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It’s Time to Terminate California’s Cap and Trade System

Posted By Nicolas Loris On April 6, 2010 @ 1:06 pm In Energy | Comments Disabled

California legislators passed a statewide cap and trade bill in 2006 that is set to begin in 2012, but a growing opposition is seeking to include a ballot measure [1]that would postpone a carbon cap until the state’s economy recovers:

“The ballot measure would bar the state from implementing the law until its jobless rate stabilized at or below 5.5% for a year, which supporters say would signal the return of a strong economy. The state’s jobless rate topped 5.5% in October 2007 and now stands at 12.5%.

Supporters and opponents of the law disagree about its potential economic effects. The California Air Resources Board, the state clean-air agency administering the law, says the cap would help the economy. It would raise the price of a unit of energy, but reduce Californians’ total energy bills through greater efficiency, the board says, freeing up money that would lead to more jobs.

But the board has scaled back its optimism. In a 2008 study, it projected the measure would produce a net gain of more than 100,000 California jobs. Economists widely criticized that study as too rosy. A second economic assessment, released by the board in March, projects a net gain of about 10,000 jobs. A June 2009 study by a group of California small businesses, however, predicted the law could raise the average California household’s annual housing, transportation, energy and food costs by about $3,900, or 15%.”

The increased recognition that cap and trade reduces economic activity is encouraging but the ballot measure does not go far enough. Delaying implementation of cap and trade will only delay the economic consequences of higher energy prices. The pill may be easier to swallow but that doesn’t make it good policy. The fact that cap and trade only makes sense if the state is not in a recession is indicative that the policy is an economy killer.

Heritage analysis [2]of the federal cap and trade bill passed in the House of Representatives found that beginning in 2012, job losses will be 192,773 higher than without a cap-and-trade bill in place. And the number of jobs lost will only go up, increasing to 285,335 by 2035. And the environmental benefit? Climatologist Chip Knappenberger projected [3]that Waxman-Markey would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree Celsius at the end of the century. If California tries to cap CO2 emissions by itself, the economic costs will come with even smaller environmental benefits – too small to even measure.

Contrary to the claims of an economic boost from green investment and green job creation and “postage stamp” costs, cap and trade does the complete opposite by increasing energy prices-thereby causing a considerable reduction in economic growth, household incomes, and employment. A more prudent ballot measure would be to remove California’s cap and trade plan completely.


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URL to article: http://blog.heritage.org/2010/04/06/it%e2%80%99s-time-to-terminate-california%e2%80%99s-cap-and-trade-system/

URLs in this post:

[1] seeking to include a ballot measure : http://online.wsj.com/article/SB10001424052702304620304575165843688369042.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird

[2] analysis : http://www.heritage.org/Research/Reports/2009/08/Impact-of-the-Waxman-Markey-Climate-Change-Legislation-on-California

[3] projected : http://masterresource.org/?p=2355

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