About Climate Legislation

What is Cap-and-Trade?

Unfortunately, most Americans are not aware of what a cap-and-trade program is, other than what they hear from advocates of the program who also speak about creating “green” jobs, providing energy security and reducing “pollution.” The truth is, cap-and-trade is a complex energy tax (essentially an energy-rationing scheme) that affects all levels of production and economic activity.

The program “caps” total emissions at an arbitrary level and then issues permits, each of which would allow a certain amount of emissions. The “cap” would become more stringent over time in order to reach greenhouse gas reduction goals. As far as the “trade” part is concerned, if a regulated facility wishes to emit more than its government-issued permits allow, the facility would have to purchase permits in the market. Permit sellers would be regulated facilities that emit less than their permits allow, either because they have low-cost ways of reducing emissions, they reduce their overall production, or they choose to go out of business.

Click here for the House climate bill (American Clean Energy and Security Act of 2009)

Click here for the Senate climate bill (Clean Energy Jobs and American Power Act)

Costs of Climate Legislation

The economic cost of a cap-and-trade program would be significant and impose severe financial burdens on all Americans. A number of studies have been completed analyzing the specific effects of cap-and-trade legislation for the United States, and all of them show increased costs for Americans.

The Heritage Foundation analysis of the economic impact of a cap-and-trade program (Waxman-Markey bill) projects that by 2035 the bill will:

  • reduce aggregate gross domestic product (GDP) by $7.4 trillion
  • destroy 844,000 jobs on average, with peak years seeing unemployment rise by over 1,900,000 jobs
  • raise electricity rates 90 percent after adjusting for inflation
  • raise inflation-adjusted gasoline prices by 74 percent
  • raise residential natural gas prices by 55 percent
  • raise an average family’s annual energy bill by $1,500
  • increase inflation-adjusted federal debt by 29 percent, or $33,400 additional federal debt per person, again after adjusting for inflation

The Tax Foundation analysis finds similar economic impacts. Passage of a cap-and-trade program would lead to:

  • an annual household burden of roughly $144.8 billion per year
  • reduction in U.S. employment by 965,000 jobs
  • cost an average household approximately $1,145 per year

The National Black Chamber of Commerce analysis finds that by 2030 the implementation of a cap-and-trade program would:

  • reduce national GDP roughly $350 billion below the baseline level
  • cut net employment by 2.5 million jobs (even after accounting for new “green” jobs)
  • reduce earnings for the average U.S. worker by $390 per year

The U.S. Treasury analysis finds that the passage of a cap-and-trade program could amount to:

  • cost increases up to $300 billion annually
  • household cost increases of $1,761 annually

“Benefits” of Climate Legislation

The unfortunate reality is that the cost isn’t justified. Some Americans have stated in national polls that they would be willing to pay a little more in taxes in order to “save” the planet from global warming. But what if we put substantial financial burdens on current generations, and the temperature or emissions levels across the globe do not change?

This is exactly what would happen.
Even using the United Nations Intergovernmental Panel on Climate Change assumptions, climatologists estimate that a federal cap-and-trade program’s impact on world temperature will be too small even to measure.

By the year 2050, implementation and full adherence to the program may lead to a decrease in global temperatures by 0.05 degrees Celsius or two years of avoided warming, hardly enough to be worth spending trillions of dollars on.

Scientist Chip Knappenberger states: “A full implementation and adherence to the long-run emissions restrictions provisions described by the Waxman-Markey Climate Bill would result only in setting back the projected rise in global temperatures by a few years—a scientifically meaningless prospect.”