NEW YORK (CNNMoney) — President Obama announced an ambitious new climate agenda that aims to cut carbon dioxide emissions 30% by 2030. But critics say the move will hike energy bills.
“The president’s plan would indeed cause a surge in electricity bills,” House Speaker John Boehner said Monday morning.
For most states, the easiest and cheapest way to get these reductions will be to close old coal-fired power plants which generally produce the cheapest — and dirtiest — electricity.
Experts say the move won’t significantly raise electricity prices for most people.
Coal, which is used to produce about 40% of the nation’s electricity, has always been a cheap source of power. But it’s not as cheap as it once was, and at the same time, the prices of wind and natural gas have fallen.
In fact, new, more efficient coal plants now under construction are expected to produce power for just under 10 cents a kilowatt hour, according to the Energy Information Agency. That will be 30% more expensive than newly-built plants that use natural gas and 20% more than new wind farms, even without subsidies.
Additionally, producing power only accounts for about half of a household’s electricity bill. Sending it over the grid accounts for the rest. So even if electricity production prices do rise, the increase in people’s monthly power bills will be muted.
People in some states will see price increases, particularly in places that currently have lots of cheap coal power plants, such as Indiana, Wyoming and West Virginia.
But nationwide, experts describe the impact of the policy as moderate, modest or marginal.
“Electricity prices will go up,” said Robert Stavins, director of Harvard’s Environmental Economics Program. “But in most people’s budgets they probably won’t even notice it. I would characterize it as modest.”
When a more ambitious climate proposal came out in 2009, the EIA said power prices under most scenarios could rise between 10% and 30%.
Now, “other things being equal, costs should be lesser,” said Prajit Ghosh, a senior North American power analyst at the energy consulting firm Wood Mackenzie. He cites cheaper natural gas and better efficiency, like LED light bulbs.
The average U.S. household spent $107 a month on electricity in 2012, according to EIA.
In addition to cutting greenhouse gases, the proposal will give the United States more leverage to demand emission cuts from other countries.
Other big polluting nations like China and India are loathe to take meaningful action unless the Untied States leads first. The United States’ actions alone will barely put a dent in global emissions, since so much pollution comes from the developing world.
“In terms of getting China and India to the negotiating table and having some credibility, this is a major step in the right direction,” said Christoper Knittel, an energy economics professor at the Massachusetts Institute of Technology.
By Steve Hargreaves