With Cap and Trade, It Will be Laborless Day

Traditionally, Labor Day symbolizes the end of summer but historically, Labor Day was a “creation of the labor movement and is dedicated to the social and economic achievements of American workers.” A day of rest. A paid holiday. Well, if Congress passes cap and trade legislation, many Americans will be forced to take unpaid days of rest because they’ll be unemployed.

The Heritage Foundation’s Center for Data Analysis found that, for the average year over the 2012-2035 timeline, job losses will be 1.1 million greater than without a cap and trade bill. By 2035, there is a projected 2.5 million fewer jobs below the baseline. Some of these jobs will be destroyed completely. Others will move overseas where carbon capping isn’t in their country’s agenda and therefore the cost of production is cheaper.

We’re not the only ones who project unemployment from cap and trade. The Brookings Institute, for instance, projects that cap-and-trade will increase unemployment by 0.5% in the first decade below the baseline. Using U.S. Census population projection estimates, that’s equivalent to about 1.7 million fewer jobs than without cap-and-trade. A study done by Charles River Associates prepared for the National Black Chamber of Congress projects increases in unemployment by 2.3-2.7 million jobs in each year of the policy through 2030–after accounting for “green job” creation.

Surely the government can create green jobs by subsidizing windmill and solar projects. But we can point to Spain as an example of how green energy investments destroy more jobs than they create. The Spanish research, directed by economist Gabriel Calzada, at King Juan Carlos University, analyzed the subsidized expenditure necessary to create the green jobs in Spain. It compared those funds to the private expenditure needed to support the average conventional job. Supported by other data as well, they conclude that each subsidized green job in Spain eliminated over two conventional jobs.

Two environmentalists from the Alliance for Sustainable Energy (ASE) recently authored a response to undermine this study. David Kreutzer, The Heritage Foundation’s Senior Policy Analyst in Energy Economics and Climate Change, debunks ASE’s claim:

“While there are multiple problems with the ASE critique of Calzada’s work, the flawed foundation of their critique is best illustrated by ASE’s following statement: “Furthermore, there is no justification given for the assumption that government spending (e.g., tax credits or subsidies) would force out private investment.”

That is, the environmentalists do not see government expenditure as having a cost. They employ the same free-lunch fallacy that underpins essentially all the analysis showing green-energy subsidies increase employment.

The first week of every principles of economics class goes over the problem with free-lunch assumptions. The labor and material used to make windmills or solar panels or to install insulation cannot simultaneously be used to make refrigerators and automobiles. When government spends more money, it necessarily diverts labor, capital and materials from the private sector.

Dr. Calzada simply calculated how many jobs, on average, would have been supported with these resources had they been left to the private market. The ASE critique doesn’t even recognize that the costs exist. Therefore, the ASE critique can hardly be used to undermine the credibility of the Spanish conclusion—subsidies for green technologies reduce overall employment.”

Happy Labor Day, and many more to come – for those of you who will still have jobs if cap and trade passes.

To read The Heritage Foundation’s full economic analysis of the Waxman-Markey cap and trade legislation, go here. To sign up to receive the Energy & Environment weekly newsletter, go here.

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Today’s Calamity: Energy Efficiency is Good – Except When It’s Not

Just as renewable energy can be a good thing if the market can provide it at an affordable rate, products designed for greater energy efficiency is a good thing. But not when the government gets in the way. Federal laws dictating how much energy home appliances are allowed to use have frequently harmed consumers, and the Waxman-Markey bill introduces a host of new ones.

Improved energy efficiency is a worthwhile goal, but not when Washington tries to mandate it with arbitrary requirements. Consumers who think the resultant energy-efficient appliances will save them money in the long run may be disappointed. These standards almost always raise the purchase price of appliances, in some cases to the point that the extra upfront costs are never recouped in the form of energy savings. For example, the Department of Energy conceded that its most recent air-conditioner standard would be a money loser for many consumers, but went ahead with it anyway.

Efficiency standards can also adversely affect product performance, features, and reliability. For example, Consumer Reports noted that several high-efficiency clothes washers meeting the latest federal standard “left our-stain soaked swatches nearly as dirty as they were before washing” and suggested that “for best results, you’ll have to spend $900 or more.”

Some standards also restrict consumer choice. For example, the 2007 energy bill effectively phases out the traditional incandescent light bulb in favor of more efficient compact fluorescent bulbs. Compared to the old-fashioned, but still-popular incandescent lights, compact fluorescent bulbs are more expensive, have a light quality some find inferior, do not fit into certain fixtures, and contain small amounts of mercury, which can be a health and safety concern if the bulbs break. Whether it’s a $1 light bulb or a $1000 washing machine, consumers are clearly better off when they have a choice, not when government steps in and decides what is best.

The Waxman-Markey proposal contains a host of new standards for everything from household lamps to portable electric spas. The new legislation makes it easier to place more requirements on appliances like air-conditioners that are already subject to stringent regulations. The overall effect would be higher costs, compromised quality, and restricted choice for homeowners with a negligible impact on the environment.

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