Policy Documents

Study: 'Cap-And-Trade' Will Lead To 17,100 To 23,300 Fewer Jobs In Arkansas

December 1, 2009

(December 2009) Arkansas will see a reduction in job growth, with 17,100 to 23,300 fewer jobs in 2030 under a 'Cap-and-Trade' proposal, according to a new study by the Arkansas Policy Foundation and the American Council for Capital Formation.

Margo Thorning, Ph.D, and Pinar Cebi Wilber, Ph.D authored the study, which concludes:

"If federal climate change legislation is enacted, the Arkansas economy is likely to experience slower growth in jobs and income. Arkansas' gross state product, employment, industrial output, state budget revenues and household income would fall relative to the baseline forecast."

The study includes a macroeconomic analysis of a Cap-and-Trade bill similar to Waxman/Markey (H.R. 2454) or Kerry/Boxer (S. 1733). The analysis concludes Arkansas is likely to experience a 4.6 percent decline in overall Manufacturing output (low cost case), and by 5.4 percent (high cost case) in 2030 compared to the baseline forecast.

Other findings of the analysis include:

• Gross State Product falls by $2.7 to $3.7 billion in 2030.

• Disposable income will fall by an average of $433 to $781 in 2030, forcing low-income families and the elderly to spend a higher proportion of their income on energy needs.

Background

The U.S. Congress is considering climate change legislation that would impose a Cap-and-Trade system requiring sharp reductions in greenhouse gases (GHGs) and mandate high levels of energy efficiency and renewable energy. These include Waxman/Markey (H.R. 2454) and Kerry/Boxer (S. 1733).

Both federal bills would require reductions in GHGs beginning in 2012. The emission reduction targets would require a reduction of as much as 20 percent below 2005 levels in 2020 and an 83 percent reduction in 2050. Multiple economic analyses show that these bills would increase the price of electricity, gasoline and natural gas. Economic productivity, employment and household income would decline as a consequence.

The Arkansas Manufacturing sector would be particularly impacted.
Arkansas, a state whose economy is tied to a strong, energy-intensive Manufacturing sector, is particularly vulnerable to adverse impacts from federal climate change bills.

Energy prices in Arkansas, a state that depends on coal and natural gas for 70 percent of electric generation, would rise at a faster rate than in many other states. Compliance with renewable portfolio standards (RPS) would be disproportionately challenging for Arkansas.

Arkansas, like other Southern states does not have as much access to ready supplies of renewable energy from wind and solar.

The study is titled "The Arkansas Economy: How Will Climate Change Legislation Impact Economic and Job Growth?" It is posted at: www.arkansaspolicyfoundation.org