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  • Generous Assumptions on Cap and Trade Do Not Mask the Costs

    The Heritage Foundation recently released its economic analysis of the Waxman-Markey cap and trade bill, and unsurprisingly, found devastating results. The goal of cap and trade is to force energy prices to rise so high that people use less of it. And boy do they. Even under the most generous assumptions the Heritage analysis found: Gas prices will rise 58 percent. Gas prices are expected to increase in the future even without cap and trade. Waxman-Markey would add an additional $1.38 to that increase. Electricity prices will rise 90 percent. In total, a family of four can expect per-year energy costs to rise $1,241 by 2035.

    A family of four will also reduce its consumption of goods and services by up to $3,000 per year, as its income and savings fall; Over the 2012-2035 time frame, the years in which we modeled the bill, aggregate GDP losses will be $9.4 trillion; in other words, we will be $9.4 trillion poorer with cap and trade than without. The government will collect $5.7 trillion in energy tax revenue. By 2035, job losses will be nearly 2.5 million.

    All of these costs come after very generous assumptions about renewable energy and does not include the full economic impact of the legislation.

    2035 and Beyond: This Heritage analysis extends only to 2035. But it should be noted that the emissions reductions continue to tighten through 2050 (when the carbon reductions are most stringent) and that model-based analysis by other groups whose models extend beyond 2035 shows increasing harm to the U.S. economy. For instance, The National Black Chamber of Commerce study projects a reduction in GDP of 1.5 percent ($730 billion) below the baseline (without cap and trade) by 2050. The Brookings Institute estimates that GDP in the U.S. would be lower by 2.5 percent in 2050.

    Clean Energy Assumptions

    The model’s baseline assumptions that will reduce carbon emissions include:

    • A near doubling of light-vehicle fuel efficiency by 2030,
    • Non-hydro renewable electricity reaching 17 percent by 2030–a more than five-fold increase, and
    • 36 billion gallons per year of ethanol production, with 20 billion gallons of cellulosic ethanol.

    Though these goals and mandates will be costly to meet (if even they can be met), the costs will occur with or without Waxman-Markey. Therefore, these costs are not counted in the Heritage analysis of the economic impacts from cap and trade. Transitioning our economy and enforcing the renewable energy mandates, the building energy efficiency standards and the new lighting and appliance efficiency measures will inevitably lead to new, unprecedented mismanagement of the economy and will cause headaches for everyone involved. And it won’t be cheap. It’s difficult for economic models to capture all these costs because of the amount of detailed information that is needed so any attempt to quantify the costs of these regulations is likely to significantly underestimate their costs.

    The current baseline – what the model assumes to occur no matter what — projects 18.3 gigawatts of increased nuclear power capacity. The history of nuclear construction in the 1960s through the 1980s shows that a much more aggressive nuclear build-out is technologically possible, but political and other factors make a “nuclear renaissance” highly uncertain. Therefore, the study assumes no additional nuclear capacity beyond the baseline increase.

    Even with all of aforementioned generous assumptions, the overwhelming costs do not justify the benefit of reducing the global temperature a fraction of a degree. Even the supposed “postage stamp” costs of carbon capping regulations outweigh the negligible benefits Americans would see from cap and trade.

    Posted in Energy [slideshow_deploy]

    14 Responses to Generous Assumptions on Cap and Trade Do Not Mask the Costs

    1. brent, lake jackson says:

      this scares myself more than health care reform..

    2. Jim says:




    3. Bobbie Jay says:

      Cap and trade is entrapment. Entrapment is against the law!

      It's ironic the "postage stamp" was brought up. Just recently (within the last 6 months), even though government claims financial issues, there have been talks of changing the design. Talks and changing the design and implementing the change all costs money. All unnecessary. NEEDLESS. None of what the government is doing, can be afforded without consequences to the majority.

    4. Bobbie Jay says:

      Majority of people, not government.

    5. Pingback: » Financial News Update - 08/10/09 NoisyRoom.net: Where liberty dwells, there is my country…

    6. Harvey Clemmons Nort says:

      Cap and trade has to be stopped along with most of the legislation that has passed or partially passed and to this day I dont think our (representatives) have yet read what they voted on. Are we getting people to run for office that we agree with. I will give almost unlimited time and energy to support amyone that will run that agrees with me. Time is short.

    7. Pingback: Green Ink: China’s Oil Thirst, Climate Engineering, and Killer Algae - Environmental Capital - WSJ

    8. fc, nc says:

      ssi is so over budget many say it will collapse. welfare and medicare and other entitlements are said to be the major crises we are facing. so now along comes obama and the crazy liberal congress. we get a $3 Billion cash for clunker give away program, the cap and trade and a government run health care reform, (now being called health insurance reform). our political leaders are killing us with their addiction to spending our money. they must go!!

    9. Choey says:

      One of my concerns is that with everyone's attention focused on the health care bill events, is there sneaky under the table goings on with the Taxman-Malarkey bill. Has anyone read or heard anything?

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    13. Charles Hammontree says:

      At a time when we sorely need to encourage production of goods in this country including extracting and processing our own fossil fules there are derelict legislators willing to continue adding burden to whatever productive sectors remain of our economy. Such legislation ignores that America is in a global economy or perhaps those legislators are on an agenda to destroy American capitalism for the segment of anti capitalistic constituents they represent.

    14. Pingback: Farm Policy » Blog Archives » Climate Legislation; Crop Estimates; Farm Bill (ACRE); and the Ag Economy (Eggs, Sugar, Pork)

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