May 25 2010
No Kidding on Cap-and-Trade
Carrie L. Lukas
Surprise! Cap-and-trade programs make economies worse. This is the new finding from California's state budget office which has been evaluating the state's foray into a cap-and-trade regime. As the Wall Street Journal reports:
The study released May 13 concludes that "California's economy at large will likely be adversely affected in the near term by implementing climate-related policies that are not adopted elsewhere." While the long-term economic costs are "unknown," the study finds that AB-32 will raise energy prices, "causing the prices of goods and services to rise; lowering business profits; and reducing production, income and jobs."
The economic reality here is what the Legislative Analyst's Office calls "economic leakage." That's jargon for businesses and jobs that will "locate or relocate outside the state of California where regulatory-related costs are lower." The study says the negative impact on most California industries will be "modest," but energy-intensive industries-specifically, aluminum, chemicals, forest products, oil and gas and steel-"may significantly reduce their business activity in California."
Yes, some new "green jobs" will be created. But the "net economywide impact," it says, "will in all likelihood be negative." Sorry. ...
It should be obvious to Members of Congress that similar jobs and business "leakage" will strike the U.S. in general if federal cap and trade passes. The hardest hit industries will leave the U.S. and relocate to the likes of China and India where marginal costs are lower. The recently introduced Kerry-Lieberman bill all but concedes the point by calling for tariffs on products from countries that don't impose similar energy costs.
IWF has written before about what cap-and-trade programs will mean to families: higher energy costs, higher costs for goods and services, and fewer jobs.
During the health care debate, proponents of the government take-over argued that somehow the government can expand coverage and lower costs, without sacrificing quality. Americans understood that this just didn't add up (and they are increasingly being proven right). Cap-and-trade proponents make similar arguments that driving up the cost of energy will be a boon for job creation because it will encourage more investment in "green" energies. The American people aren't buying it. They know that the logic is simply flawed. Let's hope this time Members listen to their constituents.