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Angie Drobnic Holan
By Angie Drobnic Holan November 17, 2009
By Catharine Richert November 17, 2009

Obama said cap and trade would increase electricity rates

In her new book, Going Rogue , Sarah Palin said President Barack Obama's support for a cap and trade plan was "misguided."

"The president has already admitted that the policy he seeks will cause our electricity bills to 'skyrocket.' Sadly, those hit hardest will be those who are already struggling to make ends meet," she wrote.

Here, we're looking at Obama's comments on electricity bills.

First, though, here's a quick summary of cap and trade for those who aren't famliar with it: To slow climate change, the government would set a cap on carbon dioxide and other greenhouse gas emissions. To comply, companies such as electric utilities must either upgrade to cleaner technologies or buy credits — also known as allowances — to continue polluting. Companies can buy and sell the credits as necessary to conduct their business.

We were familiar with Obama's original quote from his campaign for president. It came from a videotaped interview he did with the San Francisco Chronicle editorial board very early in the campaign in 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."

Obama also said the biggest challenge would 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.

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Obama was talking in general about cap and trade, but there is now a specific bill making its way through Congress, written by Reps. Henry Waxman and Edward Markey, Democrats from California and Massachusetts, respectively. Their goal is to lower carbon pollution by 17 percent by 2020 and 83 percent by 2050. Under their plan, most pollution permits initially would be given out for free. But eventually, companies would have to buy those permits from the government. 

The latest version of the bill includes a number of measures to offset higher utility bills for consumers. Revenue from the permits would be passed to consumers through rebates or expanded efficiency programs, and an additional 15 percent of the revenue would go directly to low-income consumers. 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.

So how much would rates go up for consumers? It's hard to say.

There has been much debate about the costs, and it's been difficult to come up with a reliable number because the bills have been changing as they move through the House and the Senate. Republicans have cited numbers as high as $3,000 per year, a claim that when it was combined with a falsehood on health care, earned our Pants on Fire rating. Recent estimates by the Congressional Budget Office and the Environmental Protection Agency are much lower — between $80 and $340 a year, depending on income.

So the climate debate has changed substantially since Obama sat down with the Chronicle nearly two years ago.

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 Palin got Obama's words right, we give Palin a True.

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Obama said cap and trade would increase electricity rates

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