Cap-and-Trade creates more certainty… for higher unemployment

The Senate Finance Committee yesterday convened a hearing to consider the impacts to jobs in the United States that would result from approval of pending climate change legislation. Given the state of the financial markets, how a carbon trading scheme would operate and who would be in charge of it, it is entirely appropriate that this Committee be involved in the process.

The National Petrochemical & Refiners Association (NPRA) submitted written testimony for the record highlighting the effects pending climate legislation would have on American energy jobs.  Simply stated, NPRA believes that both H.R. 2454 and S. 1733 would drive domestic gasoline and diesel production offshore, resulting in lost jobs for American workers and the outsourcing of our nation’s energy security to regions of the world that do not follow our already stringent environmental protections.  Dr. Kenneth Green of the American Enterprise Institute delivered essentially the same message to the Committee orally:

As energy prices rise, and American companies find themselves less competitive, businesses and jobs will flow to countries without greenhouse gas controls, and without stringent environmental controls of any kind, potentially allowing emissions to increase. The remedy to this, border tax adjustment, is only likely to cause a trade war that will further damage the U.S. economy. As increased energy costs raise the cost of all U.S. goods and services, consumption will decline, causing still more job losses.

The fact is that both the House and Senate versions of cap-and-trade legislation would have devastating impacts on American businesses across the economic spectrum, specifically on the domestic refining and petrochemical companies that fuel our economy and power American ingenuity – to say nothing of the adverse effects on their hundreds of thousands of employees and families.

The Energy Policy Research Foundation (EPRINC) concludes in a new study that even before domestic refiners are challenged by rising costs from carbon emissions, they will face a higher cost structure and increased international competition that threatens 2.5 million of the current 17.5 million barrels per day of domestic gasoline and diesel fuel refining capacity with permanent closure. This conclusion reflects the real, existing world circumstances that are impacting our industries and employees today.

EPRINC also found that “[i]n a scenario where [emissions] allowance costs reach $30/ton and 90% pass-through of product emission costs, total capacity losses could rise to as much as 8.0 million barrels per day and [direct/indirect refining] employment job losses could approach 400,000.”  In other words, hundreds of thousands of jobs outside the refining industry would also be lost – jobs that supply and support the domestic refining community and may originate in states where no refineries are physically located.

Some suggest that so-called “green jobs” would replace the jobs that would be lost under cap-and-trade.  First, one must question why Congress would even consider legislation they admit would result in lost jobs. Second, and more importantly, the alleged solution is hardly realistic. Should Congress not consider whether the quantity and quality of “green jobs” are enough to replace the existing jobs that will be lost under the current cap-and-trade proposals? Legislators should also consider whether it is fair and reasonable to ask a 15- or 20-year refining veteran with a strong record and career path to seek re-training in another sector that may not offer comparable salaries and benefits.

NPRA and its members do not oppose the creation of “green” or any other jobs. To the contrary, with national unemployment above 10 percent, we believe that policymakers should first preserve existing jobs, and then seek additional means for creating new opportunities for the American work force.