Global warming legislation that mandates a huge reduction in carbon dioxide emissions would hit Indiana's economy harder than any other state, according to an analysis by The Heritage Foundation.
The Waxman-Markey bill currently under consideration in Congress seeks to cut emissions from fossil fuels by 83 percent. To do so, it would create a cap-and-trade system that would raise energy prices dramatically. The nonpartisan Congressional Budget Office estimates the bill would cost the typical American household an extra $1,600 annually within a decade.
But energy-intensive businesses – such as manufacturers – would pay a far greater price. And those manufacturers most dependent on coal-generated power would be the most severely crippled.
To determine which areas of the country would be hit hardest, Heritage researchers devised a simple "Manufacturing Vulnerability Index" that reflects both the degree to which regional employment is concentrated in manufacturing and the degree to which it is dependent on coal-generated energy. The greater a region's reliance on manufacturing and coal, the more vulnerable it would be to severe job loss resulting from the proposed $1.9 trillion cap-and-trade plan.
Indiana emerged as the state most at risk from cap-and-trade. Its large manufacturing sector – more than 600,000 jobs accounting for nearly 20 percent of all employment – combined with a heavy reliance on coal (94 percent of all energy) put it at the top of the national Manufacturing Vulnerability Index. Its MVI rating was 28 percent higher than runner-up Ohio and more than three-and-a-half times that of the median rating.
Five of the 10 most vulnerable congressional districts are located in Indiana as well. The 3rd District (represented by Mark Souder-R), topped the national rankings, followed closely by the 2nd District (Joe Donnelly-D). Indiana's 6th (Mike Pence-R) and 9th (Baron Hill-D) districts finished in the fifth and sixth spots, respectively, and the 8th District (Brad Elsworth-10) ranked 10th.
"The best that can be said of cap-and-trade regimes is that they spread the pain in a bi-partisan fashion," said Heritage energy economist David Kreutzer. "But they don't spread it evenly. Indiana will pay a much higher price, in terms of lost jobs and higher energy costs, than the rest of the country if Congress adopts this approach to environmental improvement."
Heritage expects to complete a more detailed economic analysis of the Waxman-Markey bill within a week. And Kreutzer predicts the job loss numbers "won't be pretty."
A Heritage analysis of last year's Lieberman-Warner cap-and-trade bill estimated it would lead to nearly 3 million manufacturing jobs lost by the year 2029. And, Kreutzer noted, that bill was far less stringent than Waxman-Markey.
"The CO2 reductions envisioned in Lieberman-Warner would have destroyed more than half the jobs in some manufacturing sub-sectors like machinery manufacturing and those that make plastic and rubber products," Kreutzer noted. "Under this year's bill, things would only get worse."
The Heritage Foundation is a non-partisan think tank based in Washington, D.C.