The cap-and-trade debate, like most debates in Washington, has become a numbers game. One side says it’s cheap; the other says it’s expensive. Depending on what side of the political aisle you fall on, selective hearing can dictate what you believe Waxman-Markey will do to the economy and how it will affect global warming. You hear it’s a jobs bill – that investing billions of dollars in new green technologies will create or save millions of jobs, stimulating the economy while igniting a green revolution. You hear it won’t cost Americans families very much – about a stamp per day is what proponents of the bill say. Nothing could be further from the truth. Here are thirteen reasons to oppose cap and trade.
1.) It will destroy 1.15 million jobs. The Heritage Foundation’s Center for Data Analysis found that, for the average year over the 2012-2035 timeline, job loss will be 1.1 million greater than the baseline assumptions. By 2035, there is a projected 2.5 million fewer jobs than without a cap-and-trade bill. But Heritage isn’t alone in these estimates. The Brookings Institute, a supporter of a carbon tax, projects that cap-and-trade will increase unemployment by 0.5% in the first decade below the baseline. Using U.S. Census population projection estimates, that’s equivalent to about 1.7 million fewer jobs than without cap-and-trade. A study done by Charles River Associates prepared for the National Black Chamber of Congress projects increases in unemployment by 2.3-2.7 million jobs in each year of the policy through 2030–after accounting for “green job” creation.
2.) It will reduce economic growth. All three aforementioned studies found significant losses in Gross Domestic Product (GDP), our primary measure of economic activity. Heritage found the average GDP loss is $393 billion, hitting a high of $662 billion in 2035. From 2012 to 2035, the accumulated GDP loss is $9.4 trillion (in 2009 dollars). Brookings predicts GDP in the United States would be lower by 2.5 percent in 2050 and the National Black Chamber estimates that in GDP will be 1.3 percent ($350 billon) below the baseline in 2030 and 1.5 percent ($730 billion) below the baseline in 2050.
3.) It will increase your energy bills. Since 85 percent of America’s energy needs are met by carbon-emitting fossil fuels, cap-and-trade would be a massive tax on energy consumption. The carbon dioxide reduction targets are still the same at the end of the day, and the way they will be met is by raising the price of energy high enough that people use less. Heritage’s CDA found that by 2035, gasoline prices would increase 58 percent, natural gas costs would increase 55 percent, home heating oil costs would increase 56 percent, and worst of all, electricity prices would jump 90 percent. CRA’s and the Black Chamber’s studies found that, relative to the baseline, natural gas prices would rise by an estimated 16 percent, electricity prices go up by 22 percent, and gasoline increases by 23 cents per gallon, all in the year 2030.
4.) It hits low-income households hardest. Cap-and-trade is an energy tax whose weight falls disproportionately on the poor. Although upper-income families tend to use more energy (and thus emit more carbon per household), since low-income households spend a larger percentage of their income on energy, the poor suffer most. Proponents of a carbon cap acknowledge this, saying, “Relative to total expenditure, however, the poor pay more […]. This means that carbon emission-reduction policies have a regressive impact on income distribution – unless coupled with revenue-recycling policies that protect the real incomes of the poor and middle classes.” Policymakers sought to protect consumers, especially the poor, from higher energy prices by handing out rebate checks or tax cuts. If only a small portion (15 percent) of the energy tax revenue is given back to the consumer, the burden on the poor obviously becomes heavier. Rebates or not, the higher energy prices would reduce economic activity by forcing businesses to cut costs elsewhere, by reducing their workforce, for example, and thus doing damage that no check would cover.
5.) It will cost a family of four an additional $3,000 per year. When all the tax impacts have been added up, we find that the average per-family-of-four costs rise by almost $3,000 per year. In the year 2035 alone, the tax impact is $4,600. And if you add up the costs per family for the whole energy tax aggregated from 2012 to 2035, the years in which we modeled the bill, it’s about $71,500. That’s a lot of postage stamps—162,500 to be exact.
6.) More subsidies for unproven technologies and energy sources. The bill also includes a renewable electricity standard that mandates 15 percent of the nation’s electricity come from renewable energy by 2020, as well as hundreds of billions of investments (read: taxpayer subsidies) for efficiency improvements and renewable energy technology. A federally-mandated RES is proposed only because renewables are too expensive to compete otherwise. In effect, Washington is forcing costlier energy options on the public. Since renewables are lavished with substantial tax breaks, a national mandate will cost Americans both as taxpayers and as ratepayers. If cap-and-trade were so sure to work, why is all this even necessary?
7.) It would hurt America’s farmers. Farming is very energy-intensive, with fuel, chemical, electricity, and fertilizer costs; since cap-and-trade drives up the cost of energy prices, farmers’ losses will undoubtedly outweigh any money they collect from offsets (the money businesses would pay farmers to reduce carbon emissions by either not farming or using more efficient technologies). We estimate that farm income (or the amount left over after paying all expenses) will drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28 percent, 60 percent, and 94 percent, respectively. The average net income lost over the 2010-2035 timeline is $23 billion—a 57 percent decrease from the baseline—and for consistency’s sake, that’s 52 billion postage stamps.
8.) It’s Robin Hood in reverse. The Waxman-Markey bill takes a lot of money from regular Americans and funnels it to Washington bureaucrats and the corporations with the best lobbyists. Heritage finds the average climate tax revenue from this bill is $236 billion per year from 2012 through 2035 and adds up to $5.7 trillion in tax collections. Brookings estimates the revenue collected over the 2010-2050 timeframe would be about $9 trillion, reaching peaks of almost $300 billion per year during the 2030-2040 decade. And who gets that money? Well, after Washington skims off what it wants, it doles the rest out to special interests. Along with all the American energy users losing out as a result of this bill, particularly hard-hit industries include: agriculture, transportation, chemicals, wood products, machinery, paper, plastics & rubber, electrical equipment & appliances, construction and, of course, manufacturing.
9.) It would disrupt free trade. When businesses are faced with the higher costs from an energy tax through a carbon-capping policy, they can certainly make production cuts. Another logical solution is for these companies to move overseas, where they can make more efficient use of labor and capital. To counter this, the bill includes protectionist carbon tariffs to offset the competitive disadvantage U.S. firms would face. China has already threatened retaliatory protectionist policies. To mask the economic pain, the government awarded 15 percent of the allowance allocations to energy-intensive manufacturers. Free allowances do not lower the costs of Waxman-Markey; they just shift them around. Although the government awarded handouts to businesses, the carbon dioxide reduction targets are still there, and the way they will be met is by raising the price of energy, thereby inflicting more economic pain.
10.) There’s no environmental benefit. Even the flawed and significantly biased cost estimates of $140 per year or $170 per year aren’t worth the alleged benefits, since the bill would lower temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree at the end of the century. EPA Administrator Lisa Jackson confirmed the bill would do nothing for global temperatures without commitment from large emitters like India and China following suit. This, alongside Greenpeace’s adamant opposition due to all the corporate handouts in the bill, should be telling signs that the environmental benefits are nonexistent.
11.) Those losing their jobs won’t get much help. Climate Change Worker Adjustment Assistance (CCWAA). Translation: It’s welfare for those who are going to lose their jobs because of Waxman-Markey. A recently released CBO report calculates the outlays for the CCWAA to be $4.3 billion over 9 years (2011 thru 2019). Using $35,507 as the average income per person and $9,968 as the average health care cost, the annual compensation cost to a worker displaced by Waxman-Markey would be $32,829. Combining those to estimates, CBO suggest that the program would cover, on average, 14,553 displaced workers each year. The Heritage Foundation estimates that between 2011 and 2019, an average of 987,440 Americans will be out of work because of Waxman-Markey. Using CBO’s guidelines, only one out of every 68 displaced workers would receive benefits. That’s 1.47 percent of displaced workers.
12.) Growing opposition. Even though many Americans fail to understand what cap-and-trade really is because of its complexity, opposition is growing as more taxpayers are beginning to recognize its true identity: it’s an energy tax. Anti-cap-and-trade protests broke out all over the country during Independence Day parades. And they’re not alone. 186 national and state leaders have expressed their concern. 120 agricultural groups oppose cap-and-trade. Greenpeace and Friends of the Earth are against it. The U.S. Chamber of Commerce and The Black Chamber of Congress are against it. If enacted, cap-and-trade would be one of the largest tax increases in recent history. Is that how we get out of a recession?