A new study of the potential impact of the climate-friendly Waxman-Markey (W/M) Bill on manufacturing, jobs, energy prices and overall economy concludes that its enactment would have strong negative consequences — including reducing economic growth by 2.4 percent and costing 2 million jobs by 2030, according to a report in The Hill.
The study sponsored by the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) analyzes W/M under low- and high-cost cases with respect to a baseline that projects the future in the absence of the bill.
W/M sets targets that would reduce green house gases (GHG) emissions to 17 percent below 2005 levels by 2020; 42 percent below 2005 levels by 2030; and 83 percent below 2005 levels by 2050. The price of carbon permits (what companies must pay to emit CO2) could reach between $48 and $61 per metric ton of CO2 (MT) by 2020 and could increase to between $123/MT and $159/MT by 2030.
This bill passed the House of Representatives by a slim margin (219-212) earlier this summer. The Senate is expected to release its version of climate legislation in September.
Following is a summary of the study’s findings.
Impact on Jobs The jobs impact of W/M is delayed by the free allocation of permits and generous carbon offsets. By 2030, as emission reduction targets tighten and other W/M provisions phase out, U.S. jobs decline by 1.8 million under the low cost case and by 2.4 million under the high cost case. The primary cause of job losses is lower industrial output due to higher energy prices, the high cost of complying with required emissions cuts, and greater competition from overseas manufacturers with lower energy costs.
Decrease in Disposable Household Income Higher energy prices would have ripple impacts on prices throughout the economy and would impose a financial cost on households of $118 to $250 by 2020 and $730 to $1,248 by 2030.
W/M’s Impact on Energy Prices Most energy prices would rise under W/M, particularly coal, oil and natural gas. By 2020 gasoline would increase between 8.4 percent and 11.1 percent, electricity between 5 percent and 7.9 percent. By 2030, gasoline prices increase between 20 percent and 26.1 percent, natural gas by 56.3 percent and 73.5 percent while electricity prices increase by up to 50 percent. W/M would reduce GHG emissions from all sectors of the economy (transportation, residential, commercial, and industry); however, as the largest emitter of GHGs, the primary impact would fall on the electric sector. W/M would result in the electric industry shutting down most carbon-based generation and/or using expensive, as yet unproven technology, to capture and store CO2. To meet the stringent goals of W/M, the electric industry would also have to substitute high cost technologies, such as biomass and wind, for conventional generation.
Impact on Economic Growth High energy prices, fewer jobs, and loss of industrial output are estimated to reduce U.S. Gross Domestic Product (GDP) by between $419 billion and $571 billion by 2030. GDP falls by 1.8 percent under the low cost case and by 2.4 percent under the high cost case in 2030. Cumulative GDP losses range between $2.2 trillion and $3.1 trillion dollars over the 2012-2030 period.
Impact on Industry Several major economic sectors will be affected by W/M’s provisions. By 2030 manufacturing output decreases by 5.3 percent to 6.5 percent, primary metals output falls by 23 percent to 29 percent and stone and glass decrease by 14 percent to 17 percent. Other industries experiencing significant declines are motor vehicles, computer and paper. In addition, the general shift away from coal would result in a 76 percent reduction in coal production and electricity production would fall by 13.7 percent to 16.9 percent by 2030. These losses will have a lasting effect on the economic base of the United States.
Impact on Low Income Families The impacts of W/M will be felt especially by the poor, who spend a greater share of their income on energy and other goods than other income brackets. By 2030, higher energy prices mean that low income families (with average incomes of $18,500 will spend between 16 percent and 17 percent of their income on energy under W/M compared to a projected 14 percent without W/M. Others on fixed incomes, such as the elderly will also suffer disproportionately.
The Hill noted in its report that environmentalists criticized the study for underselling the development of climate-friendly sources of power and not releasing other assumptions NAM and ACCF fed into the computer model to get their economic forecast.
Margo Thorning, senior vice president and chief economist at ACCF, said the assumptions used in the NAM-ACCF study were based on information gathered from business leaders and energy experts.
“We’ve bent over backward to be generous about how quickly new technology can be put in place” that would help minimize the costs of the climate bill, Thorning said.
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