CBO Director: Cap-and-Trade Impact on Employment 'Small'

The director of the CBO switches from healthcare to climate change.

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Douglas Elmendorf, the director of the nonpartisan Congressional Budget Office, might be the busiest man in Washington. And the most blunt.

A day after the Senate Finance Committee approved Sen. Max Baucus's $829 billion healthcare bill, thanks in part to CBO analyses showing that it would insure millions of people without raising the deficit, Elmendorf was back in the Senate this morning, testifying about climate change.

On Tuesday, hours before the Finance Committee's vote, Elmendorf had frankly told the committee that he did not know whether the bill before it would successfully curb "national healthcare expenditures." This morning, speaking to a different set of senators, he sounded a similar note of uncertainty about the economic impacts of cap-and-trade legislation.

"Senator, I am overwhelmed by the uncertainty of all the things we are trying do to," he told Washington Sen. Maria Cantwell, a Democrat, responding to her friendly question about whether climate change was easier to analyze than healthcare.

Testifying before the Senate Energy and Natural Resources Committee, Elmendorf told Congress that it is very hard for CBO to predict how quickly the United States will be able to switch to an economy that doesn't rely so heavily on fossil fuels—and what the cost of the transition will be.

"One of the great uncertainties of the cost of reducing carbon emissions is how readily the economy can move," he said, noting that the CBO is to a large degree "guessing the rate." Elmendorf added, "I used the word guess deliberately."

Elmendorf did have estimates about the impact of cap-and-trade legislation on jobs. The effect on total employment, he said, will most likely be "small." But he added that an emissions cap would significantly affect jobs in particular industries and regions.

"Jobs will emerge in industries that develop" clean energy and become more energy efficient, Elmendorf said, but that "does not mean there are not substantial costs borne by affected industries and affected areas."

In his submitted testimony, Elmendorf wrote that "industries that produce carbon-based energy—coal mining, oil and gas extraction, and petroleum refining—would probably suffer significant employment losses over time." He also said that job losses would trickle into energy-intensive industries like "chemicals, primary metals, minerals mining, nonmetallic mineral products, transportation, and construction."

Still, the impact on overall employment, he estimated, would be "small."