How Michigan Will Be Affected by the Lieberman-Warner Global Climate Change Legislation

Hertiage Foundation

by William W. Beach, Ben Lieberman, David Kreutzer, Ph.D. and Nick Loris WebMemo #1930

Workers and families in the state of Michigan may be wondering how climate change legislation before Congress will affect their income, their jobs, and the cost of energy. Members of Congress are considering a number of bills designed to address climate change. Chief among them is S. 2191, America's Climate Security Act of 2007, introduced by Senators Joseph Lieberman (I-CT) and John Warner (R-VA). 1

The Lieberman–Warner legislation promises extraordinary perils for the American economy, should it become law, all for very little change in global temperature…perhaps even smaller than the .07 of a degree Celsius drop in temperature that many scientists expected from worldwide compliance with the Kyoto climate change accords. S. 2191 imposes strict upper limits on the emission of six greenhouse gases (GHG) with the primary emphasis on carbon dioxide (CO2). The mechanism for capping these emissions requires emitters to acquire federally created permits (called allowances) for each ton emitted.

Arbitrary restrictions predicated on multiple untested and undeveloped technologies will lead to severe restrictions on energy use and large increases in energy costs. In addition to the direct impact on consumers' budgets, these higher energy costs will spread through the economy, injecting unnecessary inefficiencies at virtually every stage of production and consumption.

Implementing S. 2191 will be very costly in Michigan, even given the most generous assumptions.

Ftom 2012 to 2030 the loss in Gross State Product,Non-Farm Employment Manufacturing Jobs, and Personal Income Lost would be in the millions
Table here Table 1: Estimated Economic Impact of S. 2191 in Michigan

Consumers will be hard hit. Table 2 shows the expected increases in retail energy prices (adjusted to 2006 dollars to eliminate the impact of inflation) in 2025 for Michigan. Between 2012, when the restrictions first apply, and 2025, the prices of electricity, natural gas, and gasoline could rise by nearly 20 percent nationally when compared to prices in a world without S. 2191.

Changes in Household Energy Prices in Michigan Due to S. 2191

Electricity $266
Natural Gas $181
Gasolone $375

Note: The current annual cost of natural gas is based on consumption and prices as of 2006, the most recent data available. The annual cost of gasoline is based on the average price of regular unleaded in each state on May 20, 2008.

In addition to taking a bite out of consumers' pocketbooks, the high energy prices throw a monkey wrench into the production side of the economy. Contrary to the claims of an economic boost from "green" investment and "green-collar" job creation, S. 2191 reduces economic growth, gross domestic product (GDP), and employment.

[1]To learn more about the economic effects of the Lieberman-Warner legislation, see "The Economic Costs of the Lieberman-Warner Climate Change Legislation", CDA Report published on May 12, 2008. This Report is available at www.heritage.org. The authors gratefully acknowledge the work of Dr. Shanea Watkins in preparing the maps used in this briefing memo.