Research & Commentary: Cap-and-Trade Program Would Cause Serious Economic Harm to Low-Income Oregon Families
Cap-And-Trade Programs Do Little To Reduce Emissions, Act As Regressive Tax
Once again, Oregon lawmakers have introduced a proposal for a cap-and-trade program, which would limit carbon-dioxide emissions by establishing a specific amount of carbon dioxide businesses or other organizations may produce and allowing additional capacity to be bought from other organizations that have not used their full production allowance. If an entity emits any carbon-dioxide emissions above the cap without purchasing additional allowances, the state will inflict a financial penalty.
The Oregon Senate proposal mirrors California’s cap-and-trade program by seeking to reduce carbon-dioxide emissions in the Beaver State to 45 percent below 1990 levels by 2035 and 80 percent below 1990 levels by 2050.
Advocates of cap-and-trade schemes point to California and the ten northeastern states that make up the Regional Greenhouse Gas Initiative (RGGI) as examples of how these programs can be successfully implemented. In reality, cap-and-trade programs do little to reduce carbon dioxide emissions. Even worse, they are akin to regressive taxes. Cap-and-trade programs disproportionally burden low-income households, who are less able to afford higher energy and gasoline costs that these programs are designed to produce.
When a similar cap-and-trade proposal was introduced in the 2019 legislative session, the Alliance of Western Energy Consumers (AWEC), whose members employ more than 170,000 people at 160 facilities throughout Oregon and Washington, submitted material to the Joint Committee on Carbon Reduction stating the proposed cap-and-trade program would be responsible for “cumulative compliance and energy cost impacts” exceeding $350 million by 2030 and more than $1.5 billion in 2040 for their members, who employ more than 50,000 Oregonians in industries such as “agriculture, aeronautics, air products, pulp and paper, food processing, information technology, healthcare and more.” The submission concludes that the “economic impacts and job losses to AWEC members and communities will likely be significant as a result of [cap-and-trade], as production in these facilities is curtailed and shifted to lower cost states.”
A Manhattan Institute study estimates the California cap-and-trade program raised residential electricity costs by as much as $540 million in 2013. California’s Legislative Analyst’s Office (LAO) estimates cap-and-trade will increase gasoline prices by 15–63 cents per gallon by 2021, and by 24–73 cents per gallon by 2031. LAO projects Californians spend $2 billion to $8 billion extra on gasoline by 2021. It also estimates the increased gasoline prices will cost $150–$550 per household by 2026. Retail electricity prices in the Golden State are also 58 percent higher than the national average, an 18 percentage point increase over where they were before cap-and-trade was enacted in 2012.
In a Cato Journal article released in 2018, David T. Stevenson of Delaware’s Caesar Rodney Institute writes there are “no added reductions in carbon dioxide emissions, or associated health benefits, from the RGGI program. RGGI emission reductions are consistent with national trend changes caused by new EPA power plant regulations and lower natural gas prices. The comparison requires adjusting for increases in the amount of power imported by the RGGI states, reduced economic growth in RGGI states, and loss of energy-intensive industries in the RGGI states from high electric rates.”
Further, RGGI states have experienced a 13 percent drop in goods production and a 35 percent reduction in the number of energy-intensive goods created. In five similar states, Stevenson found a 15 percent increase in goods production and only a 4 percent decrease in energy-intensive manufacturing. RGGI states also had the amount of their power imported from other states increase from 8 percent in 2007 to 17 percent in 2015.
According to the U.S. Energy Information Administration, retail electricity prices in the 10 RGGI states and California are currently 45 percent higher than the U.S. average. In Oregon, however, retail electricity prices are currently 15 percent lower than the U.S. average, thanks to the state’s abundant hydroelectric resources. Also, a 2019 Wallet Hub study found total energy costs in Oregon are near the lowest in the country.
Cap-and-trade programs simply aren’t needed, as carbon-dioxide emissions are already dropping in the United States, a development that is primarily due to the recent hydraulic fracturing revolution, which many cap-and-trade supporters continue to oppose, and the switch from coal-generated electricity to natural gas. In Oregon, per-capita greenhouse gas emissions have declined to 21 percent below their 1990 levels in 2017, and per capita energy use declined by 37 percent from 1972 to 2016.
Beaver State lawmakers should not enact cap-and-trade, which would have a minimal effect on carbon-dioxide emissions and cause considerable economic harm to all Oregonians, especially low-income Oregon families.
The following documents provide more information on cap-and-trade programs.
Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy
This analysis from Wayne Winegarden of the Pacific Research Institute shows the big government approach to fighting climate change taken by California and New York hits working class and minority communities the hardest. The paper reviews the impact of global warming policies adopted in California and New York, such as unrealistic renewable energy goals, strict low carbon fuel standards, and costly subsidies for buying higher-priced electric cars and installing solar panels. The report finds that, collectively, these expensive and burdensome policies are dramatically increasing the energy burdens of their respective state residents.
A Review of the Regional Green Gas Initiative
This Cato Journal article authored by David T. Stevenson of the Caesar Rodney Institute finds the Regional Greenhouse Gas Initiative has not shown any added emissions reductions or associated health benefits, has had minimal impact on energy efficiency and low-income fuel assistance, and has increased regional electric bills.
Less Carbon, Higher Prices: How California’s Climate Policies Affect Lower-Income Residents
This study from Jonathan Lesser of the Manhattan Institute argues California’s clean power regulations, including the state’s renewable power mandate, is a regressive tax that harms impoverished Californians more than any other group.
Five Myths of Cap-and-Trade
Articles supporting cap-and-trade programs rest on a number of fallacies. In this article by Todd Myers of the Washington Policy Center, Myers identifies and explores five persistent myths concerning cap-and-trade, including the belief that a cap on carbon dioxide emissions guarantees emissions reduction.
The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.
Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).
The Social Benefits of Fossil Fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.
Ten State Solutions to Emerging Issues
This Heartland Institute booklet explores solutions to the top public policy issues facing the states in 2018 and beyond in the areas of budget and taxes, education, energy and environment, health care, and constitutional reform. The solutions identified are proven reform ideas that have garnered significant support among the states and with legislators.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
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