Federal Climate Bill Will Intensify Oregon’s Recession

As one bad idea dies, another is born. The state-level push to be part of a regional cap-and-trade program died in the last legislative session (which ended June 29), but an even more ominous national cap-and-trade program is on the table for Oregonians.

For years, greenhouse gas emissions have increased while global temperatures have declined. Even so, many policymakers still conclude that it is time for the federal government to begin regulating the release of emissions into the atmosphere in order to attempt to stabilize the global climate. Last month, the U.S. House of Representatives passed HR 2454, known as the American Clean Energy and Security Act of 2009 or the Waxman-Markey bill. If also passed by the Senate and signed by the President, the bill would implement a federal cap-and-trade program. Advocates of the bill have proclaimed that it will be an opportunity to create a new clean energy sector that will be a boon to the United States’ weakened economy. Unfortunately, this isn’t true. A federal cap-and-trade program simply would be a complex energy tax leading to significant economic costs for the nation and for the state of Oregon.

The American Clean Energy and Security Act of 2009 attempts to reduce emissions to approximately 20% below 2005 levels by 2020 by “capping” total emissions at some arbitrary level and then issuing permits, each of which allows a certain amount of emissions. This cap would become more stringent over time. If a regulated facility wishes to emit more than its endowed permits allow, the facility would have to purchase permits in the market. Sellers would be regulated facilities that emit less than their permits allow, either because they have low-cost ways of reducing emissions, reduce their overall output or choose to go out of business.

Although it is nearly impossible to calculate the benefits (if they even exist) from reducing emissions, the costs to the Oregon economy due to a federal cap-and-trade program can be calculated. In September 2008, QuantEcon, Inc., under contract with Cascade Policy Institute, produced an economic study entitled “Oregon Greenhouse Gas Reduction Policies: The Economic and Fiscal Impact Challenges” that assessed the quantifiable and measurable costs in reaching Oregon’s own greenhouse gas reduction goals. The authors found that the strength of the economy, energy use and carbon dioxide emissions are mutually dependent (or statistically cointegrated, as economists would say). Because of the absence of any “silver bullet” technology to reduce emissions, reaching the state’s ambitious emission reduction goals would lead to considerable economic costs. Assuming that the 2020 federal reduction goal is applied to each state equally, the model is flexible enough to show that the cost to the Oregon economy from a federal cap-and-trade program is also expected to be significant.

With projections of Oregon population growth to 2020, emissions under the federal cap-and-trade program would have to drop severely to approximately 35% lower per person than today’s emissions. This drastic reduction would lead to decreased economic growth for the state. The study predicts that Oregon’s economic growth to 2020 would be approximately $41.3 billion lower than without the emissions goals. This means that recovering from the recession will be even more difficult for the state.

Currently, Oregon is dealing with one of the highest unemployment rates in the nation, and a federal cap-and-trade program will only make employment opportunities worse. The study predicts 2020 unemployment levels would be 3.6% higher than without the emissions goals. This means there will be approximately 70,000 fewer jobs in Oregon than would have existed in the absence of a federal cap-and-trade program.

Also, the study’s figures estimate that 2020 state and local tax revenues will be 10.9% ($3.7 billion) lower than without the emissions goals. Thus, state and local governments struggling to balance their budgets would have to cut services substantially and/or increase taxes.

A federal cap-and-trade program will be a hidden energy tax on every product consumed by everyone, all under the guise of “saving the planet.” Although the cost of the federal legislation may not hit all states equally, the cost to Oregonians of the American Clean Energy and Security Act will be significant. If the bill is passed by the Senate, the state of Oregon will see job losses, government revenue shortfalls and significant decreases in economic growth that will further intensify its impact on a recession-ridden state.

Todd Wynn is the climate change and energy policy analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Posted by at 11:30 | Posted in Measure 37 | 21 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Joe

    All this while much of the country enjoys record cold weather this summer.
    What buffoons.
    What idiots.
    What morons.
    This is not name-calling. This is what they are.

  • Anonymous

    I can’t wait for all the “experts” who’ve been telling us all year that weather isn’t climate (in response to the record lows and record low highs all over the country this summer) to point at this week’s heat wave as a sign of global warming.

  • v person

    Why not use the CBO economic analysis for the actual bill that the House passed instead of extrapolating from an economic analysis for an entirely different bill designed for only one state? The CBO analysis says the 10 year costs of the Waxman Markey bill are very small.

    • Todd

      The original economic analysis was not focused on any bill here in Oregon. The analysis developed relationships between certain variables….energy, emissions, gdp, tax revenues, employment etc. These relationships (known as elasticities) are used to analyze how meeting the state’s GhG reduction goals would affect gdp growth, employment, and government revenues.

      The analysis was simply updated to account for the federal goals instead of the Oregon goals. This analysis shows what could happen to the state if every state had to meet the overall 2020 federal reduction goal.

      Some facts on the CBO analysis:

      The CBO analysis does not include the decrease in GDP as a result of the bill or reaching the goals in the bill. The GDP loss in 2020 would be $161 billion (in 2009 dollars) according to Heritage Foundation analysis.

      The CBO analysis is an accounting analysisof the flow of allowance revenue; it is not an economic analysis of the true opportunity cost of the bill.

      The CBO admittedly ignores economic costs such as the decrease in GDP as a result of the bill and the fact that consumers and business will change their behavior as a result of higher energy prices.

    • Todd

      Although I did not bring it up in this commentary, it is important to note the lack of benefits of passing Waxman-Markey.

      The federal goal is not necessarily to reduce GHGs but ultimately to reduce future global temperatures. If the bill does not adjust the ‘global thermostat’, is any cost worth it? No.

      The benefits of the Waxman-Markey cap-and-trade bill are pretty much immeasurable. Climatologist Chip Knappenberger(using IPCC scenarios and sensitivities) projected that Waxman-Markey would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree Celsius at the end of the century…..approximately 2 years of avoided warming. Of course, this is assuming the IPCC assumptions are correct…..that is a discussion for another day.

      • v person

        OK, so in a $14 trillion economy we might lose $161 billion in growth? That amount would not even be noticed 10 years from now. Its a way small price to pay.

        Global temps are not going to be “reduced” for many decades no matter what we do because of the CO2 already in the atmosphere. The point, and I think you are smart enough to get this, is to stop adding to the amount so that we can flatten out the high point of the curve sooner rather than later and keep the peak temp gain at a level that we can cope with.

        • Todd

          The Brookings analysis of the Waxman-Markey bill finds loss in personal consumption of $1-2 trillion in present value. The more stringent carbon targets in subsequent years produce even higher costs.

          The National Black Chamber of Commerce found the following adverse effects from Waxman-Markey: In 2015, GDP would be 1 percent ($170 billon) below the “no cap-and-trade bill” baseline. In 2030, GDP will be 1.3 percent ($350 billon) below the baseline.

          The Heritage Foundation’s Center for Data Analysis found that, for the average year over the 2012-2035 timeline, average GDP lost is $393 billion, hitting a high of $662 billion in 2035. From 2012 to 2035, the accumulated GDP lost is $9.4 trillion (in 2009 dollars).

          Waxman-Markey will most likely be the largest tax increases in american if not world history all under the guise of ‘saving’ the planet.

          I am amazed that you consider these costs to be minimal. I understand hundreds of billions and trillions don’t seem like much anymore due to the ‘stimulus’ packages but it is a lot of money and significant cost.

          I am even more amazed that even knowing there is no benefits to the program, you still advocate for it.

          All cost, no benefit=bad public policy.

          • v person

            No benefits? Limiting temperature increases has no benefits? And not limiting them has no costs? I think we are occupying 2 different realities here Todd.

          • Todd

            “No benefits? Limiting temperature increases has no benefits?”

            We are obviously on two different pages.

            Take a look at my last comment

            “The benefits of the Waxman-Markey cap-and-trade bill are pretty much immeasurable. Climatologist Chip Knappenberger(using IPCC scenarios and sensitivities) projected that Waxman-Markey would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree Celsius at the end of the century…..approximately 2 years of avoided warming.”

            This is the ‘benefit’ you speak of? Hardly anything to spend trillions on.

            It is a sad sight to see when people are advocating for spending trillions of dollars on an issue based on climate models of dubious quality (after all….ridiculous doomsday predictions are all based on models that attempt to quantify all of the complex interactions on earth into a ‘simple’ mathematical representation….this is hardly science and hardly accurate enough to base public policy off of).

            There are many other things much more important we could be spending our money on that have real measurable benefits and advocating for a cap-and-trade program is simply detracting from real solutions to real problems.

          • dan

            v person,

            This is way off base. Look it up. Waxman-markey is a joke. it wont do a thing to reduce global temperatures. Even your hero, James Hansen, says it is useless and wont accomplish anything.

          • v person

            I’ve read different critiques of the bill. Most stay it starts slow, and gives away too many permits, but will become more effective over time. I’m no expert, but I’m ok with it.

            Todd…you are engaged in sophistry here. You dismiss the climate models, but then accept the economic models that are presumably based on the climate models. You are smart enough to be obtuse about this issue. Doing nothing to reduce CO2 presents a risk to society. That risk is darn hard to calculate sine we have no experience with a rapidly warming world. New Orleans under water alone will cost hundreds of billions in lost capital and relocation expenses, not to even mention the disruption of people’s lives. Loss of crops, loss of species, loss of forests to fires, all these are risks we run by waiting. And the longer we wait the more atmospheric CO2 there is to deal with.

            Easing the throttle back on CO2 emissions is an imperfect solution, and of course it can’t “lower” the temperature because we have 200 years worth of CO2 already in the atmosphere to deal with, plus even as we throttle down we are still increasing the total for some time. What we have is a compromise solution that you are ridiculing because it is a compromise, but then you teat it as if it is a radical departure, which it isn’t.

            And I will ask you. Do the economic models you cite include a global treaty to reduce carbon or are they only dealing with the US? Because at the end of the day this has to be a global solution, not a US only solution as you well know. Thus modeling US contributions only makes no sense at all.

          • jim karlock

            And I ask you:

            Where is the evidence that CO2 can actually cause dangerous warming?

            I have been asking this question for months and no one has ever provided any evidence. (Except that idiot David Appell who tried to pawn off the IPCC’s models not being able to model recent temperatures without CO2 as actual evidence of warming instead of incompetence.)


  • Dave A.

    The sooner the public wises up and realizes they’ve been had both of these jerks the sooner they will have to earn a real living. I’m amazed that a blowhard lawyer d**k like Waxman has managed to stay in Congress so long.

  • Anonymous

    v person-Appel-dean-Bradbury,

    What a complete jerk. There is absolutely nothing to show these policies will reduce anything or save anything. “Easing the throttle back” on CO2 emissions will do nothing while soaring energy costs as Hansen et al have called for.
    Your juvenile trotting out of the scare bromides is old hat and laughable.

    Just as is the insane idea that this insanity is some sort of compromise.

    Your scenarios of “New Orleans under water. Loss of crops, loss of species, loss of forests to fires, all these are risks we run by waiting” is as real as Lubcheno’s fabrications, polar bear depletion, NW snow pack loss and many other blatant falsehood your kind peddle.

    Human CO2 emissions are not causing the planet to warm, and waiting won’t trigger it or increase it any time, ever.
    Especially as technology advances and energy sources evolve.

    Stop lying.

    • v person

      “What a complete jerk…. juvenile…insane…fabrications….blatant falsehood …lying.”

      You really know how to pack it in. Thanks for elevating the debate.

  • Anonymous

    No where near the packing in you’re engaged in with the blatant misinformation your’e spreading.

    Any of the particular characterizations or label of the ilk who are perpetrating the AGW fraud are a deserved part of the debate.

    If you’re too lost to figure out that that blatant lying to advance an agenda isn’t civil too bad.
    Your and yours deliberately avoiding the litany of examples of lies by officials is far worse than any accurate labels you don’t like hearing.

    Tell me, how does one elevte a debate with political hack peddling BS?

    Endless requests for you and your to address the many examples of egregious falsehoods draws no feedback.
    All that’s left is to point out your lack of integrity etc.

  • OR_libertarian

    I’d just like to mention that a significant portion of Oregon’s economy is based in the production of wine and beer. Many of us just focus on energy emissions, but I’d like to remind people that the fermentation process creates tons of CO2. I have been able to visit many of the local wineries and breweries here in Oregon, and many of these operations are of the smaller, craftsman variety. It is very common that these businesses just release the CO2 openly in the air as the fermentation process carries along.

    Think about what this legislation could do to a very robust industry in Oregon! All these wonderful varieties of wines and beers may not exist in the future if these smaller businesses cannot restructure their facilities to meet whatever regulations will be imposed upon them. Already the “sin tax” on alcohol has dramatically increased to bring the state more revenue. I am beginning to think that no one really knows the vast implications this legislation could have, and how far reaching and invasive it will become.

  • Rupert in Springfield

    Isn’t the point of all these things really just to transfer money from the average American to the well connected elite? I mean Al Gore himself only believes in this stuff just so far as its a great way for him to make money. They guy flys around in a private jet telling us to conserve. It’s ridiculous. Here in Oregon we still have the stupid ethanol mandate just so some guy in eastern Oregon can make a bunch of money.

    I for one would support a tax that would just take the money and transfer it directly to the Al Gores of the world. Why go through the silly rigmarole when it really all boils down to that? I’m sick of having to get a brand new lawn mower repaired to go through this silly ethanol stuff when it would be much more efficient and a lot less hassle to just simply send in a check to Ted to distribute to his pals.

    • v person

      “Isn’t the point of all these things really just to transfer money from the average American to the well connected elite? ”

      Actually no. If that were the point, then a simple tax on carbon emissions would be a more direct way to accomplish that, as you suggest. The point is to reduce CO2 and build new energy alternatives as painlesly as possible.

  • Anonymous

    Reducing CO2 emissions is the highest cost and most painful way to acheive new energy alternatives. It wastes billions and accomplishes nothing. You’re duped, dishonest and advocating insanity.

  • Terry Parker

    First of all, we all know Waxman is on the take. That was proven during the Democratic convention when he got the media kicked out of a corporate sponsored party where the booze was free flowing and he was whooping it up.

    As for Oregon: it is green deficient, at least the green in the form of dollars that remain in the pockets of Oregonians. Having the nation’s second highest employment, all the hot air being spewed out from environmental zealots and eco eccentric politicians is for the most part pumping the economy dry. They aren’t talking about the jobs they are eliminating – only empty promises for the future – most of which will require taxpayer subsidies draining the economy even more. .

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