Testimony before the Oregon Joint Committee on Carbon Reduction Regarding Cap-and-Trade

Thank you, Chairman Dembrow, Chairwoman Power, and Members of the Committee:

My name is Timothy Benson, and I am a policy analyst with The Heartland Institute, a 34-year-old independent, national, nonprofit organization whose mission is to discover, develop, and promote free-market solutions to social and economic problems. Heartland is headquartered in Illinois and focuses on providing national, state, and local elected officials with reliable and timely research and analyses on important policy issues. Heartland would like to submit the following testimony against the passage of House Bill 2020, which would establish a cap-and-trade program in Oregon.

HB 2020 mirrors California’s cap-and-trade program by seeking to reduce carbon dioxide emissions in Oregon to 80 percent below 1990 levels by 2050. This would cause unnecessary hardship to Oregon families.

Advocates of cap-and-trade schemes point to California and the nine northeastern states that make up the Regional Greenhouse Gas Initiative (RGGI) as examples of how these programs can be successfully implemented. In reality, cap-and-trade programs do little to reduce carbon dioxide emissions. Even worse, they are akin to regressive taxes. Cap-and-trade programs disproportionally burden low-income households, many of whom can’t afford the higher energy and gasoline costs these programs are designed to produce.

The Alliance of Western Energy Consumers (AWEC), submitted material to the Joint Committee on Carbon Reduction stating the proposed cap-and-trade program would be responsible for “cumulative compliance and energy cost impacts” exceeding $350 million by 2030 and more than $1.5 billion in 2040 for their members, who employ more than 50,000 Oregonians in industries such as “agriculture, aeronautics, air products, pulp and paper, food processing, information technology, healthcare and more.”^[1] The submission concludes that the “economic impacts and job losses to AWEC members and communities will likely be significant as a result of [cap-and-trade], as production in these facilities is curtailed and shifted to lower cost states.”^[2]

A Manhattan Institute study estimates the California cap-and-trade program raised residential electricity costs by as much as $540 million in 2013.^[3] California’s Legislative Analyst’s Office (LAO) estimates cap-and-trade will increase gasoline prices by 15–63 cents per gallon by 2021 and by 24–73 cents per gallon by 2031.^[4] LAO projects Californians will spend $2 billion to $8 billion more on gasoline by 2021.^[5] It also estimates the increased gasoline prices will cost $150–$550 per household by 2026.^[6] Further, retail electricity prices in the Golden State are 53 percent higher than the national average.^[7] Prior to the creation of its cap-and-trade program, California’s electricity prices were only 40 percent higher.^[8]

In a Cato Journal article released in 2018, David T. Stevenson of Delaware’s Caesar Rodney Institute writes there are “no added reductions in carbon dioxide emissions, or associated health benefits, from the RGGI program. RGGI emission reductions are consistent with national trend changes caused by new EPA power plant regulations and lower natural gas prices. The comparison requires adjusting for increases in the amount of power imported by the RGGI states, reduced economic growth in RGGI states, and loss of energy intensive industries in the RGGI states from high electric rates.”^[9]

Further, RGGI states have experienced a 13 percent drop in goods production and a 35 percent reduction in the number of energy-intensive goods created. In five comparable non-RGGI states, Stevenson found a 15 percent increase in goods production and only a 4 percent decrease in energy-intensive manufacturing. RGGI states also increased the amount of power imported from other states from 8 percent in 2007 to 17 percent in 2015.^[10]

According to the U.S. Energy Information Administration, retail electricity prices in the 10 RGGI states and California are currently 40 percent higher than the U.S. average.^[11] In Oregon, retail electricity prices are currently 18 percent lower than the U.S. average, thanks to the state’s abundant hydroelectric resources.^[12] Also, a 2018 WalletHub study found total energy costs in Oregon are the fourth-lowest in the country.^[13]

Oregon lawmakers should not enact cap-and-trade as proposed in HB 2020, or any other cap-and-trade program, for that matter. A cap-and-trade program would have a minimal effect on carbon-dioxide emissions and cause considerable economic harm to all Oregonians, especially low-income Oregon families. Cap-and-trade programs simply aren’t needed, as carbon dioxide emissions are already dropping across the United States.^[14]

For more information about The Heartland Institute’s work, please visit our website at www.heartland.org, or contact Heartland’s State Relations Manager for Oregon, Lindsey Stroud, by phone at 757/354-8170 or by email at [email protected].

Tim Benson

Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.

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