The Economic Effects of Proposed Cap-and-Trade Legislation

President Obama and several members of Congress have proposed legislation to reduce greenhouse gas (GHG) emissions in the United States. The Waxman-Markey Bill currently before Congress would bring GHG emissions, and hence carbon emissions, below 2005 levels in steps – 3% below those levels by 2012, 20% by 2020, 42% by 2030, and 83% by 2050.

Waxman-Markey would create a “cap-and-trade” system, under which U.S. producers would receive tradable permits to emit greenhouse gasses. Producers buying the permits would, in effect, pay a tax for the privilege of emitting greenhouse gasses currently emitted without charge. The resulting “carbon tax” would have an effect on production and employment similar to an explicit excise tax on production. More

Green Jobs a Cost, Not Benefit, to the National Economy

Academic Study Finds Critical Economic Flaws and Assumptions in Previous Reports

BOSTON, MA – Recent studies forecasting the potential economic benefits of government green job programs are critically flawed and erroneously promote these jobs as a benefit, according to a report released today by The Beacon Hill Institute (BHI) at Suffolk University.

The economic analysis reviewed the primary claims of three of the most influential green jobs studies and found serious economic flaws in each. “Contrary to the claims made in these studies, we found that the green job initiatives reviewed in each actually causes greater harm than good to the American economy and will cause growth to slow,” reported Paul Bachman, Director of Research at the Beacon Hill Institute, one of the report’s authors.

The studies reviewed by BHI include:

* The United Nations Environment Programme, International Labor Organization, International Trade Union Confederation’s Green Jobs Initiative, “Green Jobs: Towards Sustainable Work in a Low-Carbon World.”

* The Center for American Progress, “Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy.”

* The U.S. Conference of Mayors, “U.S. Metro Economics: Current and Potential Green Jobs in the U.S. Economy” prepared by Global Insight.

The authors of the BHI critique identified a fundamental error in each of these studies, specifically "counting the creation of a green job as a benefit and rationale for its proposed program in and of itself.

”The BHI study also stresses that “Jobs - green or otherwise - are not benefits but are instead costs. If the green job is a net benefit it has to be because the value the job produces for consumers is greater than the cost of performing the job. This argument is never made in any of these three green jobs studies.” MORE

Full Text of Study (PDF)
Press Release (PDF)

BHI: Western Climate Initiative's Cap and Trade Program will cost California jobs and income

Backers' forecast is 'flawed,' say authors of
new report

BOSTON, MA- Specific proposals that several Western states, including California, would implement to comply with a proposed cap-and-trade carbon emissions control pact would destroy jobs and erode income, according to a report co-released by an economics institute.

In a thorough review of the claims made by the Western Climate Initiative, the Beacon Hill Institute at Suffolk University in Boston identified several flaws made by the seven-state consortium, calling into question so-called cost savings ranging between $11.4 billion and $23.5 billion. These flaws render WCI’s projections useless in determining the initiative’s cost to state economies.

The authors of the report write, “Using the Western Climate Initiative’s own projections of increases in fuel costs, BHI finds that the policies will decrease employment, investment, personal income and disposable income. More.

PDF Press Release
Full Report

Sales Tax Hike Will Destroy Jobs and Investment in Massachusetts

BOSTON, MA- A proposal to increase the state sales tax by 25 percent would destroy approximately 12,000 jobs and discourage nearly $51 million in business investment.*

Using its trademark State Tax Modeling Program (STAMP), BHI found that the average person would lose approximately $457 per year in wages.

The institute also pointed out that the increase in the sales tax would not result in expected revenues. The actual increase, given the dynamic effects would be $649 million not $900 million.

The sales tax would continue to be regressive with the increase falling disproportionately on low income earners. A 20 percent increase would represent 0.51% of the household earning less than $10,000 while only 0.26% of the income of a household earning more than $70,000.

BHI FaxSheet: Massachusetts Sales Tax Hike Would Destory 12,000 Jobs and $51 million in Investment (Updated May 2009 from earliery analysis of proposed increase to 6%)