By Joby Warrick
Washington Post Staff Writer
Wednesday, March 4, 1998; Page A01

If implemented, the international global warming treaty the United States signed in Kyoto, Japan, could add $70 to $110 to the average American household's annual energy bill over the next 15 years, according to a long-awaited White House economic analysis due to be released today.

In the first official assessment of the cost of December's historic global warming treaty, the Clinton administration forecasts that the agreement would result in, at most, "modest" price hikes for gasoline and other fuels as America's share of the international tab for cutting greenhouse gas emissions. And those increases could be offset completely by lower electricity bills if Congress passes laws to allow utility companies to compete, administration officials said.

But some economists were skeptical, and others who basically support the White House estimates point out that they are based on several optimistic assumptions, including cooperation by developing countries and international acceptance of market-based trading mechanisms that would drastically lower the cost of cutting emissions.

"It's true that the impact can be relatively small -- if this is done in the smartest possible way," said Robert Stavins, an economist and professor of public policy at Harvard University's John F. Kennedy School of Government. "But if we don't do it that way it will cost 10 times what the administration is saying."

At the conclusion of the 10-day Kyoto summit, 159 nations agreed to the first legally binding international protocol to fight global warming. The treaty calls for reducing "greenhouse gas" emissions, which are produced mostly from burning fossil fuels such as oil, by an average of 5 percent below what they were in 1990.

The accord has been strongly criticized by some major industries, members of Congress and others who fear it could cripple the economy and require the United States to make greater sacrifices than the rest of the world. As a result, the Clinton administration has said it would not even submit the agreement to the Senate for approval until it won participation by developing countries and took other steps to build support, including releasing an accurate assessment of the treaty's economic impact.

The new economic predictions are scheduled to be unveiled today by Janet Yellen, chairman of the White House Council of Economic Advisers, in testimony before the House Commerce Committee. Based on a months-long study using internationally respected economic-forecasting models, Yellen will project a net increase in the national annual energy costs of $7 billion to $12 billion by 2012, the deadline set in Kyoto for industrialized countries to achieve sharp cuts in emissions.

For American consumers, that translates to about a 4- to 6-cent per gallon hike at the gasoline pump, as well as comparable increases of 3 percent to 5 percent for electricity, fuel oil and natural gas, according to White House sources familiar with the analysis.

The estimates were described as "very conservative" by administration sources, who said that projected increase could easily turn into a wash or even a modest drop in energy prices. For example, if the administration's plans for restructuring the utility industry are approved by Congress, utility bills could fall by an average $90 per household by 2012, according to White House estimates.

Any increase in energy prices would amount to a small premium for what administration officials called an "insurance policy" against a potentially serious environmental threat: Many scientists say even greater economic disruption is likely if levels of heat-trapping greenhouse gases continue to rise. The resulting increased temperatures could cause widespread flooding, crop failures and other devastating effects, they say.

"The bottom line is, we face potentially catastrophic costs if we do nothing," said a White House official who spoke on the condition of anonymity. "But if we do it right, we can insure against those for a very modest premium."

But the official acknowledged "enormous uncertainties" in predicting future economic impacts, and noted that several key assumptions are based on the willingness of other countries to accept a U.S. proposal to cooperate with the West in achieving cuts in greenhouse gases -- a prospect that appeared highly uncertain during the Kyoto talks.

For example, the White House analysis assumes that industrial countries will be able to trade emissions credits under an international framework that allows industries to find the cheapest ways to cut emissions of carbon dioxide and other gases. Such a mechanism -- which Kyoto negotiators agreed to in principle -- could slash the cost of compliance by up to 50 percent.

More than half of the remaining costs would be eliminated if a similar trading scheme is established with "key" developing countries, particularly China, India and Brazil. But those countries flatly rejected the idea during the tumultuous negotiations in Japan.

Some economists who have been critical of the Kyoto accord disputed the White House projections as wildly optimistic.

"It strikes me that the increase in prices are impossibly low," said W. David Montgomery, vice president of Charles River Associates, an economic consulting firm. He said the administration's assessment "shows a great deal of optimism on what it can accomplish in negotiations" with developing countries over the next few years.