Climate Change Legislation and U.S. Job Growth: A Review of the Evidence
Presented Before the Committee on Finance United States Senate
November 10, 2009
Executive Summary
Climate Change Policy and Economic Models: As policymakers study options for reducing GHGs, they need to understand the individual strengths and weakness of the economic different models used. In addition, they need to evaluate the reasonableness of the assumptions used in the models on the availability of new technologies, offsets, banking and other parameters of the modeling process. Most experts conclude that macroeconomic models are better at predicting the impact of cap and trade legislation to reduce GHGs than are Input/Output models.
Impact of Climate Change Bills on U.S. Economic and Job Growth: An analysis by the American Council for Capital Formation and the National Association of Manufacturers of H.R. 2454 using a version of DOE: EIA’s National Energy Modeling System showed that the bill would reduce total U.S. employment (net of new jobs created in green industries) by 80,000 jobs in the high cost case in 2020 and by between 1,790,000 to 2,440,000 jobs in 2030. Manufacturing is hard hit; it absorbs between 59 to 66 percent of the job losses over the 2012-2030 period. GDP declines by as much as 0.2 to 0.4 percent in 2020 and by up to 2.4 percent relative to the baseline forecast in 2030.
Energy Use Critical for Economic Growth: Each 1 percent increase in U.S. GDP is accompanied by a 0.2 percent increase in energy use. Substituting more expensive renewable energy for cheaper fossil energy through H.R. 2454’s cap and trade provisions, national renewable portfolio standards for electricity generation, and mandating increases in energy efficiency across all sectors of the economy slows productivity growth and has a negative effect on overall U.S. employment.
Environmental Benefits of House and Senate Climate Bills Negligible: U.S. climate change policies will have virtually no environmental benefits unless developing countries, whose emissions are growing strongly, also participate. As noted in the 2009 Council of Economic Advisers’ Report to the President, global concentrations of CO2 in 2100 will be almost unaffected by U.S. emission reductions.
Conclusions: To be effective, policies to reduce global GHG emission growth must include both developed and developing countries. Polices that enhance technology development and transfer are likely to be more widely accepted than those that require sharp, near- term reductions in per capita energy use.