McCain Should Look at High Price Tag of Climate Change Policy
Senator McCain’s support for a cap and trade policy on U.S. carbon emissions could aggravate an already struggling economy with reduced GDP, higher energy prices, job loss and lower household incomes, the American Council for Capital Formation (ACCF) said today. The Washington-based think tank has conducted numerous economic studies on the impact that emissions trading system proposals have on economies including Senator McCain’s 2005 legislative proposal.
“While the goal of reducing global greenhouse gas emissions is worthy, the consequences of the cap and trade proposal offered by Senator McCain and in S. 2191 are quite evident,” said Dr. Margo Thorning, senior vice president and chief economist of the American Council on Capital Formation. “Senator McCain and lawmakers on Capitol Hill would be wise to weigh the enormous costs of these proposed measures against our current sluggish economy, particularly in view of the minimal expected environmental benefits.”
In its most recent analysis, ACCF commissioned a joint study with the National Association of Manufacturers (NAM) assessing the potential national and state economic impacts resulting from America’s Climate Security Act of 2007 (S. 2191), authored by U.S. Senators Joseph Lieberman and John Warner. Similar to the climate change policy promoted by McCain, S. 2191 aims to reduce total U. S. greenhouse gas emissions with the goal of lowering emissions 63 percent below their 2005 levels by the year 2050. These reductions would be achieved through a system that would call for companies to cap their emissions, and then to have them trade emissions rights with each other.
Conducted by Science Applications International Corporation (SAIC) using assumptions provided by ACCF and NAM, the study includes a comprehensive national economic assessment, as well as separate and specific overviews of the impacts the legislation could have on all 50 U.S. states. A sampling of the national findings includes:
- Gross Domestic Product (GDP) losses of $151 billion to $210 billion in 2020 and $631 billion to $669 billion per year in 2030
- Employment losses of 1.2 million to 1.8 million jobs in 2020 and 3 million to 4 million jobs in 2030
- Household income losses of $739 to $2,927 per year in 2020 and $4,022 to $6,752 per year in 2030
- Electricity price increases of 28% to 33% by 2020 and 101% to 129% by 2030
- Gasoline price increases (per gallon) of 20% to 69% by 2020 and 77% to 145% by 2030
The SAIC analysis was undertaken with the National Energy Modeling System model, the model used by the Department of Energy’s Energy Information Administration. The ACCF and NAM provided assumptions about the cost and availability of new energy technologies, oil prices, and other key factors. The study’s findings indicate substantial and growing impacts to consumers and the economy of meeting the increasingly stringent emission targets through 2030 established by the Lieberman-Warner Climate Security Act.
“Energy use and economic growth go hand in hand,” Thorning concluded. “The U.S. should reject mandatory cap and trade programs, look to free market policies based on technology and reducing energy intensity, and work with developing countries on cleaner development – promoting improvements in their living standards while slowing their very rapid growth in greenhouse gas emissions.”