NCPA - National Center for Policy Analysis


November 18, 2004

In 2003, Senators John McCain and Joseph Lieberman cosponsored the "Climate Stewardship Act" (S. 139). The bill would require greenhouse gas reductions from the commercial, industrial, utility and transportation sectors. It would set up a cap and trade system -- a cap on total emissions, a government auction of allowances to the affected industries permitting them to emit carbon dioxide, and permission for companies to trade these allowances among themselves.

A June 2003 analysis by the U.S. Energy Information Agency of the probable economic effects of the bill found that by 2025:

  • Gasoline would cost 40 cents more per gallon than it would otherwise.
  • The average household would spend $444.00 more per year on energy, including a 46 percent increase in electricity prices.
  • Gross domestic product would be $675 billion to $1.63 trillion lower, in present dollars.

A study by an economic research institute, the American Council for Capital Formation, underscored these findings, estimating that under S. 139:

  • By 2020, gasoline prices would increase 30 to 50 cents per gallon.
  • Electricity prices would increase 43 percent and average household income would fall by as much as $2,255 per year by 2020.
  • By 2025, U.S. GDP would be reduced by $164 billion to $525 billion per year.
  • More than 600,000 jobs could be lost in the United States.

Both analyses agree that the burden of these costs will be extremely regressive, disproportionately affecting seniors and low income households. This is because the poor and those on fixed incomes spend a greater portion of their disposable income on food and fuel than the average household and are the least able to afford newer, more fuel-efficient technologies, says H. Sterling Burnett, a senior fellow with the National Center for Policy Analysis.

Source: H. Sterling Burnett, "Regulating Greenhouse Gas Emissions," Brief Analysis No. 494,? November 18, 2004; "Analysis of S.139, the Climate Stewardship Act of 2003," Energy Information Administration, June 2003; and "Study Estimates Cost of McCain/Lieberman (SA 2028) Climate Bill on States," American Council for Capital Formation, July 2004.

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