Tuesday, May 19, 2009

Economic Impact of Cap and Trade on US Economy

The conservative Heritage Foundation’s Center for Data Analysis used an econometric model of the U.S. economy to measure the projected impact of the cap and trade bill now before Congress and found that by 2035 it would:
  • Reduce aggregate gross domestic product by $7.4 trillion;
  • Destroy 844,000 jobs on average, with peak years seeing unemployment rise by more than 1,900,000;
  • 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;
  • And increase inflation-adjusted federal debt by 29 percent, or $33,400 more per person — again after adjusting for inflation.
Just imagine this analysis being half right - its very serious. Gains in emissions ? Almost none. As one Democrat has said the bill is "environmental socialism" - all pain for almost no environmental gain.


Richard Eddington said...

I wanted to comment on a previous post concerning energy policy. I was curious to know how you reached your analysis of energy poverty in the United States. I am accustomed to seeing energy poverty in the context of developing countries' poorest citizens who lack all access to the traditional energy grid, not Americans who cannot pay their heating bills.

In the sense of energy poverty in the developing world, renewable energy is a very real solution, with less cost than establishing or tapping into the existing urban infrastructure. Biomass generators can not only provide electricity but also compost for fertilizers. Solar panels and photovoltaic sources also provide energy crucial in areas hit frequently by tropical storms that wipe out traditional infrastructure and eliminate the hours spent, usually by women and children, in collecting firewood. Renewable energy also cuts down on respiratory illness arising from fine particulate matter and soot from kerosene, charcoal, or wood burning stoves.

In an American context, yes the cost of switching to more renewable energy is more costly, given the existing infrastructure. Yet your Luddite attitude towards the jobs lost via renewable industries belies your self-titled status as "imagineer." What are the statistics of job creation? Perhaps jobs are lost, but new industries are created as technology and financial incentives improve.

America has no social safety nets; blaming rising energy costs and the inability of American real incomes to match their increase upon a switch to renewable fuels is myopic and simplistic. Out-of-pocket costs in the short run or at the margin may increase, but social benefits from decreased emissions in the air may pass on through savings in health care costs.

As my family comes from a rural area in the Northeast who lost power for weeks during a deadly ice storm and had to be relocated from their homes for a week, options for renewable, self-sufficient energy aside from the main grid is looking better than ever. Look back to the years of the post-Great Depression where rural energy initiatives, albeit not green or cleantech, were implemented to extend electricity to all reaches of America.

We do not have unlimited options, and we face a painful shift as we transition through the growing pains of growing green, but staying on the status quo, impervious to both the global geopolitical insecurities and the health risks arising from continued fossil fuel production is far more dangerous indeed.

Stephen Murgatroyd said...

I also lived through rolling black outs in the UK during the Heath administration for 6 months - so know what having energy shortages means..

Look at the evidence from Spain concerning net job loss in the economy as a whole and the systemic impacts of alternative energy on the economy - I think you may be surprised.