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Posted at 6:00 AM ET, 01/30/2008

Mitt pumps gas

By Michael Dobbs

Palm Beach, FL., Jan. 28, 2008.

The McCain energy bill "adds a thousand dollars a year to the cost of fuel and energy for the average Florida household. If you want that kind of liberal democrat course as a senator, then you can vote for him."

--Mitt Romney, West Palm Beach, FL., Jan. 28, 2008.

During the closing hours of the Florida primary, Mitt Romney pounded John McCain for legislation he has championed in the Senate, including the 2003 McCain-Lieberman energy bill, which was designed to cut back on carbon dioxide emissions in line with the Kyoto treaty. He claimed that the bill would cost the average Florida household of four around $1000 a year in increased energy costs.

Romney's $1000 estimate is not supported by the most authoritative government cost-benefit analysis of the original 2003 Climate Stewardship Act promoted by McCain, or subsequent energy bills that are still held up in Congress. And the GOP candidate conveniently omits to mention that the extra costs will be phased in over several decades.

The Facts

The Romney campaign provided some crude back-of-the-envelope calculations to support the $1,000 figure, based on current consumption patterns. They assume that the cap on carbon dioxide emissions proposed by Senators McCain and Lieberman back in 2003 would lead to a 50 cent per gallon increase in the cost of gasoline. In the case of Florida, that works out at $4.35 billion in increased annual gas costs, of $244 per person. According to these calculations, a family of four would have to pay just under $1000 for gas per year.

Romney's math may be more or less correct, but energy economists say that his logic is flawed. The McCain-Lieberman bill is one of several measures that propose a cap-and-trade system. According to a study by the Energy Information Administration, which is part of the Department of Energy, the original 2003 bill could lead a 40 cent per gallon increase in the price of gasoline by 2025. But the consumer would be protected from the full brunt of the increase by the introduction of fuel efficient technologies, and various rebates and consumer credits.

The Energy Information Administration estimated the average household's energy bill would rise under the original McCain-Lieberman bill by around $444 per year by 2025. See this study, page two. Under more recent versions of the legislation, the rise in energy costs would be lower, thanks to a more relaxed system of offsets. Under the cap-and-trade system, countries that produce high-levels of carbon emissions will be able to buy credits from countries that pollute less, reducing the burden on high polluters like the United States. An economic analysis of different bills is available here.

Dallas Burtraw, an economist with Resources for the Future, a Washington D.C. think tank that tracks various cap-and-trade proposals, said it is misleading to think of higher energy prices as a tax. Much of the revenue raised by the government from higher gas prices will be recycled back into the economy, directly benefiting consumers in the form of tax cuts or credits for energy-efficient technologies.

The Pinocchio Test

In order to reach his $1000 figure, Romney has assumed a static economy, in which everybody consumes the same amount of gas and fuel as they do today. He ignores the structural changes to the economy that are likely to take result from the promotion of fuel-efficient technologies at the expense of inefficient technologies. The Romney figure is at odds with analysis by top U.S. government economists.

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By Michael Dobbs  | January 30, 2008; 6:00 AM ET
Categories:  2 Pinocchios, Candidate Watch, Economy, Environment  
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Next: GOP Debate, Jan. 30, 2008.

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