The horrific cost of cap-and-trade

A secret Treasury Department analysis of the cost of the cap-and-trade bill has been made public:

The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.

A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration’s estimate, the cost per American household would be an extra $1,761 a year.

A second memorandum, which was prepared for Obama’s transition team after the November election, says this about climate change policies: “Economic costs will likely be on the order of 1 percent of GDP, making them equal in scale to all existing environmental regulation.”

The documents (PDF) were obtained under the Freedom of Information Act by the free-market Competitive Enterprise Institute and released on Tuesday.

(Via Hot Air.)

A 15% tax hike. I can see why they didn’t want the analysis to become public. The White House’s public estimate, $175 per year, was an order of magnitude too small.

I also suspect that even the secret analysis severely lowballs the cost, since government analyses usually rely on static assumptions about the economy’s behavior.

UPDATE: Jonathan Adler says the facts are a little more complicated than this might suggest. The $100-$200 billion estimate doesn’t really apply to the bill being considered now in Congress. The figures that would apply to the current bill are still being kept secret and were redacted in the document. So the Treasury Department’s secret analysis is still secret.

Adler goes on to point out that the redaction of part of the document is not consistent with the Freedom of Information act, much less the president’s announced policy on FOIA requests.

Adler’s explanation also shows that my speculation above was accurate, but didn’t go far enough. The cost figure does not include any effects on the economy, whether under static or dynamic assumptions.

UPDATE: The document is now unredacted. A key portion reads (with underlining to mark the formerly redacted portion):

While such a program can yield environmental benefits that justify its costs, it will raise energy prices and impose annual costs on the order of tens (and potentially hundreds) of billions of dollars.

Another reads:

Domestic policies to address climate change and the related issues of energy security and affordability will involve significant costs and potential revenues, possibly up to several percentage points of annual GDP (i.e. equal in size to the corporate income tax).

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