(Albuquerque, NM)—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 an economics institute.
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.”
New Mexico is one of seven full participants in WCI along with Arizona, California, Montana, Oregon, Utah, and Washington. BHI found that WCI’s policy recommendations “would have substantial negative effects” on the economies of its member states. Under a scenario in which 100 percent of greenhouse gas emission permits would be auctioned off to emitters in a cap-and-trade scheme, BHI determined that the seven states:
Would lose from 103,931 to 251,674 private sector jobs, while the permit revenue would allow the states to hire 57,269 to 142,241 state employees;
Would put investment by firms at serious risk by slowing investment in the region by $548 million to $1,448 million;
Would diminish total personal income, which would fall by $6.35 billion to $18.31 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. New Mexico could lose as many as 4,689 net jobs, $1.2 billion in personal income, and $219 million in per capita disposable income.
“Like many of New Mexico’s taxpayers, the Rio Grande Foundation is fearful that a cap-and-trade program such as the one contained in the Western Climate Initiative will only increase the economic burdens on both rate-payers and our state’s business community during the current economic downturn. As the Beacon Hill study concludes the WCI will actually reduce investment, personal income, and disposable income at a time when encouraging financial security should be job one for our lawmakers,” said Rio Grande Foundation President Paul Gessing.
Gessing added: “The fear is not theoretical. Only weeks ago, the CEO of New Mexico’s largest electric utility, Jeff Sterba of PNM, said that PNM could build a new coal-fired generating plant that would generate electricity for 5 cents per kilowatt hour, one of the most economical options available. Yet Sterba noted, according to an interview in the Albuquerque Journal, that ‘climate change regulations, (such as a) cap and trade system, could drive that cost in the future to 10 or 15 cents for the same kilowatt hour of electricity.’
“Doubling or even tripling the price of electricity to New Mexico consumers would be a backbreaking blow to individuals, businesses and industries and devastating to the New Mexico economy since 80 per cent of the electricity used in the state comes from coal generation.
“And that is only one (albeit drastic) negative blow to the New Mexico economy. The oil and gas economy, the mainstay of the New Mexico economy and the chief provider of taxes for education and other government services, also would be hit hard.
“Cap and trade is every bit a tax – even though its supporters work hard to call it anything but a tax. It is a tax and one that would hit New Mexico and its people hard indeed.”
The complete study is available at http://www.beaconhill.org/