NCPA - National Center for Policy Analysis


May 14, 2008

Bills recently introduced in Congress would control greenhouse gas emissions through cap-and-trade schemes.  They would place an upper limit, or cap, on the overall level of emissions, and then distribute or sell to companies or industries emissions credits -- rights to emit specific amounts of greenhouse gases.  However, the proposals unveiled so far would harm the U.S. economy, disproportionately hurt the poor and fail to produce the environmental benefits promised by proponents, say H. Sterling Burnett, a senior fellow and D. Sean Shurtleff, a graduate student fellow with the National Center for Policy Analysis.

The Environmental Protection Agency (EPA) recently analyzed the three most prominent cap-and-trade Senate bills.  The EPA found any of the three would reduce U.S. greenhouse gas emissions below current levels.  For instance, using 2007 CO2 emissions levels as a reference, by 2050:

  • Legislation sponsored by Senators Jeff Bingaman (D-N.M.) and Arlen Specter (R-Pa.) would trim U.S. emissions by less than 4 percent below current levels.
  • A more stringent bill by Senators Joe Lieberman (I-Conn.) and John McCain (R-Ariz.), would reduce U.S. emissions nearly 16 percent.
  • One of the most restrictive bills, introduced by Senators Joe Lieberman and John Warner (R-Va.), would cut emissions 44 percent.

Unfortunately, these bills would substantially raise energy prices and reduce economic growth.  The greatest impact of the cap-and-trade bills on consumers would be higher electricity and gasoline prices.

  • An analysis from Science Applications International Corporation (SAIC) concludes Lieberman-Warner would increase gasoline prices 60 percent to 144 percent by 2030, and raise electricity prices 77 percent to 129 percent.
  • The EPA estimates Lieberman-Warner would increase gasoline prices $0.53 per gallon in 2030 and $1.40 in 2050.

Source: H. Sterling Burnett and D. Sean Shurtleff, "Capping CO2 Emissions, Boosting Energy Costs," National Center for Policy Analysis, Brief Analysis No. 617, May 13, 2008.

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