On June 26, a 1,427-page climate change bill introduced by
Representatives Henry Waxman (D-CA) and Edward Markey (D-MA) passed
the House by a narrow margin. The bill, also known as
Waxman-Markey, includes a number of alarming provisions, chief
among them a cap-and-trade program that would attempt to curb
global warming by imposing 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 (or "allowances") for each ton
of greenhouse gas emitted.
Because these allowances carry a price-and because 85 percent of
the United States' energy needs come from carbon-emitting fossil
fuels-Waxman-Markey is best described as a significant tax on
energy use. Since everything Americans use and produce requires
energy, the tax hits U.S. pocketbooks again and again. The Heritage
Foundation's Center for Data Analysis forecasts severe
consequences, including skyrocketing energy costs, millions of jobs
lost, and falling household income and economic activity-all for
negligible changes in the global temperature.
Workers and families in New Jersey may be wondering how
cap-and-trade legislation would affect their income, their jobs,
and the cost of energy. Implementing Waxman-Markey would put a
chokehold on New Jersey's economic potential, reducing gross state
product by $17.93 billion in 2035.
Consumers would be hit hard. Between 2012 (when the restrictions
first apply) and 2035 (the last year of this analysis), the prices
of electricity and gasoline will rise sharply when compared to
prices in a world without cap and trade. By 2035, Americans living
in the state of New Jersey will see their electricity prices rise
by $1,158.26 and their gasoline prices rise by $1.30 per gallon
solely because of Waxman-Markey.
As the economy adjusts to shrinking gross domestic product (GDP)
and rising energy prices, employment will take a big hit in New
Jersey. Beginning in 2012, job losses will be 48,291 higher than
without a cap-and-trade bill in place. And the number of jobs lost
will only go up, increasing to 63,397 by 2035.
Contrary to the claims of an economic boost from green
investment and green job creation and "postage stamp" costs, the
Waxman-Markey climate change legislation does the complete opposite
by increasing energy prices-thereby causing a considerable
reduction in the rate of economic growth, the amount of GDP,
household incomes, and employment.
David W. Kreutzer,
Ph.D., is Senior Policy Analyst for Energy Economics and
Climate Change, Karen A.
Campbell, Ph.D., is Policy Analyst in Macroeconomics, William W. Beach is
Director of the Center for Data Analysis, Ben Lieberman is Senior
Policy Analyst in Energy and the Environment, and Nicolas D. Loris is a
Research Assistant in the Thomas A. Roe Institute for Economic
Policy Studies at The Heritage Foundation.