June 24, 2009 | Factsheet on
The High Cost of Cap and Trade: Why the EPA and CBO Are Wrong
The EPA Is Wrong
- False Assumptions: Proponents of cap and trade point to
the low cost estimates by the EPA and CBO as a reason to pass
Waxman-Markey. The EPA underestimates that the bill would cost
households an additional $140 a year.
- Based on Consumption: The EPA's numbers are based on
consumption changes, which are typically less than income changes,
as families respond to income losses by saving less.
- Uses Discounting: Discounting is a reasonable approach
for comparing costs and benefits that occur at widely different
times. However, costs of climate change rarely use a discounted
rate this high. Without discounting, the impact per household is
$1,288 in 2050. Adjusting household size to reflect a family of
four raises this cost to over $1,900.
Assumes Rebates: The EPA assumes all the allowance
proceeds will be rebated directly to consumers. This clearly isn't
the case, since most of the allowances have been promised to
- No New Taxes?The loss that the EPA calculates doesn't
include the cost of the energy tax to consumers, since the EPA
assumes that all of the money is rebated. The cost of the energy
tax is actually $4,600 per family of four in 2035.
The CBO Is Wrong
- False Assumptions: CBO underestimates that the bill
would cost households $175 in 2020. They assume that the carbon tax
isn't a tax if the government spends the money. When have Americans
ever seen all of a tax returned to them? It's like suggesting your
tax rebate will be as large as the amount taken from your paycheck
- Numbers Don't Add Up: The CBO's allowance cost numbers
don't add up. They say the allowance price will be $28. Since there
are 5.056 billion tons of CO2 equivalent in the cap that year, that
implies a $141 billion gross cost. They list $91.4 billion.
- Hard to Believe: In the CBO's June 5 analysis, they
projected allowance revenues of $119.7 billion, $129.7 billion,
$136 billion, $145.6 billion and $152.9 billion for the years
2015-2019. It's hard to believe that the next number in that series
would be $91.4 billion.
- Ignores Economic Damage: The CBO doesn't include the
decrease in GDP as a result of the bill. The GDP hit in 2020 would
be $161 billion (in 2009 dollars) according to our analysis. For a
family of four, that is $1,870 that they ignore.
Cap and Trade Is Wrong
- It's a Massive Energy Tax
- It Will Not Make a Substantive Impact on the
- It Will Kill Jobs
- It Will Cause Electricity Bills and Gas Prices to Sharply
- It Will Outsource Manufacturing Jobs and Hurt Free
- It Will Make You Choose among Energy, Groceries, Clothing
- It Will Be Highly Susceptible to Fraud and
- It Will Hurt Senior Citizens, the Poor, and the Unemployed
- It Will Cost American Families Nearly $3,000 a Year
- President Obama Admitted "Electricity Rates Would
Necessarily Skyrocket" Under His Cap-and-Trade Program (January
For more information, please visit: http://www.heritage.org/News/Cap-and-Trade-Global-Warming-Bill.cfm