Western climate plan would cost jobs, study says

A new study finds that a carbon cap-and-trade plan in the western US could slow investment, cost the region hundreds of thousands of jobs, and cut personal income for millions of workers.

By OGJ editors
HOUSTON, Mar 24 -- A new study finds that a carbon cap-and-trade plan in the western US could slow investment, cost the region hundreds of thousands of jobs, and cut personal income for millions of workers.

The analysis, conducted by economists at the Beacon Hill Institute (BHI) of Suffolk University in Boston, also found that the proposed Western Climate Initiative (WCI) would require Western states to dramatically increase their number of government employees.

The BHI study reconfirms many of the findings of a study released last month by the Western Business Roundtable (WBR). That study concluded that the WCI plan could seriously damage the West's economy if implemented in its present form.

The carbon cap-and-trade scheme is being pushed by a handful of western governors, the Western Governors' Association, and some environmental groups, according to WBR.

In its September 2008 report, WCI released its research on cap-and-trade policy, which is intended to reduce by 2020 the amount of greenhouse gas emissions to 15% below 2005 emission levels.

But BHI finds that due to an inadequate cost and benefit review, the WCI's results show tens of billions of dollars of savings annually.

Using the WCI projections of increases in fuel costs, the BHI study authors concluded that the policies will decrease employment, investment, personal income, and disposable income.

None of the seven WCI states—California, Arizona, New Mexico, Oregon, Washington, Utah, and Montana—would escape economic harm should cap-and-trade be imposed, the new study found. Four Canadian provinces—British Columbia, Manitoba, Ontario, and Quebec—also signed the Western Regional Climate Action Initiative Agreement.

The BHI study found that under a scenario of a broad policy with no offsets, in which 100% of greenhouse gas emission permits would be auctioned off to emitters, the seven western states would lose up to 251,674 private sector jobs, while the permit revenue would allow the states to hire as many as 142,241 state employees.

The plan also would put investment by firms at serious risk by slowing investment in the region by as much as $1.448 billion, and the plan would diminish total personal income by $6.35 billion to $18.31 billion/year.

Under a scenario where states auction the minimum of 25% of the permits issued, the West would suffer even greater losses, according to the study.

"If state governors and provincial premiers seek to truly meet the goals underscored in the WCI proposals, they should require a complete and thorough cost-benefit analysis," BHI said. "This consortium of state and provincial governments should understand that, whatever the benefits of the proposals, they will place the state and regional economies at a competitive disadvantage to other regions through higher prices for energy and transportation, and [will] exert measurable, negative effects on their economies."

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