Engineering News

Study: Working Class Will Bear Brunt of Cap-and-Trade
September 30, 2009

With Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) expected to reveal a draft of the Senate’s climate bill this week, free-market think tank Institute for Energy Research (IER) released a new analysis Tuesday outlining how cap-and-trade would precipitate a financial windfall for well-connected special interests and politically favored companies.

The study, entitled "Who Benefits from Free Emission Allowances? An Economic Analysis of the Waxman-Markey Cap-and-Trade," details how shareholders, not ratepayers, will be the primary beneficiaries of cap-and-trade’s largess. The analysis also outlines the significant wealth-transfer that cap-and-trade would initiate -- a $14 billion redistribution of resources from the nation’s poorest citizens to the nation’s wealthiest citizens.

The study’s lead author, Andrew Chamberlain, issued the following statement Tuesday:

"Many of the current estimates of cap-and trade’s distributional impact are in direct contradiction to microeconomic theory. Using implausible assumptions about free emissions allowances, the government’s analysis concludes that the costs associated with cap-and-trade legislation are progressive. Unfortunately, they are almost certainly regressive, with America’s top income-earners profiting by more than $14 billion per year, and low- and middle-income households footing a large portion of the burden. What’s more, the free allowances distributed under Waxman-Markey will result in large windfall profits for the corporate allies of the legislation."

Based on these findings, IER economist Bob Murphy made the following remarks:

"Andrew Chamberlain’s analysis of the Waxman-Markey bill’s cap-and-trade title illustrates just how flawed and skewed this legislation is toward rent-seeking special interests. For one, Chamberlain puts to rest the ‘postage stamp a day’ claim that proponents and some in the media point to as the cost of this misguided legislation. And secondly, and more important, it shows that cap-and-trade, as outlined in Waxman-Markey, is nothing more than a transfer of wealth from the poorest to the richest among us.

"These new findings should send a clear message to the American people – cap-and-trade helps the powerful and hurts the rest of us. And as Congress’ corporate allies receive the bulk of the benefits Waxman-Markey has to offer, our environment, along with our struggling economy, will suffer for years to come. Congress needs to get out of the business of picking winners and losers and allow the market to determine which energy and electricity sources should power our economy."

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

Source: Institute for Energy Research

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