A New York Times story on Wednesday reported on an unreleased EPA “analysis” of S. 139, the Climate Stewardship Act of 2003, introduced by Sen. Joe Lieberman and sponsored by Sen. John McCain.
In fact, the “analysis” the Timesreported on was a spreadsheet from one data-run at EPA–in other words, it was back-of-the-envelope and not a thorough, objective, credible piece of work. That’s compared to a 500 plus page report from DOE’s Energy Information Administration, which found that S. 139 would significantly harm the U.S. economy. Moreover, earlier this month, the Congressional Budget Office concluded that carbon cap and trade programs, such as S. 139, would mean “welfare losses,” in the form of lower wages and stock prices, and regressive impacts on the poor.
As with Kyoto, S. 139 would impose huge costs and do nothing meaningful for the environment. The following are some notable points from the EIA and CBO studies:
EIA Analysis of S. 139
S. 139 would reduce GDP by $106 billion.
At a time when manufacturing jobs are moving overseas because of high natural gas prices, S. 139 would increase natural gas prices 16 percent in 2010 and 46 percent in 2025 compared to the reference case.
As a result, energy-intensive manufacturing sectors would be adversely affected by S. 139. The value of shipments for energy-intensive sectors as a group declines by 1.5 percent. In particular, bulk chemicals would decrease by 2.6 percent, refining by 2.1 percent, steel by 2.8 percent, and aluminum by 3 percent.
S. 139 would increase electricity prices 9 percent in 2010 and 46 percent in 2025. The average household’s energy bill, including the fuel cost of personal transportation, is expected to increase by $444 (13 percent) a year in 2025. In other words, S. 139 would be equivalent to an energy tax increase.
Coal production is projected to decline dramatically in response to S. 139. By 2025 it is expected to be 78 percent below the reference case level and 72 percent below today’s level. Currently, coal fuels 52 percent of the nation’s electricity needs.
As a result of the projected reduction in coal use, coal employment is expected to decline dramatically under S. 139. The bill would eliminate over 50,000 coal industry jobs.
CBO Analysis of Carbon Cap and Trade
“The price increases resulting from a carbon cap would be regressive–that is, they would place a relatively greater burden on lower-income households than on higher-income ones. Higher-income households would face larger costs in dollar amounts, but those costs would make up a smaller share of their average annual income. For example, one study estimated that the price increases resulting from a 15 percent cut in carbon emissions would cost the average household in the lowest one-fifth of the income distribution about $560 a year, or 3.3 percent of its average income. Households in the top one-fifth of the income distribution would pay an additional $1,800 a year, or 1.7 percent of their average income.”
“A cap-and-trade program for carbon emissions could impose significant costs on the economy in the form of welfare losses. Those losses would include the value of society’s resources (capital, labor, and natural resources) that would be devoted to producing goods in ways that yielded lower carbon emissions. They would also include the net value of decreased production and consumption that would result from the carbon cap. Welfare losses are real costs to the economy in that they would not be recovered elsewhere in the form of higher income. Those losses would be borne by people in their roles as shareholders, consumers, and workers.”
“A carbon trading program would affect government outlays and tax receipts in several ways. First, it would cause the government (like other consumers) to pay higher prices for carbon-intensive goods. Second, because the payments of some government programs, such as Social Security, are indexed to changes in the overall price level, higher prices could result in greater spending on those payments. Third, a cap-and-trade program for carbon emissions would lead to a decline in economic activity and a corresponding decrease in tax collections.”