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Research & Commentary: New Cap-and-Trade Bill Just as Bad for Washington as Every Previous Cap-and-Trade Bill

March 31, 2021

Cap-And-Trade Programs Do Little To Reduce Emissions, Act As Regressive Tax

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A proposal in the Washington Senate, the Climate Commitment Act, would create a cap-and-trade scheme designed to get the Evergreen State to get its carbon-dioxide emissions to “net zero” by 2050.

Under the bill, large carbon-dioxide emitters (those with emissions larger than 25,000 metric tons of carbon-dioxide equivalent) would have to register for the program and purchase emission allowances from the state, funds raised from which would be used by the Department of Ecology (DOE) to pay for “green” energy infrastructures projects, establish a “Climate Task Force” and an “Environmental Justice and Equity Advisory Panel,” among others.

The program would begin in 2023, and is expected to raise at least $237 million in the first year, another $973 million through 2025, and $1.03 billion from 2025 through 2027.

Advocates of cap-and-trade schemes point to California and the 11 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.

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.”

According to the U.S. Energy Information Administration, retail electricity prices in the 11 RGGI states and California are currently 40 percent higher than the U.S. average. Thanks to its copious hydroelectric power sources, however, the Evergreen State currently has some of the lowest retail electricity prices in the United States at 8.04 cents per kilowatt hour. This rate is 23 percent below the U.S. average. Moreover, a 2020 WalletHub study reports that Washington has the lowest total energy costs in the United States.

A cap-and-trade scheme would make everything more expensive for working families in Washington, raise costs for businesses, and have an insignificant effect on global carbon dioxide emissions. In the middle of the COVID-19 pandemic, when economic situations for many people are especially precarious, purposefully raising electricity prices is extremely foolish and hard-hearted. For the good of all Washingtonians, legislators should reject the Climate Commitment Act. 

The following documents provide more information about cap-and-trade schemes and fossil fuels.

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
https://www.pacificresearch.org/wp-content/uploads/2018/12/LegislatingEnergy_F_Web.pdf
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
https://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2018/2/cato-journal-v38n1-chapter-11.pdf
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
https://www.heartland.org/publications-resources/publications/less-carbon-higher-prices-how-californias-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
https://www.heartland.org/publications-resources/publications/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.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://www.heartland.org/publications-resources/publications/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
https://www.heartland.org/publications-resources/publications/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.

 

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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