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Cap-and-Trade Would Cut Thousands of Montana Jobs

Bozeman, Mont. — If pending federal climate change legislation is enacted, Montana would stand to lose between 4,964 and 6,761 jobs by 2030, according to a study released today by the Montana Policy Institute (MPI) and the American Council for Capital Formation (ACCF).

The primary cause of job losses is lower industrial output due to higher energy prices, the high cost of complying with emissions cuts required by the legislation, and greater competition from overseas manufacturers. Among the hardest hit would be manufacturing jobs.

“As Congress considers far-reaching energy legislation that would impose an aggressive ‘cap-and-trade’ system, it’s important for us to examine what this means for Montana families and businesses,” said Carl Graham, president of the MPI. “It’s clear from these findings that the impact would be devastating for our economy – slashing jobs and reversing all the progress we’ve made, especially in the development of our state’s natural resources.”

The economic impact of this legislation on Montana is not isolated to jobs.

• By 2030, the average Montana family can expect the price of electricity to increase by up to 61 percent, gasoline 27 percent and natural gas 78 percent. Low income families and the elderly, who spend a disproportionate amount of their income on energy, will be especially hurt. Disposable income in Montana would fall by $414 to $764 in 2030.

• Under this legislation, Montana would experience a sharp decrease in manufacturing output, especially in nonmetallic mineral product manufacturing and primary metal manufacturing, important sectors for the Montana economy. The higher energy prices, fewer jobs and loss of industrial output under this legislation are estimated to reduce Montana’s gross state product (GSP) by as much as $900 million to $1.2 billion in 2030.

• State tax revenues would be reduced by as much as $65 million by 2030, forcing Montana policymakers to make hard choices about how to fund basic services, such as law enforcement, hospitals and schools.

Despite the current recession, recent employment figures demonstrate a promising trend. In the past ten years, employment in the Montana mining industry has grown 68.4 percent. In 2008, while the U.S. unemployment rate rose, Montana’s employment grew at a rate of 1.7 percent, and our state’s economy grew at a rate of 1.8 percent. If pending energy legislation were enacted, this continued growth would be impossible.

“Previous research about the impacts of this legislation on the national level found significant loss to gross domestic product. Montana, a state whose economy is tied to manufacturing and energy development, is particularly vulnerable to adverse impacts from this federal energy legislation,” said Margo Thorning, Ph.D., senior vice president and chief economist of the ACCF, who recently testified on Capitol Hill. “If pending federal energy legislation is enacted, the Montana economy will significantly decline and thousands of jobs will be lost.”

About the Study

The ACCF and the National Association of Manufacturers (NAM) recently conducted a macroeconomic study examining the impacts of this legislation on the U.S. economy. This study is a deeper examination of those initial findings specific to Montana. This analysis was undertaken using a version of the National Energy Modeling System (NEMS), the same tool used by the United States Energy Information Administration for its energy forecasting and policy analysis.

The study authors also explored both high- and low-cost scenarios to account for a wide range of assumptions regarding the likely cost and availability of new technologies, energy efficiency and renewable electricity standards, and domestic and international offsets.

This research examines the impact of H.R. 2454, known as Waxman-Markey, on Montana’s economy. Because the Senate version, (S. 1733) known as Kerry-Boxer, requires further emissions reductions, the economic impacts addressed in this research would be higher if that legislation were enacted.

This study is a joint project of the Montana Policy Institute (MPI) and the American Council for Capital Formation (ACCF).

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ACCF is a Washington, D.C.-based group which provides sound research to U.S. and international policymakers, the media and public. ACCF advocates for economic, regulatory and environmental policies that promote capital formation, economic growth and a higher standard of living for all.

The Montana Policy Institute is a nonpartisan policy research organization that equips Montana citizens and decision makers to better evaluate state public policy options from the perspective of free markets, limited government, individual rights and individual responsibility. To find out more visit us on the web at www.montanapolicy.org.

Contact:

Carl Graham

President

Montana Policy Institute

Phone : (406) 219-0508 Montana Policy Institute

67 W Kagy Blvd Ste. B

Bozeman, MT 59715

info@montanapolicy.org

Press Releas

Montanans Are the Losers Under Cap-and-Trade

We’re hearing a lot about jobs lately and how important it is to “save or create” them. That’s all well and good, but many of those who on one hand wax eloquent about ways to reward businesses for hiring people are on the other hand feverishly pressing for programs that will make hiring more difficult and expensive. The “cap-and-trade” measures currently rattling around in Washington are great cases in point.

Congress is now debating far-reaching energy legislation that would impose an aggressive cap-and-trade system on greenhouse gas emissions (GHG) and mandate high levels of energy efficiency and renewable energy production. You might be hearing that this legislation is dead in the Senate, but nothing could be further from the truth. Big banks, big business, and other special interests have too much riding on this new financial scheme for it to go quietly into the night. And as usual, the rest of us would foot the bill.

As an example, a study released on February 11th by the Montana Policy Institute (MPI) and the American Council for Capital Formation (ACCF) shows that Montana would stand to lose between 4,964 and 6,761 jobs by 2030 under cap-and-trade. And that’s just the start.

Most jobs would be lost due to lower industrial output because of higher energy prices, the high cost of complying with emissions cuts required by the legislation, and greater competition from overseas manufacturers without the same pressures. Among the hardest hit would be manufacturing jobs—the heart of our state’s economy – and those at the lower end of the wage spectrum.

As Congress debates our energy future, we need to understand what Washington special interests are trying to do to our economy, our jobs and our future. It’s clear from these findings that Montana has nothing to gain—in fact, too much to lose—from cap-and-trade legislation, and that the economic impact of this legislation on Montana is enormous and not isolated to lost jobs.

• By 2030, the average Montana family can expect the price of electricity to increase by up to 61 percent, gasoline 27 percent and natural gas 78 percent. Low income families and the elderly, who spend a disproportionate amount of their income on energy, will be especially hurt.

• Montana would experience a sharp decrease in manufacturing output. The higher energy prices, fewer jobs and loss of industrial output under this legislation are estimated to reduce Montana’s gross state product (GSP) by between $900 million and $1.2 billion in 2030. Coal production alone could decrease by 96 percent. The impacts of artificially higher fuel, feed, and chemical prices on our farming families will force hard choices for them as well.

• State tax revenues would be reduced by as much as $65 million by 2030, forcing Montana policymakers to make hard choices about how to fund basic services, such as law enforcement, hospitals and schools, even as their costs increase with higher energy prices.

Despite the current recession, recent employment figures demonstrate a promising trend. In 2008, while the U.S. unemployment rate rose, Montana’s employment actually grew at a rate of 1.7 percent, and our state’s economy grew at a rate of 1.8 percent.

But much of this growth is tied to mining and the development of our natural resources, areas hard hit by cap-and-trade legislation. In the past ten years, employment in the Montana mining industry has grown 68.4 percent and is now responsible for 16,220 Montana jobs. A recent study by Pricewaterhouse Coopers credited the oil and natural gas industry for 34,210 jobs and a $3.3 billion contribution to the state’s economy. If cap-and-trade legislation is enacted, this growth would be reversed as jobs and production move overseas.

We all want a clean environment. Most of us live in Montana because we love our Big Sky and the beautiful land beneath it. But those shrill voices demanding that we trade our economic well being for a clean environment are trying to drive us into a false choice. Exporting our jobs to cheap overseas labor and our energy production to dirty overseas power plants will not help the environment or reduce greenhouse gases. There are alternatives to cap-and-trade, and a politician’s willingness to look at them can be a litmus test indicating whose interests he or she is really serving.

 

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Carl Graham is president of the Montana Policy Institute, a nonpartisan policy research organization that equips Montana citizens and decision makers to better evaluate state public policy options from the perspective of free markets, limited government, individual rights and individual responsibility.

 

Cap and Trade

Cap and Trade

By Rep. Bob Lake

 

There’s little doubt that the Waxman-Markey cap and trade bill will have a negative impact on our economy. Economists on both sides of the issue agree that it will, the question they’re debating is by what degree. It’s amazing to me that in one of the economically-weakest points in our country’s history, Congress would be contemplating passing legislation that all agree would make things worse.

The experts are projecting losses to our GDP and job growth and at the same time higher prices for consumers for gasoline, electricity, and consumer goods. The double-whammy of declines in jobs and higher prices for consumers can only serve to make our economic situation worse and slow our recovery.

What are the impacts we can expect here in Montana? Considering that our second-biggest industry in much of the state is energy-production and our largest industry, agriculture, depends on significant energy inputs, it could be disastrous.

As I’ve been watching this proposals’ progress, which will now be considered by the US Senate, one of the things I’ve been contemplating is what impact it could have on our state tax revenues. Most people recognize that in recent years we’ve been in a relatively rosy budgetary situation, with at one point having a 1.4 billion budget surplus.

A large factor in our growth has been a healthy influx of tax revenues from the increased oil and gas activity in eastern Montana. We’ve had increases directly from the oil and gas severance taxes and property taxes but also indirectly in the form of income taxes from all the new, high-paying jobs in the oil fields of Eastern Montana. Our state also has significant revenues from coal production (though not nearly what the state of Wyoming realizes).

I fear that a lot of those tax revenues will dry up in very short order under a cap and trade scenario.

A bigger challenge we face is that the influx of tax revenue we’ve had in recent years has fueled an unprecedented growth in state government. The new funding that has been added to state government during the good times now become ongoing obligations we somehow need to fund in future years. That leaves two options: increase taxes to offset a reduction in energy-related taxes or start cutting government services.

If we increase taxes, we’re turning that double-whammy (reduced job growth and higher consumer prices) into a triple-whammy by adding a potential increased tax burden on homeowners or income taxpayers. If we reduce services the needy will suffer and the triple turns into a quad.

As for agriculture our #1 industry, cap and trade is going to hit small producers (which make up the vast majority of Montana operators) inordinately hard. Most ag businesses have very little opportunity to pass on their increased energy input costs on to consumers. Cap and trade will make fuel, fertilizer, and feed costs all increase at the mercy of the market. Inevitably, we will all be forced to pay more for our food because of these higher costs.

We all know the thin margins most ag operations already operate on. Cap and trade could be the proverbial straw that breaks the camels’ back for a lot of family farms and ranches.

Don’t get me wrong, there are benefit’s to reducing our nation’s carbon emissions. Reducing those emissions comes with a cost, and right now Montana is in a position to be hit harder than most other states based on the current legislation already passed by the House and on its way to the Senate.

There are other options available. I urge Senator Baucus and Senator Tester to work to develop a better bill that will actually improve conditions in Montana. The Waxman-Markey bill certainly does not.

 

Western Climate Initiative Cap-and-Trade

Economic research institute finds deficiencies in WCI’s analysis of impacts from recommendations.

 

Bozeman, Mont.—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, the Beacon Hill Institute 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. 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. Montana could lose as many as 2,869 jobs and $689 million in personal income by the year 2020.

“This report shines the light on yet another example of political advocacy masquerading as scientific analysis,” said Carl Graham, president of the Montana Policy Institute. “Montanans deserve an honest look at the true long term costs and benefits of climate change measures before special interest groups and their politicians make decisions that will cost us our jobs, empty our pocketbooks, and dictate how we live our lives.”

 

The complete study is available at www.montanapolicy.org.

 

The Montana Policy Institute is a nonprofit, nonpartisan policy research center based in Bozeman. To find out more visit us on the web at www.montanapolicy.org.

 

Western Climate Initiative Cap-and-Trade Initiative Imposes Drastic Costs

For Immediate Release: March 23, 2009

Contacts:

Carl Graham, President, Montana Policy Institute (406) 219-0508

Frank Conte, Director of Communications, Beacon Hill Institute: (617) 573-8050

 

Economic research institute finds deficiencies in WCI’s analysis of impacts from recommendations

Bozeman, Mont.—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, the Beacon Hill Institute 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. 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. Montana could lose as many as 2,869 jobs and $689 million in personal income by the year 2020.

“This report shines the light on yet another example of political advocacy masquerading as scientific analysis,” said Carl Graham, president of the Montana Policy Institute. “Montanans deserve an honest look at the true long term costs and benefits of climate change measures before special interest groups and their politicians make decisions that will cost us our jobs, empty our pocketbooks, and dictate how we live our lives.”

 

The complete study is available at www.montanapolicy.org.

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