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</p>Rebecca Lefton, writing a <ahref="http://www.americanprogress.org/issues/2010/02/false_energy_claims.html">report for the Center for American Progress, tries to debunk a <ahref="http://www.heritage.org/Research/Economy/bg2365.cfm">study of the Boxer-Kerry bill published by The Heritage Foundation. Instead she demonstrates that she didnt read the study or doesnt understand the economic logic of the bill she supposedly supports. Further she offers as a substitute for Heritages work an analysis done by the Environmental Protection Agency. Either she didnt read the EPA report, doesnt understand it, or is willfully misrepresenting it.
The economic fallacies of Leftons review are many, but the primary one is her assertion that Heritage cost projections are grossly overestimated. In support of her assertion she claims the <ahref="http://www.epa.gov/climatechange/economics/pdfs/HR2454_Analysis.pdf">EPA projects an annual cost of between $80 and $111 annually per household. EPAs actual, inflation-adjusted annual costs range up to $1,288 annually. Unlike Heritage, the EPA did not do a complete, new economic analysis of the Boxer-Kerry bill (S. 1733), but instead based their report on the economic analysis of the Waxman-Markey bill (H.R. 2454). So it is necessary to go to <ahref="http://www.epa.gov/climatechange/economics/pdfs/HR2454_Analysis.pdf">page 14 of EPAs analysis of H.R. 2454 to find these inflation adjusted cost household cost projections. However, even these larger impacts would be an apples-to-oranges comparison next to the Heritage estimates.<spanid="more-25694"></span>
Previously <ahref="http://www.heritage.org/Research/EnergyandEnvironment/wm2580.cfm">we have pointed out that converting from lost consumption per household to lost income per family of four (a more comprehensive and intuitive measure) would bump the range of EPA costs up to $2,700 or more per year. Thats a far cry from $111 dollars, but even this large number is dependent on several unreasonably generous assumptions concerning nuclear power, as yet undeveloped carbon capture-and-storage technology, and developing a world-wide market for offsets (paying others to cut CO2).
Leftons misunderstanding of what the $111 estimate actually represents is very common (though still mistaken) and was addressed <ahref="http://www.heritage.org/Research/EnergyandEnvironment/wm2705.cfm ">here.
Lefton accuses Heritage of not adjusting the damaging economic impact of cap and trade to account for efficiency mandates. The implication being that such an adjustment would moderate the negative effects. In fact, the mandates add to the economic costs making the pain even greater.
Suppose your employer withheld your pay unless you shopped at a discount department store. This would be a mandate that might cut your consumption spending. Capping your pay at 20 percent of your current salary, like an energy or CO2 cap, would cut your consumption. However, telling you to shop at the discount store after you get the pay cut wont lighten the burden of having 80 percent less income.
The Heritage report provides support for this clear result from multiple sourcesincluding the current Congressional Budget Office, which <ahref="http://www.cbo.gov/ftpdocs/105xx/doc10562/09-16-CapandStandards.pdf">said (pg. 4) the mandates would result in a generally higher cost to the economy.
Nevertheless, Lefton accuses us of failing to recognize the key role the mandates will play and with a quote implies the EPA analysis shows great savings from the mandates. What does the EPA <ahref="http://www.epa.gov/climatechange/economics/pdfs/EPA_S1733_Analysis.pdf">actually say?
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The resulting modeled economic impacts of the energy efficiency provisions [mandates] include modest reductions in allowance prices (~1.5%), fossil fuel prices (coal and natural gas ~1%), and electricity prices (