Oregon Greenhouse Gas Reduction Policies: The Economic and Fiscal Impact Challenges

Many policymakers in Oregon have concluded that global warming is a crisis, that human use of fossil fuels is the primary cause of climate change, and that state policies must be enacted to stabilize the global climate. Because of this, policy initiatives to regulate greenhouse gas emissions are fast becoming a dominant feature of statewide public policy. Oregon has adopted one of the most ambitious greenhouse gas reduction goals in the world.

Cascade Policy Institute undertook this independent economic study with QuantEcon, Inc. in order to assess the quantifiable and measurable costs associated with a cap-and-trade program or any other wide-ranging greenhouse gas reduction strategy. The study finds that economic vitality, energy use and carbon dioxide emissions have been tightly cointegrated historically, and that energy strongly “causes” economic vitality. Because of this, the costs to Oregon’s economy of meeting the emission reduction goals of Governor Ted Kulongoski’s Climate Change Agenda are substantial.

Global warming policies obviously come with challenges in implementation and risks regarding their effects. Although the benefits of reduced emissions could include avoiding economic damage that could result from changing climate conditions, much less uncertainty exists regarding costs associated with reduced use of fossil fuel energy. Oregon’s implementation of a cap-and-trade program would have vast economic implications that would reduce economic growth and state revenues, increase unemployment, and most likely offer little or no environmental benefit.

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This paper was prepared under a contract between the Cascade Policy Institute and QuantEcon, Inc., Randall J. Pozdena, PhD, President. The paper was co-authored by Eric Fruits, PhD, President of Economics International, under subcontract to QuantEcon, Inc.

About Cascade Policy Institute: Founded in 1991, Cascade Policy Institute is Oregon’s premier policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility and economic opportunity. To that end, the Institute publishes policy studies, provides public speakers, organizes community forums and sponsors educational programs.

Cascade Policy Institute is a tax-exempt educational organization as defined under IRS code 501(c)(3). Cascade neither solicits nor accepts government funding and is supported by individual, foundation and business contributions. Nothing appearing in this document is to be construed as necessarily representing the views of Cascade or its donors, or as an attempt to aid or hinder the passage of any bill before any legislative body. The views expressed herein are the author’s own. Copyright 2008 by Cascade Policy Institute. All rights reserved.

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