The Consequences of Lieberman-Warner

By May 13, 2008Global Warming

The Heritage Foundation has just released an analysis of the economic consequences of the Lieberman-Warner cap-and-trade legislation, S. 2191, America’s Climate Security Act of 2007. Conducted by Heritage’s Center for Data Analysis, “The Economic Costs of the Lieberman-Warner Climate Change Legislation” is well presented, argued and documented.

Our analysis makes clear that S. 2191 promises extraordinary perils for the American economy. Arbitrary restrictions predicated on multiple, untested, and undeveloped technologies will lead to severe restrictions on energy use and large increases in energy costs. In addition to the direct impact on consumers’ budgets, these higher energy costs will spread through the economy and inject unnecessary inefficiencies at virtually every stage of production and consumption–all of which will add yet more financial burdens that must be borne by American taxpayers.

S. 2191 extracts trillions of dollars from the mil­lions of American energy consumers and delivers this wealth to permanently identified classes of recipients, such as tribal groups and preferred tech­nology sectors, while largely circumventing the normal congressional appropriations process. Unbound by the periodic review of the normal bud­getary process, this de facto tax-and-spend program threatens to become permanent — independent of the goals of the legislation.

Making reasonable assumptions, the analysts conclude:

  • Cumulative gross domestic product (GDP) losses are at least $1.7 trillion and could reach $4.8 tril­lion by 2030 (in inflation-adjusted 2006 dollars).
  • Single-year GDP losses hit at least $155 billion and realistically could exceed $500 billion (in inflation-adjusted 2006 dollars).
  • Annual job losses exceed 500,000 before 2030 and could approach 1,000,000.
  • The annual cost of emission permits to energy users will be at least $100 billion by 2020 and could exceed $300 billion by 2030 (in inflation-adjusted 2006 dollars).
  • The average household will pay $467 more each year for its natural gas and electricity (in infla­tion-adjusted 2006 dollars). That means that the average household will spend an additional $8,870 to purchase household energy over the period 2012 through 2030.
  • Various groups and government bodies, working independently of one another, have examined the bill’s potential consequences and reach similar conclusions: With its emission limits and injection of government control into the marketplace, Lieberman-Warner imposes dramatic economic costs. We’d say it wreaks havoc.

    The analyses:

  • Environmental Protection Agency.
  • Energy Information Administration.
  • Congressional Budget Office, cost estimate.
  • American Petroleum Institute, conducted by ICF International.
  • National Association of Manufacturers and American Council for Capital Formation, conducted by Science Applications International Corporation (SAIC).
  • P.S. Forgot the MIT Study.

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