Mythbusters: Cap-and-Trade Costs “Less Than a Postage Stamp a Day”

by William Yeatman on July 20, 2009

I just returned from Capitol Hill, where I attended a briefing by the Heritage Foundation’s Nicolas Loris and Dr. David Kreutzer, on modeling the economic impact of the Waxman-Markey Clean Energy and Security Act.

Here’s the take-away:

You probably have heard House Speaker Nancy Pelosi (D-San Francisco) claim that a cap-and-trade energy rationing scheme will cost Americans “only a postage stamp a day.” Her assertion is based on two economic studies, one by the Congressional Budget Office, and the other by the Environmental Protection Agency. Each study is grossly flawed, but in different ways.

The CBO study ignores the impact of a cap-and-trade on Gross Domestic Product, which is like trying to calculate a baseball player’s batting average without including singles or doubles. Of course the CBO underestimates the economic impact of Waxman-Markey-it ignores the fact that expensive energy makes everything made with energy more expensive, which is everything.

The EPA study generates such a low cost for cap-and-trade energy rationing by using an accounting trick called “discounting.” It’s complicated, but the important point to remember is that no other reputable study-not the CBO’s, not the liberal leaning Brookings Institute’s, not the U.S. Black Chamber of Commerce’s-uses this trick, and without it, the EPA’s cost calculation soars.

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