ICF Study Shows Latest Revision to Bill Brings Down Allowance Prices by More Than One Third
ICF International (NASDAQ:ICFI) announced today that it has conducted an analysis of the revised release of the Lieberman-Warner Climate Bill with the Boxer Amendments (S. 3036). The analysis indicates that the revised bill has the potential to reduce future carbon dioxide (CO2) allowance prices by approximately one third compared to the earlier version. These and other key findings are reported in an update to ICF’s U.S. Emission and Fuel Markets Outlook that examines U.S. energy market dynamics under proposed air regulations and alternative greenhouse gas emission control programs, including the multi-sector legislation proposed by Senators Joe Lieberman (I-Conn.) and John Warner (R-Va.).
While the bill is expected to face careful scrutiny in the U.S. Senate, where debate started on Monday, ICF believes that, whether it passes or not, the bill has significantly advanced the debate on climate change legislation. Comparing the costs associated with the latest version of the bill to those in the earlier version highlights the impact of offsets and the role that they may serve as a key cost containment measure. The cost of any proposed climate change legislation is expected to be a crucial factor in eventual U.S. legislation. With both presidential candidates supporting greenhouse gas legislation, ICF expects a mandatory emission reduction regime at the federal level to take effect in the next five to seven years.
Two weeks ago, Senators Lieberman and Warner revised their proposal to allow for the use of international offset projects—including a carve-out for forestry—of up to 15 percent of the required emission cap, in addition to the 15 percent offsets from domestic U.S. sources that were previously allowed.
“By opening up the total amount of offsets allowed from 15 percent to 30 percent, the bill’s sponsors have recognized the fundamental importance of offsets as a bridge compliance mechanism until the technologies are developed that allow a transition to a low-carbon future,” said Steve Fine, vice president at ICF. “By doubling the offset provision, they have brought down forecasted allowance prices by more than one third.”
ICF projects that the majority of reductions required by S. 3036 and other proposed bills will be achieved by the power sector. These reductions would come at a time when the U.S. electric sector is going to require 300 to 500 GW of new generating capacity in the next 25 years to meet growing demand.
