News Story

Michigan’s Costly Tab for Cap-and-Trade

Cap-and-trade legislation will hit Michigan hard by 2030 if passed, costing the state as many as 91,000 jobs while raising residential energy costs as much as 60 percent and cutting a family's disposable income by as much as $1,400 a year, according to a new study.

The study was done by the American Council for Capital Formation, a Washington-based public policy research think tank. It analyzed the impact of the Waxman-Markey HR 2545 bill. That bill contains the "cap-and-trade" language. Cap-and-trade puts a cap on emissions — and energy consumption. Sources either lower their emissions, with the ability to trade any excess allowance not used, or they can exceed the cap and purchase more credits to cover that over usage.

"It's really all pain and no gain as far as our study shows," said Margo Thorning, one of the study's two authors and the senior vice president and chief economist of the ACCF.

The ACCF did a baseline study on Michigan without a cap-and-trade bill, and then compared that to what would happen if the climate legislation were passed.

The study's findings:

Michigan will have between 66,600 and 90,800 fewer jobs by 2030 if cap-and-trade legislation is passed. The job losses will be from lower industrial output due to higher energy prices, the high cost of complying with required emission cuts and greater competition from overseas manufacturers with lower energy costs.

Michigan's energy costs will go up by 2030. Gasoline prices will increase by 20 to 26 percent, electricity prices will increase up to 60 percent and natural gas prices will increase up to 79 percent.

Disposable income for families will be reduced between $883 and $1,435 per year by 2030.

According to the study, cap-and-trade will slow Michigan's economic growth because the state's energy users will have to subsidize more expensive energy sources such as wind and solar power to quickly meet federal mandates.

Thorning said the negative impact economically will not result in any clear environmental benefit because larger developing countries aren't on the same cap-and-trade energy diet.

"The environment doesn't benefit unless China and India take on targets, and they haven't taken on targets," Thorning said. "Our small change will be swamped by the emerging countries who are growing and dependent upon fossil fuels."

The original version of this story was posted online on March 18, 2010.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.