Congressional Budget Office report Says Cap, Trade Expensive, Hurts Poor
Speaking of cap and trade flaws, the Congressional Budget Office (CBO) has
released a new report on proposed CO2
cap-and-trade legislation saying it would have a negative impact on Americans,
in particular, the poor.
The CBO report, titled "Trade-Offs in Allocating
Allowances for CO2 Emissions," says
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. It also adds that price increases would be regressive with poorer households bearing a larger burden relative to their income
than wealthier households.
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.
CBO
Researchers concluded 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% 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.
To read
the full CBO report, click here.
- David Adams (with thanks to Frank Maisano)
