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By Catharine Richert June 11, 2009

Pence claims that Obama said energy costs will skyrocket with a cap-and-trade plan

With Congress debating a cap-and-trade plan to reduce global warming, House Republicans are touting an alternative that they say will be less expensive.

Instead of regulating carbon dioxide by forcing power companies to buy and trade polluting credits, why not subsidize renewable fuel production and build new nuclear reactors, posited GOP Congressman Mike Pence on MSNBC's Morning Joe on June 10, 2009. Otherwise, he said, power companies will pass the cost of buying those credits on to the consumer, driving up the price of energy.
Pence wanted to make clear that he was not taking credit for that economic prediction.

"I don't think you need to look any further than the president himself ... who literally said [if] his cap-and-trade proposals were to pass, that utility rates, his words now, would, 'necessarily skyrocket,'" said Pence. He added that Democrat "John Dingle of Michigan and the Commerce Committee said people don't realize this is a tax, and a 'great big one.'"

It didn't take us long to find Barack Obama's original quote, which came from a videotaped interview he did with the San Francisco Chronicle editorial board very early in the presidential campaign, January 2008.

"Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket," Obama told the Chronicle . "Coal-powered plants, you know, natural gas, you name it, whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers."

While Obama was talking specifically about cap-and-trade, he was also making a larger point that the biggest challenge will be making sure voters understand why such a plan is necessary.

"The problem is can you get the American people to say this is really important," Obama said.

So, Pence is right. Obama did say that cap-and-trade would be costly to power plants and to consumers.

What's fuzzy, however, is how costly. PolitiFact has already looked into the issue and found that estimates vary. Republicans say each household will pay $3,100 a year, a figure they came up with based upon a Massachusetts Institute of Technology study that predicted a cap-and-trade proposal would generate $366 billion annually. On March 24, 2009, we gave the claim a Pants on Fire ruling because the GOP's calculation was badly flawed and because the GOP used the figure even though the author of the MIT study had told them it was wrong. And in an April 1 letter to House Republicans, authors of the MIT study said that the report was being misinterpreted; by their count, estimates hover closer to $340 per family.

Congress has its own estimate: A 15 percent cut in carbon emissions would cost the average household about $1,600, according to a March 12, 2009, Congressional Budget Office testimony.

It is worth noting that the climate debate has changed substantially since Obama sat down with the Chronicle nearly a year and a half ago. Legislators have opted to give 85 percent of the polluting permits away for free instead of putting them up for sale, as Obama pledged to do on the campaign trail. In theory, this approach should reduce costs to consumers. Furthermore, revenue from auctioned permits will help consumers pay for increased energy prices, according to Obama's first budget.

Despite those potential cost cuts, there's still little disagreement that consumers will pay for cap-and-trade, whether it's $3,100 a year or $340. Because that hasn't changed since Obama first said that utility rates would "necessarily skyrocket," and because Pence got Obama's words just right, we give Pence a True.

Featured Fact-check

Our Sources

House Republicans, Mike Pence comments on GOP energy alternative , accessed June 11, 2009

The San Francisco Chronicle, Obama's comments on cap-and-trade costs , accessed June 11, 2009

Obama's climate change campaign promise , accessed June 11, 2009

The New York Times, Climate Bill Clears Hurdle, but Others Remain , by John M. Broder, May 21, 2009

MIT Joint Program on the Science and Policy of Global Climate Change, Assessment of U.S. Cap-and-Trade Proposals , April 2007, accessed June 11, 2009

MIT letter to House Republicans, accessed June 11, 2009

Congressional Budget Office, March 12 testimony to the Subcommittee on Income Security and Family Support.


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