Federal Cap and Trade Legislation Will Stall Michigan's Manufacturing Engine

WASHINGTON, July 1 /PRNewswire/ -- Michigan could face declines in gross state product, employment, industrial output, state budget revenues and household income if federal climate change legislation is enacted, according to a new study by the American Council for Capital Formation (ACCF).   Higher energy costs resulting from proposed mandatory carbon emission reductions, energy efficiency mandates and renewable portfolio standards (RPS) that have already passed the U.S. House of Representatives will impede recovery from the current recession and reduce state budget receipts. The study raised the concern of veteran Michigan Congressman Fred Upton, ranking Republican on the House Energy and Environment Subcommittee, whose district is comprised of a diverse cross section of the state's manufacturing and agriculture base.

"The ACCF study reinforces what many others have already predicted - that cap-and-tax legislation will result in skyrocketing energy bills and massive job losses," said Congressman Fred Upton (R-MI).  "Kerry-Lieberman puts a bullseye squarely on the backs of Michigan's working families who are already struggling to keep the lights on.  In Michigan where nearly one out of every five folks is out of work, jobs must be our top priority, not a national energy tax."

"Michigan and manufacturing have been vital to American's economic prosperity for decades," said ACCF Senior Vice President and Chief Economist Margo Thorning.  "Unfortunately, the state's already distressed economy could slow even further if Congress requires these aggressive emission reduction targets in greenhouse gases. Multiple economic analyses show that these federal climate bills would increase the price of electricity, gasoline and natural gas. In consequence, economic productivity, employment and household income would decline."

The ACCF looked at the potential economic impact of various climate change bills that would impose a cap-and-trade system requiring sharp reductions in greenhouse gases (GHGs) and mandate high levels of energy efficiency and renewable energy. The U.S. House of Representatives passed a 1500-page climate change bill (Waxman/Markey, H.R. 2454) by seven votes in June 2009.  Led by Senators John Kerry and Barbara Boxer, the U.S. Senate Environment and Public Works Committee passed a similar bill, S.1733, the Kerry/Boxer bill, which has tighter near-term emission reduction targets than the Waxman/Markey bill in November 2009.  In May 2010, Senators John Kerry and Joe Lieberman introduced the American Power Act; its emission reduction targets are virtually the same as those in H.R. 2454.

Key findings of the ACCF study include:

• If a cap-and-trade climate change bill similar to the Waxman/Markey bill (H.R. 2454) or the Kerry/Boxer bill (S.1733) or the American Power Act is enacted, Michigan is likely to experience a decrease in manufacturing output according to a recent macroeconomic analysis of H.R. 2454. Overall manufacturing output declines by 5.4 percent in the low cost case and by 6 percent in the high cost case in 2030 compared to the baseline forecast.

• Another important segment of Michigan's manufacturing industry, transportation manufacturing, falls considerably; declining by up to 9 percent in 2030.

• Gross state product declines by $12 billion to $16.5 billion in 2030. Such reductions in GSP will reduce state budget receipts and force policymakers to make hard choices.

• Michigan will see a reduction in job growth; there will be 66,700 to 90,800 fewer jobs in 2030.

• Disposable income will fall by an average of $883 to $1,435 in 2030. Low-income families and the elderly will spend a higher proportion of their income on energy.

"These economic pains will be particularly acute in industrial states like Michigan where unemployment is outpacing the rest of the nation at nearly 14%. Without question, jobs and economic health weigh most on the residents of these states.  Yet, they will be hit the hardest under a cap and trade policy.  Now is not the time to enact policies that will impede Michigan's path to recovery and job growth."

View the full study "The Michigan Economy: How Will Climate Change Legislation Impact Economic and Job Growth?"

Founded in 1973, The American Council for Capital Formation (www.accf.org) is a nonprofit, nonpartisan economic policy organization dedicated to the advocacy of tax, energy, environmental and regulatory policies that encourage saving and investment.

SOURCE American Council for Capital Formation