The Impact of Cap and Trade

by | Jun 12, 2009 | Politics

In October 2007, the Brookings Institute published a paper suggesting a cap-and-trade system as the best short-medium term approach to seriously address climate change.

On June 8, 2009, they hosted a preview of a forthcoming report on the economic impact of climate change reduction strategies. Three Brookings experts “analyzed the economic and environmental effects of potential U.S. greenhouse gas cap-and-trade programs, including emissions reduction scenarios that are broadly consistent with the targets proposed by the Obama administration and key committees in the House of Representatives.”

The economic consequences of cap and trade, including the bill that is currently being considered by Congress, might surprise many of you. The presentation slide show is available in PDF and the charts are quite clear. (Normally I would include snapshots of the graphs, but I’m working today “on the road” and don’t have a computer with SnagIt. Click on the link to see the PDF.)

The scenarios aim to reduce personal consumption by 0.3 percent to 0.5 percent, or about $1 trillion to $2 trillion in from 2010 to 2050.

This bill (and any similar bills) would reduce the level of U.S. Gross Domestic Product (GDP) by around 2.5 percent relative to what it otherwise would have been in 2050.

Employment levels would fall by 0.5 percent in the first 10 years alone.

And let’s not forget the cost to the average person (not “rich taxpayer,” but each and every person living in the U.S.) The study found that for every eight percent of reduced carbon emissions, it increases energy costs to the consumer by 45 percent. It could cost you up to $3100 a year for gasoline or electricity.

Looking at the charts, I see that the President was serious in Jan 2008 when he said that his plan will bankrupt the coal industry.

The colorful graph on page 26 shows a sharp increase in purchaser’s prices on electricity, refining, coal, and crude oil (gasoline) by 2015, with coal being the highest increase at nearly 60%. The next page graph shows increase on purchasers prices by 2025. Refining is up about 30%, Coal is at or over 100% and crude oil is up nearly 40%. Electricity is up between 10-15%.

Why are the prices skyrocketing? The next two slides shows the effect of cap-and-trade on production by 2015 (six years away) and 2025. By 2015, production of refining, coal and crude oil all drop by nearly 10%. By 2025 – the production of all three drops by over 30-35%.

The effect on employment? Jobs lost? By 2025 they show that Electricity will have lost over 20% of their jobs, coal industry is at 40% and crude oil is over 30%.

Here in our hometown, gas has gone up over 40 cents in the last month. All summer when I hear the air conditioner kick on (to cool my house to 78F, a number my husband is always trying to lower) all I can think about is the meter on the side of my house rolling those numbers. Last summer it was a game to guess the amount of the electric bill before it arrived. Consider your highest electric bill, and increase it by 45%. If you live in a cool climate, what is your heating bill during the winter? Increase it. Do you know anyone working for crude oil? Coal? Electric company? How many of them will lose their jobs?

Feel like you can’t do anything about it? Think again. Contact your Congressman today and tell them you want them to stand firm and vote AGAINST cap and trade.


Shelly Henley Kelly