Climate Hype Could Dim Maryland Economy
By Deneen Borelli
July 1, 2008
"Cap-and-trade" legislation, the de facto tax on fossil fuel use that currently provides about 85 percent of U.S. energy, was recently defeated in the U.S. Senate.
"America's Climate Security Act" (S. 2191), which sought to penalize companies that emit "greenhouse gases" alleged to influence climate change, failed to garner enough votes to end debate.
The bill's ignominious defeat, however, doesn't mean the issue is dead. In fact, political prognostication points to a Senate and White House next year that would be more favorable to cap-and-trade.
Some states already have their own mini-pacts. Maryland, for example, signed on with the Regional Greenhouse Gas Initiative, a coalition of northeastern and mid-Atlantic states. Maryland's goal is to reduce the state's carbon dioxide (CO2) emissions from electrical generators approximately 10 percent from present output by 2019.
Doing so will allegedly reduce global CO2 concentrations, cooling the planet.
This desire to do what feels good politically seems to be more important than doing what is scientifically and economically responsible.
According to Senate testimony by Dr. Anne E. Smith, vice president of Charles River Associates International (CRAI), S. 2191 would have cost up to $6 trillion nationally over 40 years. CRAI also estimates up to 3.4 million American jobs may disappear by 2020 if cap-and-trade regulations are enacted.
In Maryland, a loss of tens of thousands of jobs is expected from a cap-and-trade policy. A study of S. 2191 conducted by the American Council for Capital Formation (ACCF) found that "Maryland would lose 26,885 to 40,442 jobs in 2020 and 75,864 to 100,986 jobs in 2030," with losses attributed to "lower industrial output due to higher energy prices" and "greater competition from overseas manufacturers with lower energy costs." In other words, multinational corporations can avoid regulatory compliance costs by exporting jobs out of Maryland and the U.S. altogether.
The Free State's largest economic sectors - chemical and food products manufacturing - would show decreases in output of 7.2 to 8.2 percent and 1.6 to 2.4 percent, respectively in 2020 due to emissions caps, according to the ACCF. The study also suggests all manufacturing sectors would suffer output losses of between 3.2 percent and 4.4 percent by 2020.
Higher energy prices are expected to hit consumers in the pocketbook. The ACCF reported "Maryland would see disposable household income reduced by $1,191 to $3,863 per year by 2020 and $5,022 to $9,157 by 2030." This would undoubtedly precipitate an economic downturn since consumer spending now comprises two-thirds of our economy.
The impact of cap-and-trade on utility rates was quantified by Duke Energy, a major supplier of electricity to Midwestern states. According to their analysis, it is "estimated its customers' power bills could increase by up to 53 percent when the legislation [becomes] effective in 2012." The ACCF study found electricity prices in Maryland would increase by 103 to 135 percent by 2030 - and the price of gasoline would increase by 74 to 145 percent.
Skyrocketing energy prices would disproportionately harm low- and fixed-income consumers. A report by the nonpartisan Congressional Budget Office states "...most of the cost of meeting a cap on CO2 emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline." The report adds "...poorer households would bear a larger burden relative to their income than wealthier households would."
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