Cap and Trade

The Economic Costs of the Lieberman-Warner Climate Change Legislation -The Heritage Foundation

Summary: This Heritage Foundation Study proffers a stark critique of the Lieberman-Warner legislation and its drastic impact on the U.S. economy. The study is rather extensive but provides eyebrow-raising cost projections of the legislation’s impact, namely job losses exceeding 500,000 before 2030 and even approaching 1,000,000 and the extra $467 per year the average household would pay for natural gas and electricity, a figure that compounds to $8,870 over the 2012-2030 period. This study also includes the job loss numbers Minnesota would experience where the bill to become law. Minnesota earns the dubious ranking of #1 nationwide, losing the most jobs per 1 million people in 2025 at 5,166 jobs per 1 million people.

Cap and Trade: A Bad Trade-Off for the Economy and Company Earnings - Free Enterprise Education Institute

Summary: This piece by Wayne Winegarden is a quality primer on the shortcomings of cap-and-trade systems. The author employs a cost-benefit analysis, finding no benefit to the policy since cap-and-trade fails to reduce global warming and reporting that analyses conducted during the Clinton-Gore Administration indicated adhering to Kyoto-based carbon caps would adversely impact the economy. Winegarden states that cap-and-trade would raise gas prices by 53%, energy prices by 86%, raise interest rates because higher energy prices will exert upward pressure on overall prices and contribute to inflation, and several negative effects. The article also speaks of the policy’s impact in light of basic economic concepts like productivity and inflation and tax and industrial policies.

The Adverse Economic Impacts of Cap-and-Trade Regulations -Arthur Laffer and Wayne Winegarden

Summary: The eminent economist Arthur Laffer and his colleague Wayne Winegarden offer perhaps the best analysis of the economic impacts of cap-and-trade systems in this piece. The economists report that the U.S. economy would decline by up to 4.2% if the system were implemented to achieve Kyoto Protocol targets. Laffer and Winegarden also note that the cap-and-trade system could result in an energy supply shock, given that fossil fuels provide 86% of our current energy needs and that such shocks in the past 30 years have resulted in slow economic growth, increased unemployment, and declines in the stock market. Moreover, the economists report that under their projections the potential income loss for a family of four in 2020 would be $10,800 under a cap-and-trade system with Kyoto targets.

Cap and Trade Would Stifle Economy, Delay Transition to Cleaner Fuels - The Heartland Institute

Summary: This commentary emphasizes the arbitrary and economically-harmful qualities begat by cap-and-trade. Beyond subjecting the changing cap levels over time to political influences rather than market or scientific forces, the authors write that there are no cost-competitive alternatives to coal-generated energy available today to achieve these reductions. O’Keefe and Kueter argue that the caps on carbon emissions may freeze technological development and cause companies to “resist replacing their capital stock before the end of its economic life” since they will be coerced into meeting arbitrary goals. The authors also explain that cap-and-trade does not increase the cost of carbon (and thereby create an incentive to end use of carbon) and would increase the cost to businesses by forcing them to opt for more expensive fuels and to implement monitoring and reporting mechanisms to track their emissions and to acquire additional allowances if they exceed the emissions limit. O’Keefe and Kueter instead advocate for the continued development and use of new technologies and “rapid turnover of equipment.”