Cap-and-Trade Could Cost Washington as Many as 18,292 Net Jobs, $5.7 Billion in Personal Income Economic research institute finds deficiencies in Wes

Seattle – Specific proposals that several Western states 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 a national economics institute and the Washington Policy Center.

In a thorough review of the claims made by the Western Climate Initiative (WCI), the Beacon Hill Institute (BHI) at Suffolk University 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 WCI’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. While WCI claims the ‘design is also intended to mitigate economic impacts, including impacts on consumers, income, and employment,’ they fail to quantify the impacts.”

Seven states are full participants in WCI: Arizona, California, Montana, New Mexico, Oregon, Utah, and Washington. Beacon Hill Institute found that WCI’s policy recommendations “would have substantial negative effects” on the economies of its member states. The WCI has recommended three different cap-and-trade scenarios that consider “narrow” and “broad” market coverage and the use of offsets. Under a scenario in which 25 percent of greenhouse gas emission permits would be auctioned off to emitters in a cap-and-trade scheme, BHI, using their STAMP® (State Tax Analysis Modeling Program) model, determined that the seven states:

· Would lose between 35,177 to 165,397 private sector jobs, while the permit revenue would allow the states to hire up to 19,710 state employees

· Would put investment by firms at serious risk by slowing investment in the region by $1.6 billion to $4.5 billion

· Would diminish total personal income, which would fall by $10.2 billion to $47.71 billion per year

The proposals’ negative economic effects stem from the price and tax increases the states would impose on the energy and transportation sectors. Because a cap on carbon emissions is effectively a tax on energy production that is passed to industry, businesses and consumers, the effect is likely to drive commerce and jobs to other states or countries.

“The cap-and-trade program would increase input costs for producers located within WCI states, placing them at a competitive disadvantage to those outside the areas,” BHI noted. “The pressure would be especially acute for producers that utilize large amounts of energy in the production process, such as manufacturers.”

Beacon Hill found that none of the seven WCI states would escape economic harm should cap-and-trade be imposed. Washington State could lose:

· 18,292 net jobs

· $5.71 billion in personal income

· $302.54 in per capita disposable income

If Washington were to adopt the WCI cap-and-trade proposal based on an auction of 25 percent of emission allowances. The environmental community in Washington have advocated for 100 percent auction of emission allowances.

“Past studies claiming to show cap-and-trade creates new ‘green’ jobs have ignored the costs of those policies,” said Todd Myers, environmental director at the Washington Policy Center in Seattle. “This study shows that increasing taxes and regulations will likely kill jobs and prosperity at a time when we can least afford it.”