 9.7 percent by 2012 and 11.7 percent by 2020.

What’s more, the impact of the cap-and-trade system will vary by state. Electricity prices will rise more in states that rely heavily on coal, such as North Dakota, than in states that rely on sources of electricity that produce little carbon dioxide. According to Bugnion, prices could increase by 19.2 percent in North Dakota by 2012 but only 2.6 percent in Washington State, which relies heavily on hydroelectric power, over the same period.