New Study: American Households Would Face Annual Burden of $144.8 Billion Under Cap-and-Trade System

March 17, 2009

With climate change legislation becoming a top congressional priority in recent months, Tax Foundation Adjunct Scholar Andrew Chamberlain has written a new study showing that a cap-and-trade system curbing greenhouse gas emissions would place an annual burden of $144.8 billion on American households. The average annual household burden would be $1,218, which would be approximately 2% of the average household income.

Chamberlain explains that this burden would be disproportionately borne by low-income households, those under age 25 and over 75 years, those in southern states, and single parents with dependent children. He argues that “lawmakers weighing the costs and benefits of climate policy should be aware that cap-and-trade would impose a significant and regressive annual burden on U.S. households.” The bottom 20 percent of income earners has an annual cap-and-trade burden that is equal to 6.2% of their household cash income. The second quintile has a burden equal to 3.2% of household cash income, the third quintile 2.4%, the fourth quintile 2.0% and the top quintile 1.4%.

“A cap-and-trade system offers lawmakers a way to curb greenhouse gas emissions through regulations rather than tax increases – a less visible approach that enjoys the popular perception of being less burdensome to households,” says Chamberlain. “Contrary to this perception, economic theory teaches that cap-and-trade and carbon taxes impose nearly identical economic burdens on households.”

Read the press release here. Working Paper No. 6 can be found at http://www.taxfoundation.org/legacy/show/24472.html.


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