The cost of cap and trade.

How expensive would the cap-and-trade measures (which limit each industry's C[O.sub.2] emissions and allow them to sell any emission allowances that they don't use) of the Climate Stewardship Act be if that measure becomes law? One way to tell may be to revisit an analysis of the Kyoto Accord, the UN agreement on greenhouse gases. That agreement also created a cap-and-trade system for reducing carbon emissions. According to William O'Keefe, head of the George C. Marshall Institute, "Ratification [of Kyoto] by the U.S. would have cost the economy some $200 billion every year." What about the new cap-and-trade plans before Congress today? A stark summary of the likely economic impact of the earlier Lieberman-McCain plan on which current proposals are based was prepared in 2003 by economist Terry Dinan of the Congressional Budget Office. "A cap-and-trade program for carbon emissions could impose significant costs on the economy," Dinan noted in his study. "Those losses would include the value of society's resources (capital, labor, and natural resources) that would be devoted to producing goods in ways that yielded lower carbon emissions."

Moreover, the costs associated with cap-and-trade programs would disproportionately affect middle- and lower-class families. "The price increases resulting from a carbon cap would be regressive--that is, they would place a relatively greater burden on lower-income house holds than on higher-income ones," Dinan warned. How much is at stake? According to Dinan, "one study estimated that the price increases resulting from a 15 percent cut in carbon emissions would cost the average household in the lowest one-fifth of the income distribution about $560 a year, or 3.3 percent of its average income. Households in the top one-fifth of the income distribution would pay an additional $1,800 a year, or 1.7 percent of their average income."

Dinan's estimate is on the low end of the scale. In fact, the economic impact of measures now before Congress could be worse. In an op-ed in the Wall Street Journal in December of last year, Senator James Inhofe pointed out that cap-and-trade measures "would cost the average American family more than $2,700 a year while having no measurable impact on global temperature."