Almost a year to the day after the U.S. House narrowly adopted a costly cap-and-tax scheme, the American Council for Capital Formation (ACCF) released a study today that predicts Michigan could face declines in gross state product, employment, industrial output, state budget revenues and household income if federal climate change legislation is enacted. Congressman Fred Upton (R-MI), top Republican of the House Subcommittee on Energy and Environment, led the fight in the U.S. House against the cap-and-tax legislation and continues working to protect Michigan jobs as the Kerry-Lieberman bill is debated in the Senate.

“The ACCF study reinforces what many others have already predicted - that cap-and-tax legislation will result in skyrocketing energy bills and massive job losses,” said Upton. “Kerry-Lieberman puts a bullseye squarely on the backs of Michigan’s working families who are already struggling to keep the lights on. In Michigan where nearly one out of every five folks is out of work, jobs must be our top priority, not a national energy tax.”

The ACCF looked at the potential economic impact of various climate change bills that would impose a cap-and-trade system requiring sharp reductions in greenhouse gases and mandate high levels of energy efficiency and renewable energy. The U.S. House of Representatives passed a 1500-page climate change bill (Waxman/Markey, H.R. 2454) by a margin of seven votes in June 2009. Led by Senators John Kerry and Barbara Boxer, the U.S. Senate Environment and Public Works Committee passed a similar bill in November 2009, S.1733, the Kerry-Boxer bill, which has tighter near-term emission reduction targets than the Waxman-Markey bill. In May 2010, Senators John Kerry and Joe Lieberman introduced the American Power Act where the emission reduction targets are virtually the same as those in H.R. 2454.

“Michigan and manufacturing have been vital to American’s economic prosperity for decades,” said ACCF Senior Vice President and Chief Economist Margo Thorning. “Unfortunately, the state’s already distressed economy could slow even further if Congress requires these aggressive emission reduction targets in greenhouse gases. Multiple economic analyses show that these federal climate bills would increase the price of electricity, gasoline and natural gas. In consequence, economic productivity, employment and household income would decline.”

Key findings of the ACCF study include:

• If a cap-and-trade climate change bill similar to the Waxman-Markey bill (H.R. 2454), the Kerry-Boxer bill (S.1733) or the American Power Act is enacted, Michigan is likely to experience a decrease in manufacturing output. Overall manufacturing output declines by 5.4 percent in the low-cost case and by 6 percent in the high-cost case in 2030 compared to the baseline forecast.

• Another important segment of Michigan’s manufacturing industry, transportation manufacturing, falls considerably, declining by up to 9 percent in 2030.

• Gross state product (GSP) declines by $12 to $16.5 billion in 2030. Such reductions in GSP will dramatically reduce state budget receipts.

• Michigan will see a reduction in job growth; there will be 66,700 to 90,800 fewer jobs in 2030.

• Disposable income will fall by an average of $883 to $1,435 in 2030. Low-income families and the elderly will spend a higher proportion of their income on energy.

The American Council for Capital Formation (www.accf.org), founded in 1973, is a nonprofit, nonpartisan economic policy organization dedicated to the advocacy of tax, energy, environmental and regulatory policies that encourage saving and investment.