Cost of cap-and-trade: Oregon Senate Testimony

Dr, Eric Fruits, EconInternational,

If passed, Oregon SB 80 would establish a greenhouse gas cap-and-trade scheme for the State of Oregon. The Oregon Senate Committee on Environment and Natural Resources will have a public hearing on SB 80 on Thursday April 9, 2009 at 3:00 P.M. in Hearing Room C.  The following is the written testimony submitted by Eric Fruits regarding the costs of Oregon SB 80.

TESTIMONY: In September 2008, I co-authored a comprehensive analysis of the economic and fiscal impacts on Oregon of meeting the ambitious greenhouse gas reduction goals outlined in the proposed amendments to SB 80. In February 2009, I submitted testimony on the economic and fiscal impacts associated with the cap-and-trade scheme introduced in SB 80. I have attached my past testimony and the report I co-authored.

This letter summarizes my earlier testimony and presents new evidence of the substantial costs associated with trying to meet Oregon’s aggressive greenhouse gas emissions reduction goals.

* Oregon’s economic output would be $48.3 billion lower; 90,000 fewer people would be employed; and state and local government revenues would be $4.4 billion lower (Pozdena & Fruits, 2008).
* Subsequent independent research supports our findings: a 1 percent decline in carbon dioxide emissions is associated with a 0.74 percent decline in GDP (Annicchiarico, et al., 2009).
* Recent research calculates that for every “green” job created via subsidies and tax breaks, 2.2 jobs elsewhere in the economy are destroyed (Álvarez, 2009).

There is no avoiding the substantial costs of SB 80. Households, businesses, and the public sector will have steeper power bills and will pay more to engage in nearly every activity.

Today, businesses are shrinking, closing shop, or exiting the state. Oregon now has its highest unemployment in 25 years and one of the worst unemployment rates in the country. Higher energy prices under SB 80 will worsen an already dire economic situation.

It is now evident that hopes of creating new “green” jobs funded with tax credits and subsidies paid by existing Oregon businesses and consumers is a losing proposition where more jobs are lost than created. Projections of increased employment under SB 80 are built on unrealistic assumptions and flawed models that produce counterintuitive results that have been refuted by real world observations.

Sources cited:

— Álvarez, G. C. (2009). Study of the effects on employment of public aid to renewable energy sources. King Juan Carlos University, Madrid, Spain.

—  Annicchiarico, B., Bennato, A. R., and Costa, A. (2009). Economic growth and carbon dioxide emissions in Italy, 1861-2003. MPRA Paper No. 12817.

–Fruits, E. and Pozdena, R. J. (2008). Oregon Greenhouse Gas Reduction Policies: The Economic and Fiscal Impact Challenges. Cascade Policy Institute. Portland, OR.

Read more: Costs of cap-and-trade in Oregon: Testimony to the Oregon Senate | Econ International Blog –

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