You can have a lot of fun playing games with assumptions. For instance, EPA managed to lose $1.22 trillion in the costs of the Waxman-Markey cap and trade bill to 2019. Here is how.

The budget put forward by President Obama contained a set of assumptions for GDP growth that would result from his administrations efforts to restart the economy. For 2010-2019 the average GDP growth rate is projected to be about 3.3% (for exact numbers see Table S-8 in the President’s Budget in PDF). By contrast, the EPA’s analysis of the Waxman-Markey Bill uses a GDP growth rate of 2.5% per year (see page 14 in the EPA analysis here in PDF).

Starting with the GDP figures in the President’s Budget and applying the different GDP growth rates leads to a difference in the size of the economy of $1.22 trillion between the President’s Budget projections and the EPA analysis of Waxman-Markey. Not a small number. (The 2010 GDP values start at different values as well, which could add another $400 billion to the total.)

A lower GDP means fewer emissions. It also means that needed efficiency gains are smaller to meet the same targets. For instance the EPA analysis assumes that the US will see energy intensity improve at a rate faster than the 2.5% per year GDP growth. To maintain the same energy demand figures this rate would have to increase to above 3.3% per year. Both of the values stretch credulity, but that is for another time. The point is that in addition to the “lost” GDP growth, there would be considerable extra costs for emissions reduction (determining how much would require re-running the EPA analysis, but it is safe to say that it would be a lot).

How much is $1.22 trillion? About $11,000 per U.S. household (assuming 115 million households). This number obly gets larger in the out years if GDP growth rates exceed the 2.5% assumed by EPA. Adding in the costs of addition emissions reductions would make this number considerably larger.

There are plenty of other hidden and acknowledged assumptions in the EPA analysis as well.