Cap-and-trade bill will cut jobs, not emissions

The swift passage of the Waxman-Markey “cap and trade” bill by the House of Representatives has left Americans asking what it will mean for both our environment and for our economy. Many promises have been made that this legislation will lead to an influx in green jobs while curbing greenhouse gas emissions. In February, we heard similar job-creation claims made about the economic stimulus package, but our nation’s unemployment rate is now approaching 10 percent. Is cap and trade now the latest answer to our country’s problems?

A more thorough look at the bill reveals that it — in theory and in practice — fails our economy and our environment. First, let’s look at the potential economic impact of the Waxman-Markey bill.

Under Waxman-Markey, the average American household will face higher energy costs. Estimates vary widely, with a range from $175 to $4,500 per year. Focusing on the low end of the range, the Congressional Budget Office estimates that cap and trade will cost $175 per household in 2020; however, CBO admits that this calculation does not take into account the loss in gross domestic product that will result from enacting this new scheme. According to the Heritage Foundation, GDP loss from cap and trade would be $161 billion in 2020, which means a loss of $1,870 per household per year. Under that scenario, the average monthly energy bill for a North Carolina family would double.

Perhaps worse, the higher cost of energy would prompt manufacturers to move their operations overseas to places like India and China, where greenhouse gas emissions are not regulated and the cost of energy and doing business is much lower. According to an analysis by the Heritage Foundation, almost 2 million American jobs could be lost in 2012 if Congress enacts the Waxman-Markey cap and trade bill.

We only need to look at California to understand that a national cap and trade will only encourage business to flee. In 2006, California enacted Assembly Bill 32, which implements a cap and trade system to take effect by the start of 2011. Even those who support the state’s cap and trade program worry that the bill could “create economic incentives to do business elsewhere.”

While I can appreciate the claim that we will create green jobs with this bill, we must also look at the net job creation (or loss), and not simply green job creation.  A recent study of Spain’s quest for green jobs sheds some light on this question.  The study found that nine jobs were lost for every four green jobs created. Put another way, 2.2 jobs were destroyed for every green job created. That does not sound like such a great deal for American workers and families. We certainly need green jobs — but they should not come at the expense of other energy and manufacturing jobs.

Despite much rhetoric to the contrary, even farmers stand to lose under Waxman-Markey. American Farm Bureau economists predict the bill will cost U.S. farmers approximately $5 billion in farm income each year by 2020. By 2030, the number increases to $13 billion annually. Even with the agriculture offset program proposed by Waxman-Markey, this will cost farmers billions.

From an economic perspective, it is clear that the Waxman-Markey bill would not only fail to create jobs in the U.S., it would ship them overseas. On top of that, it will impose new costs on Americans in the form of substantially higher prices for every-day essentials. But even if Americans are willing to pay the economic price that would come along with this regime, would an American cap and trade system as envisioned by Waxman-Markey actually reduce greenhouse gas emissions?

The answer is no, and here is why: By creating a market for the right to pollute, it is possible to establish a market-based mechanism for curbing certain types of pollution, if done right. The United States has used this approach to address nitrogen dioxide (NOx) and sulfer dioxide (SOx), and we have seen success with reducing these pollutants.

When it comes to greenhouse gas emissions, the same cap and trade model cannot work. Regardless of whether carbon dioxide is emitted in Bangor, Maine or Bangalore, India, it still ends up in the Earth’s atmosphere. So, unless rapidly industrializing countries like India and China also take action to reduce emissions, we will still find ourselves in the same ecological boat, except all of our jobs will be in India and China instead of here.

India and China have made it clear that they will not reduce emissions. Just last week, we were reminded yet again when G-8 leaders failed to secure an agreement from developing nations on this very issue. Even administration officials agree that U.S. action alone will not improve the environment. Testifying at a Senate hearing last week, EPA Administrator Lisa Jackson, when presented with an EPA chart that analyzed last year’s cap and trade bill, stated, “I believe the central parts of the EPA chart are that U.S. action alone will not impact world CO2 levels.”

So if Waxman-Markey is not good for our economy and not good for our environment, then what exactly is it good for? I believe the answer lies in good old-fashioned pork barrel politics, except now it has a green label on it. Americans are right to be suspicious of the claims being made about this legislation, just as they have been about the economic benefits of the stimulus bill. We should all take the time — time denied to members of the House — to read this 1,428-page bill very carefully as it makes its way through the Senate. The Senate and the American people deserve to know what Waxman-Markey really means to the American economy, our environment, and our way of life.

Burr is a member of the Senate Energy and Natural Resources Committee and ranking member of the National Parks Subcommittee.