Center for American Progress

Transitioning to a Clean-Energy Economy Will Save Consumers Money, Especially in Low-Income Households

Transitioning to a Clean-Energy Economy Will Save Consumers Money, Especially in Low-Income Households

Learn about how transitioning to a clean energy economy will cost Americans only pennies a day while reducing household energy costs.

A woman pumps gas to the right of a sign for self-serve unleaded in Lexington, Massachusetts. (AP/Lisa Poole)
A woman pumps gas to the right of a sign for self-serve unleaded in Lexington, Massachusetts. (AP/Lisa Poole)

One of the most common and most compelling arguments against comprehensive climate and energy legislation is that it could raise consumer electricity prices. The reality is that the American Clean Energy and Security Act recently passed by the House would raise prices by only about the cost of a postage stamp a day in the short term, and lower them in the long term.

And doing nothing could devastate consumers. Our dependence on volatile fossil fuels leaves consumers at the mercy of a market that offers few choices. Who can avoid paying $4 or more for gasoline when there are few transit or alternative fuel options? How can small businesses survive power outages when there are no alternative electricity options, or when the grid is not “smart” enough to avoid the outages in the first place? How can renters make it through cold winters when heating oil costs go through the roof, if no money has been made available for energy efficiency retrofits on their homes?

According to Paul Krugman—New York Times columnist, economist, and winner of the Nobel Prize—“it’s important to understand that just as denials that climate change is happening are junk science, predictions of economic disaster if we try to do anything about climate change are junk economics.”

Clean-energy legislation would cost “less than a postage stamp a day”

The American Clean Energy and Security Act (H.R. 2454) is Congress’ first serious attempt at clean-energy legislation that includes a cap-and-trade program. Recent estimates suggest that it will “cost households less than a postage stamp a day” as it paves way for our transition to a low-carbon economy.

  • An initial estimate by the Environmental Protection Agency found that H.R. 2454 would only cost consumers $98 to $140 a year.
  • Another study by the Congressional Budget Office suggests that the net annual economy-wide cost of the legislation would only be about $175 per household by the year 2020.
  • H.R. 2454 will direct 15 percent of revenue raised from the sale of allowances to low-income consumers to help households cope with any increase in their energy costs.
  • H.R. 2454 also includes free allowances to gas and electric companies with the stipulation that those funds are used to provide cost relief to their customers.

Investing in clean energy will save Americans money in the long term

  • Savings: The American Council for an Energy-Efficient Economy issued an analysis in July 2009 estimating that H.R. 2454 could save American consumers approximately $750 per household by 2020 and $3,900 per household by 2030.
  • Efficiency: A recent report issued by the Political Economy Research Institute at the University of Massachusetts and the Center for American Progress finds that as little as $2,500 invested in energy efficiency retrofits could lead to cost savings to consumers of 30 percent annually on average.
  • Renewable electricity: According to the Union of Concerned Scientists, a renewable electricity standard to generate 25 percent of the nation’s electricity from renewable energies by 2025 would create nearly $65 billion of consumer savings in electricity costs by 2025.
  • Green Bank: The creation of a Green Bank to help fund the transition to a clean-energy economy could provide favorable financing of renewable resources and allow investors a return on their capital. This will help keep costs low for consumers while making renewable energy competitive with current electricity prices.

More from the Congressional Budget Office

The most recent CBO report on the American Clean Energy and Security Act shows that:

  • Households that fall into the lowest quintile—those making less than $20,292 a year—would see a net benefit of approximately $40 per year.
  • The highest quintile—those making over $100,000 a year—would see a net cost of $245 per year.
  • Overall net costs for all households would average 0.2 percent of the households’ after-tax income.

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