Capping Economic Growth: Trading Tax Dollars for High Energy Costs
Senate Rejected an Economic
- 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
- 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 com-parison, this is
equivalent to the economic damage done by over 600 hurricanes.
The Bottom Line: In the first 20 years, Lieberman-Warner
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
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..
And With Little Impact
- Minor Effect: Even if Congress enacted and implemented a
bill to constrain carbon, its impact on global temperatures would
be minor according to temperature calculation based on the EPA's
estimate of CO2 levels and the Intergovernmental Panel on Climate
Change's sensitivity estimates.
- By 2100: By these calculations, the Lieberman-Warner
bill would result in a drop in global temperature of only 0.1 to
0.2 degrees Celsius at the end of the century.
- The Ultimate Outsourcing: Adopting a cap and trade
scheme for the U.S. alone would allow countries like China to
continue building their manufacturing base at our expense, and hurt
global trade through unfair competition.
- Lessons Learned: The U.S. should learn from the EU's
long, unsuccessful history when it comes to emissions trading
schemes and not follow down the same path of failure.
More Energy and Lower Prices
Check out Heritage ideas for how to provide more energy at lower
prices at: http://blog.heritage.org/2009/03/03/capping-economic-growth-trading-tax-dollars-for-high-energy-costs.