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Ten northeastern states recently entered into a carbon cap and trade pact. Mike Catanzaro examines the state-by-state impact of this environmentalist carbon trading scheme.

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State-By-State Impact of Carbon Cap and Trade Pact

Ten northeastern states recently entered into a carbon cap and trade pact. Mike Catanzaro examines the state-by-state impact of this environmentalist carbon trading scheme.

Governors from 10 northeastern states (Connecticut, Maine, Pennsylvania, Vermont, New Jersey, Rhode Island, Massachusetts, Delaware, New Hampshire, and New York) recently agreed to form a carbon cap and trade pact, a move that will have real economic consequences — in those states and throughout the country.

At a time when the country faces a natural gas crisis that is devastating the manufacturing industry, and with the unemployment rate hovering over 6 percent, such a Kyoto-like carbon-trading scheme is an economically risky endeavor that will bring no environmental benefits. Among other things, natural gas prices will skyrocket (above and beyond their current historical highs) and manufacturing jobs will be lost.

The following outlines the likely impacts of regulating carbon dioxide on jobs, manufacturing, and natural gas prices in these states. The picture is one of high unemployment, especially in manufacturing, and huge spikes in natural gas. The data were drawn from a state-by-state study by the non-partisan Wharton Econometric Forecasting Associates (WEFA), which examined the economic effects of Kyoto’s carbon caps.

Note that WEFA’s analysis assumes implementation of a carbon tax to meet Kyoto’s requirements. This is important, because a carbon tax, as the Congressional Budget Office found, would be more efficient, and therefore less costly, than carbon cap and trade, the option chosen by the Northeastern governors. In other words, WEFA’s analysis understates the cost burdens these states would actually experience under such a regulatory regime.

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Connecticut

Jobs: 28,100 jobs lost, unemployment rate as high as 7 percent.

Manufacturing: “Connecticut’s manufacturing sector would be significantly harmed. Manufacturing employment would decline by 2.5 percent (6,200 jobs).”

Natural Gas: “Industrial firms in Connecticut would be burdened in the global competition for markets with price increases of 79 percent for delivered natural gas and 51 percent for electricity by 2010 versus baseline levels.”

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Maine

Jobs: 7,000 jobs lost, unemployment as high as 6.4 percent.

Manufacturing: “Maine’s manufacturing sector would be negatively impacted. Manufacturing employment would decline by 2.5 percent (2,000 jobs) by 2010.”

Natural Gas: “Industrial firms in Maine would be burdened in the global competition for markets with price increases of 79 percent for delivered natural gas and 51 percent for electricity by 2010 versus baseline levels.”

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Massachusetts

Jobs: 45,600 jobs lost, unemployment as high as 5.5 percent.

Manufacturing: “Employment would decline by 1.0 percent (4,000 jobs) by 2010. “Hardest hit among the industries in the state would be manufacturing, as firms experience increased cost of power and move jobs from the state.”

Natural Gas: “Industrial firms in Massachusetts would be burdened in the global competition for markets with price increases of 79 percent for delivered natural gas and 51 percent for electricity by 2010 versus baseline levels.”

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New Hampshire

Jobs: 12,4000 jobs lost, unemployment as high as 6.1 percent.

Manufacturing: “Employment would decline by 0.8 percent (800 jobs). “New Hampshire has a high concentration of capital goods producers, which would see large declines in exports.”

Natural Gas: “Industrial firms in New Hampshire would be burdened in the global Competition for markets with price increases of 79% for delivered natural gas and 51% for electricity by 2010 versus baseline levels.”

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New Jersey

Jobs: 120,500 jobs lost, unemployment as high as 7.8 percent

Manufacturing: “New Jersey’s manufacturing sector would be harmed more than the US average. Manufacturing employment would decline by 5.8% (23,300 jobs) in New Jersey by 2010, while the national average would fall 3.3%.”

Natural Gas: “Industrial firms in New Jersey would be burdened in the global competition for markets with price increases of 93% for delivered natural gas and 62% for electricity by 2010 versus baseline levels.”

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New York

Jobs: 140,000 jobs lost, unemployment as high as 7.8 percent

Manufacturing: “New York’s manufacturing sector would be harmed more than the US average. Manufacturing employment would decline by 3.5% (25,000 jobs) in New York by 2010 relative to the baseline forecast, while the national average would fall 3.3%.”

Natural Gas: “Industrial firms in New York would be burdened in the global competition for markets with price increases of 93% for delivered natural gas and 62% for electricity by 2010 versus baseline levels.”

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Pennsylvania

Jobs: 108,000 jobs lost, unemployment as high as 6.4 percent

Manufacturing: “Pennsylvania’s manufacturing sector would be harmed significantly. Manufacturing employment would decline by 3.2% (25,600 jobs) in Pennsylvania by 2010 relative to the baseline forecast, while the national average would fall 3.3%.”

Natural Gas: “Industrial firms in Pennsylvania would be burdened in the global competition for markets with price increases of 93% for delivered natural gas and 62% for electricity by 2010 versus baseline levels.”

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Rhode Island

Jobs: 3,400 jobs lost, unemployment as high as 5.3 percent

Manufacturing: “Manufacturing employment would decline by 1.3% (800 jobs) in Rhode Island by 2010. Rhode Island has a high concentration of capital goods producers, which would see large declines in exports.”

Natural Gas: “Industrial firms in Rhode Island would be burdened in the global competition for markets with price increases of 79% for delivered natural gas and 51% for electricity by 2010 versus baseline levels.”

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Vermont

Jobs: 2,300 jobs lost, unemployment as high as 4.8 percent

Manufacturing: “Manufacturing employment would decline by 2.4% (1,100 jobs) in Vermont by 2010. Vermont has a high concentration of capital goods producers, which would see large declines in exports.”

Natural Gas: “Industrial firms in Vermont would be burdened in the global competition for markets with price increases of 79% for delivered natural gas and 51% for electricity by 2010 versus baseline levels.”

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Delaware

Jobs: 4,500 jobs lost, unemployment as high as 5.6 percent

Manufacturing: “Manufacturing employment would decline by 2.6% (1,500 jobs) in Delaware by 2010. Delaware has a high concentration of chemicals producers, which would see large declines in exports.”

Natural Gas: “Industrial firms in Delaware would be burdened in the global competition for markets with price increases of 103% for delivered natural gas and 81% for electricity by 2010 versus baseline levels.”

Written By

Mr. Catanzaro is Communications Director for the Senate Environment and Public Works Committee.

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