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NEW CBO REPORT EXPOSES FAILURES OF C02 CAP-AND-TRADE SCHEMES
April 26, 2007

Posted by Marc Morano - (10:03 AM ET) -  marc_morano@epw.senate.gov

NEW CBO REPORT EXPOSES FAILURES OF C02 CAP-AND-TRADE SCHEMES

"The CBO has revealed that a C02 cap-and-trade allocation scheme will result in a transfer of wealth from poor to rich." 

WASHINGTON, DC – Senator James Inhofe (R-Okla.), Ranking Member of the Environment & Public Works Committee, today said the new Congressional Budget Office (CBO) report on proposed C02 cap-and-trade legislation was a "devastating indictment." The CBO report laid out the negative impact a cap-and-trade system would have on Americans, in particular, the poor. The CBO report, titled "Trade-Offs in Allocating Allowances for CO2 Emissions," was released on April 25, 2007.

"The CBO report exposes what I have been saying all along: C02 cap-and-trade schemes are an utter failure," Senator Inhofe said. "The CBO has revealed that a C02 cap-and-trade allocation scheme will result in a transfer of wealth from poor to rich. The Democratic leadership has to explain why they are willing to line the pockets of their corporate friends at the expense of the working class.

"Far from being good for the economy, as advocates say, C02 allocation schemes will disproportionately burden the poor, raise taxes, increase government spending, raise gas prices, raise home energy costs and decrease wages. It is hard to imagine the CBO issuing a more devastating indictment of proposed C02 cap-and-trade schemes. The CBO report should be viewed as a stern warning to our elected leaders to avoid symbolic solutions to an alleged climate ‘crisis’ that places the financial burden on America’s poor and working class.

"Today’s report confirms what Europe, Canada and many other nations have come to realize about C02 cap-and-trade schemes: The entire carbon debate has been skewed toward the least effective and most economically damaging of the various approaches. 

 
"Today’s CBO report is the most recent analysis to show the folly of schemes like the Kyoto Protocol. Kyoto, if implemented, would essentially result in the largest tax increase in the history of the U.S., costing an estimated $300 billion a year -- 10 times the cost of the Clinton-Gore tax increase of 1993. And even Kyoto proponents concede that it would have virtually no impact on the climate."

Excerpts from the CBO report (emphasis added):

"Regardless of how the allowances were distributed, most of the cost of meeting a cap on CO2 emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline. Those price increases would be regressive in that poorer households would bear a larger burden relative to their income than wealthier households would."

"The CBO noted that the proposed cap-and-trade allocation method "would increase producers’ profits without lessening consumers’ costs. In essence, such a strategy would transfer income from energy consumers—among whom lower income households would bear disproportionately large burdens—to shareholders of energy companies, who are disproportionately higher-income households."

"Researchers conclude that much or all of the allowance cost would be passed on to consumers in the form of higher prices. Those price increases would disproportionately affect people at the bottom of the income scale. For example, the Congressional Budget Office (CBO) estimated that the price rises resulting from a 15 percent cut in CO2 emissions would cost the average household in the lowest one-fifth (quintile) of the income distribution about 3.3 percent of its average income. By comparison, a household in the top quintile would pay about 1.7 percent of its average income."

"A cap-and-trade program for CO2 emissions would tend to increase government spending and decrease revenues."

"The higher prices caused by the cap would lower real (inflation-adjusted) wages and real returns on capital, indirectly raising marginal tax rates on those sources of income."

To read the full CBO report, go to: http://www.cbo.gov/ftpdocs/80xx/doc8027/04-25-Cap_Trade.pdf  

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