The Thomas Jefferson Instit ute for Public Policy is a non-partisan research and education organi zation de voted to improvi ng the lives of the people in Virginia. The Institute wa s organized in 1996, and was the only state and local govemm ent focused pub lie policy foundation in Virgi nia based on a philosophy of lim ited government, free enterprise and individual responsibility. It is a “solutions tank” seeking better ways to accomplish the policies and program s currently be ing undertaken by state and local government – always based on the Ins titute’s underlying philosophy. The first study was published in February 1997.
The work of the Thomas Jefferson Institute for Public Policy is geared toward educating our political, business and community leadership about the issues facing our society here in Virg inia. The Institute offers creative solutions to these problems in a non-partisan manner.
The Thomas Jefferson Institute is a fully approve d foundation by the Internal Revenue Service. It is designated a 501 ( c ) 3 organization and contributions are tax-deductible under the law. Indivi duals, corporati ons, associations and foundations are inv ited to contri bute to the T homas Jefferson Institute and participate in our programs.
For more information on the programs and publications of the Thomas Jefferson Institute, please contact:
Thomas Jefferson Institute for Public Policy
9035 Golden Sunset Lane Springfield, Virginia 22153
This paper, “Economic Impact on Virginia from Proposed Cap and Trade Legislation ” is published by the Thomas Jefferson Institute for Public Policy. This paper does not necessarily reflect the views of the Thomas Jefferson Institute or its Board of Directors. Nothing in this study should be construed as an attempt to hinder or aid any legislation.
As the country is immersed in the gigantic health care debate, there remain other important issues facing our economy. One of these is the pending “Cap and Trade” legislation pending in Congress known as the Waxman-Markey bill.
Climate Change is a big issue and new scientific facts are surfacing regularly to challenge the cause of climate change and even if the earth is actually warming. But that is an argument for another day.
The “Cap and Trade” legislation that passed the House of Representatives needs to be analyzed from an economic impact point of view and that is exactly what the Thomas Jefferson Institute and the Virginia Manufacturers Association wanted to do.
We have re-printed herein two important economic analyses of the current “Cap and Trade” legislation – the Waxman-Markey Bill. One was completed by The Heritage Foundation of Washington DC (Heritage) and released on August 19, 2009 and one by the Beacon Hill Institute (BHI) released in June of this year. William Beach, the Director of Heritage’s Center for Data Analysis is a member of the Board of Directors of the Thomas Jefferson Institute. The BHI is same high-powered group of economists that built the effective tax-and-spend economic model for the Jefferson Institute (Virginia STAMP) that was praised in the past by Republicans and Democrats.
These analyses show the huge impact that the proposed Cap and Trade legislation will have on our economy. It is the hope of the Thomas Jefferson Institute and the Virginia Manufacturers Association that this economic impact will be considered by our congressional delegation as it ponders what to do concerning this legislation.
According these analyses the proposed carbon tax will cost the residents of Virginia greatly over the next decades.
The Beacon Hill Institute analysis shows the carbon tax will cost Virginia more than $3 billion in 2020 and over $25 billion by 2050. This increased cost of energy will result in more than 65,000 jobs being lost by 2020 and more than 780,000 jobs by 2050 -a huge number of jobs in our state, real disposable income will decrease by close to $7 billion by 2020 and more than $17 billion by 2050, annual investment in our state will decrease by $911 million by 2020 and by close to $8 billion by 2050, and state and local governments would lose more than $1 billion in taxes by 2020 and more than $9 billion by 2050 in constant dollars. This impact would cause all sorts of problems to our economy as we strive to compete on a national and international level.
In the Heritage economic analysis the “Cap and Trade” legislation as passed by the House of Representatives will, on the average between the years 2012 & 2035, lower the state’s gross state product by over $8 billion, reduce personal income by over $3 billion, eliminate over 26,000 jobs, raise electricity price more than $500 per household and gasoline prices by 64 cents per gallon.
It is our hope that those involved in crafting and influencing public policy will look at this report and take its finding into careful consideration as national legislation is crafted to confront climate change. Economic growth and prosperity is the key to human advancement. There are ways other than the proposed “Cap and Trade” legislation that can be considered to allow both vibrant economic growth and protection from undue climate change. Indeed, many argue that the way to a more environmentally friendly world is to encourage true environmental stewardship and that means economic development in a way that improves our environment and maintains a strong incentive for economic growth. We have proven this can be accomplished here in the United States since our air and water are dramatically cleaner than was the case at the first national “Earth Day” over 40 years ago.
These two economic analyses are a caution to our elected leaders and others that whatever Climate Change/Cap and Trade legislation is ultimately crafted, it needs to be carefully reviewed and analyzed so that our quality of life and economic growth are not adversely impacted.
These two economic analyses are provided as a public service and is not meant to support or defeat any specific piece of legislation. We do hope that it adds to the public discussion surrounding is this important issue of “Cap and Trade.”
Michael W. Thompson Brett Vassey
Chairman and President President and CEO
Thomas Jefferson Institute for Public Policy Virginia Manufacturers Association
Thomas Jefferson Institute for Public Policy
No. 2585-VA August 19, 2009
David W. Kreutzer, Ph.D., Karen A. Campbell Ph.D., William W. Beach, Ben Lieberman, and Nicolas D. Loris
|The Waxman-Markey EffectFor the state of Virginia, over the 2012-2035 timeframe, on average the Waxman-Markey bill would:• Lower gross state product by $8,762 million,• Reduce personal income by $3,247 million,• Destroy 26,604 jobs,• Raise electricity prices by $532.18 per household,• Raise gasoline prices by $0.64 per gallon.Source: Heritage Foundation calculations based on the IHS/Global Insight U.S. Macroeconomic and Energy models.Table I *WM 2585-VA X heritage.orgOn June 26, a 1,427-page climate change bill introduced by Representatives Henry Waxman (D-CA) and Edward Markey (D-MA) passed the House by a narrow margin. The bill, also known as Waxman-Markey, includes a number of alarming provisions, chief among them a cap-and-trade program that would attempt to curb global warming by imposing strict upper limits on the emission of six greenhouse gases, with the primary emphasis on carbon dioxide (C02). The mechanism for capping these emissions requires emitters to acquire federally created permits (or “allowances”) for each ton of greenhouse gas emitted.Because these allowances carry a price—and because 85 percent of the United States’ energy needs come from carbon-emitting fossil fuels— Waxman-Markey is best described as a significant tax on energy use. Since everything Americans use and produce requires energy, the tax hits U.S. pocketbooks again and again. The Heritage Foundation’s Center for Data Analysis forecasts severe consequences, including skyrocketing energy costs, millions of jobs lost, and falling household income and economic activity—all for negligible changes in the global temperature.1Workers and families in Virginia may be wondering how cap-and-trade legislation would affect their income, their jobs, and the cost of energy. Implementing Waxman-Markey would put a chokehold on Virginia’s economic potential, reducing gross state product by $14.75 billion in 2035.WeHeritage ‘FoundationLEADERSHIP FOR AMERICA°||Consumers would be hit hard. Between 2012 (when the restrictions first apply) and 2035 (the last year of this analysis), the prices of electricity and gasoline will rise sharply when compared to prices in a world without cap and trade. By 2035, Americans living in the state of Virginia will see their electricity prices rise by $1,031.73 and their gasoline prices rise by $1.31 per gallon solely because of Waxman-Markey.This paper, in its entirety, can be found at: www.heritage.org/Research/EnergyandEnvironment/wm2585-VA.cfmProduced by the Center for Data AnalysisPublished by The Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002-4999 (202) 546-4400 • heritage.orgNothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.|
|Economic Indicators in VirginiaChanges in Virginia’s economy due to the Waxman-Markey climate change bill. Figures are adjusted for inflation.Utility Costs in VirginiaCosts for electricity and gasoline in Virginia with and without the Waxman-Markey climate change bill. Figures are adjusted for inflation.Extra costs due to Waxman-Markey bill Without bill|