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WebMemo #1930-CA on Energy and Environment

May 20, 2008

How California Would Be Affected by the Lieberman-Warner Climate Change Legislation

By , , and

Workers and families in the state of California may be wondering how climate change legislation before Congress would affect their income, their jobs, and the cost of energy. Members of Congress are considering a number of bills designed to address climate change. Chief among them is S. 2191, America's Climate Security Act of 2007, introduced by Senators Joseph Lieberman (I-CT) and John Warner (R-VA).[1]

The Lieberman-Warner legislation promises extraordinary perils for the American economy, should it become law, all for very little change in global temperature--perhaps even smaller than the .07 of a degree Celsius drop in temperature that many scientists expected from worldwide compliance with the Kyoto climate change accords. S. 2191 imposes strict upper limits on the emission of six greenhouse gases with the primary emphasis on carbon dioxide (CO2). The mechanism for capping these emissions requires emitters to acquire federally created permits (called allowances) for each ton emitted.

Arbitrary restrictions predicated on multiple untested and undeveloped technologies will lead to severe restrictions on energy use and large increases in energy costs. In addition to the direct impact on consumers' budgets, these higher energy costs would spread through the economy, injecting unnecessary inefficiencies at virtually every stage of production and consumption.

Implementing S. 2191 would be costly in California, even given the most generous assumptions. Notable costs are listed in Table 1.

Consumers would be hard hit. Table 2 shows the expected increases in retail energy prices (adjusted to 2006 dollars to eliminate the impact of inflation) in 2025 for California. Between 2012, when the restrictions first apply, and 2025, the prices of electricity, natural gas, and gasoline could rise by nearly 20 percent nationally when compared to prices in a world without S. 2191.

In addition to taking a bite out of consumers' pocketbooks, the high energy prices throw a monkey wrench into the production side of the economy. Contrary to the claims of an economic boost from "green" investment and "green-collar" job creation, S. 2191 reduces economic growth, gross domestic product (GDP), and employment.

William W. Beach is Director of the Center for Data Analysis; David W. Kreutzer, Ph.D., is Senior Policy Analyst for Energy Economics and Climate Change in the Center for Data Analysis; Ben Lieberman is Senior Policy Analyst in Energy and the Environment in the Thomas A. Roe Institute for Economic Policy Studies; and Nicolas D. Loris is a Research Assistant in the Roe Institute at The Heritage Foundation.



[1]To learn more about the economic effects of the Lieberman-Warner legislation, see "The Economic Costs of the Lieberman- Warner Climate Change Legislation." CDA Report published on May 12, 2008, and available at www.heritage.org/Research/EnergyandEnvironment/cda08-02.cfm. The authors gratefully acknowledge the work of Dr. Shanea Watkins in preparing the maps used in this briefing me

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