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Tuesday, August 18, 2009

The federal government is working to pass climate legislation that would combat global warming by reducing the nation’s emissions of greenhouse gases. One impact of the proposals to cap emissions would be an increase in the cost of fossil fuel energy and energy-related goods. Low and moderate income consumers would be hit harder by these increased costs because they spend a bigger share of their income on necessities like energy than wealthier households do.

The House bill, which passed in June, sets aside 15 percent of the value of emissions allowances (the permits that allow companies to pollute) to provide financial relief to low-income consumers through an energy refund. Here in Washington State, there are 1.2 million people living below 150 percent of poverty* who could potentially benefit from the energy refund.

However, CBO has found that over 60 percent of the relief the bill would distribute through utilities would go to businesses, rather than individual households. Businesses would likely retain this relief as added profit benefiting high income owners and shareholders rather than pass it on to consumers in the form of lower prices for their products. Thus the graph below shows that the House bill would benefit higher income households, as a percentage of income, more than those in the middle.

According to this paper by the DC-based Center on Budget and Policy Priorities, the Senate bill which has yet to be voted on, should build on the House approach by adopting the consumer provisions and redirecting resources provided through utility companies for their business and industrial customers instead to moderate income households.

*Calculated from American Fact Finder ACS 2007 table B17002

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