Capping Economic Growth: Trading Tax Dollars for High Energy Costs
Rory Cooper /
Senate Rejected an Economic Disaster
- Bleak Cap and Trade Future: EPA Administrator Lisa Jackson said she planned to move the country toward a “carbon constrained future.” Any scheme, whether cap-and-trade or a carbon tax, that raises the price on carbon dioxide will raise energy costs while generating enormous sums of tax revenue for the government that American families and workers will ultimately pay for. They will be left with high energy costs, high prices, and low incomes.
- Lieberman-Warner: Last year, the Senate rejected cap-and-tax legislation that would have capped CO2 emissions 70% below 2005 levels by 2050. A Heritage analysis of that bill found startling economic impacts.
- 600 Hurricanes Couldn’t Cause This Much Economic Damage: In the first 20 years alone, the Lieberman-Warner bill would have resulted in aggregate real GDP losses (that is, adjusted for inflation) of nearly $5 trillion—for comparison, this is equivalent to the economic damage done by over 600 hurricanes.
- The Bottom Line: In the first 20 years, the Lieberman-Warner bill would have destroyed over 900,000 jobs, caused nearly 3 million job losses in the manufacturing sector by 2029, caused some manufacturing sectors (e.g., paper, chemicals, and plastics) to shed over 50% of their jobs and generated up to $300 billion per year in government revenue while reducing income by nearly $5 trillion.
Now a New, Costlier Version
- Old Assumption: Analysis of the Lieberman-Warner bill assumed 30% (15% domestic, 15% foreign) of the emissions cuts could be met by allowing industry to purchase carbon credit offsets from international trading and domestic non-energy reductions such as cleaner farming technologies or planting forests. Such offsets are really ways for utilities and manufacturers to comply with the caps without actually reducing emissions.
- New Reality: Reports suggest that the new House bill would not allow for such offsets even though the emission caps might be much more aggressive.
- More Expensive: With this approach, this year’s incarnation would be much more costly than the bill rejected by the U.S. Senate last year. Such a costly approach is bad under normal circumstances and even worse during a recession.
- Scholars Agree: Scholars from Clemson University recently did a review of eight different Lieberman-Warner analyses and they showed that the conclusions drawn by The Heritage Foundation fit in the mainstream of economic analysis.