A new study on the economic impacts of Gov. Jay Inslee’s cap-and-trade proposal finds that it will gradually drive up the price of every major energy source in Washington state, from electricity to gasoline, and cost the state an average of 56,000 jobs annually through 2035.

That conclusion is in stark contrast to modeling from Inslee’s office, which contends the economic impacts of cap-and-trade will be minimal.

Over the next 20 years, the study forecasts 9 percent increases in the price of gasoline and diesel, to $4.49 per gallon of gasoline by 2035, and $5.48 per gallon of diesel. The study assumed a price floor of gasoline based on 2012 levels of $3.27 per gallon; the price has dropped lower currently, to below $2 a gallon in areas of Washington state.

The price of natural gas would jump 22.6 percent to $11.63 per btu in 20 years, and price per kilowatt hour of electricity would increase to $7.94 per kilowatt hour, an 11 percent increase.

The study argues this would make cap-and-trade a net loser for the state, as the loss of tax revenue from reduced economic activity would swallow up any gains from the revenue generated.

Combined, the increase in energy costs would draw down the average household income by about $60 a month.

Commissioned by the Washington Climate Collaborative, a coalition of the Association of Washington Business, the Western States Petroleum Association, the Washington Farm Bureau, trade councils and labor groups, the study notes that the cap-and-trade program will see a price per-metric ton of carbon start at about $12, and gradually increase to $45.

The study was done by a Utah-based firm, Energy Strategies, with consultation from the University of Idaho and Washington State University.

That’s similar to the scenarios by Inslee’s staff, and OFM came to similar conclusions on the increased energy costs.

But the governor’s office laid out a different scenario under the cap-and-trade proposal: minimal job loss to about 11,000 jobs gained, and negligible economic impacts.

The key difference between them is how widespread the effects of cap-and-trade will have on the overall economy; the governor’s staff contended that cap-and-trade would apply narrowly to a handful of the worst polluters statewide.

Its analysis argued that there were some economic sectors that would see job growth, such as construction, health care practitioners, while transportation, natural gas distributors, petroleum workers and electric power generators would see slight job losses.

The scenario assumes all the costs of cap-and-trade would be passed on to consumers, and the effects would be minimal as people accepted the higher prices. Positive gains would be the result of the program spending 80 percent of its revenue on schools and transportation, with another 10 percent devoted to tax credits for low-income families.

“The potential increases in fuel costs do not affect the overall net positive effect of the program on the statewide economy, mostly because fuel costs are a relatively small portion of average household and business expenditures,” the analysis says. “These positive changes to the economy result primarily from reinvestment of the program funds.”

The Climate Collaborative study identified much more widespread effects, calling it an “economy-wide cap-and-trade program that will economically impact all Washington households, businesses, and industry.”

The basis for that judgment is that half of the emissions targeted by cap-and-trade have links to residential and business use of petroleum and natural gas to heat homes.

The study also argued against Inslee’s urgency in adopting cap-and-trade, saying Washington was already on a path to reducing carbon emissions, and is within 3 percent of meeting its goal to reduce the statewide carbon emission total to 1990 levels.

Greenhouse gas emissions have fallen by an average of .5 percent annually since 2005, which the study attributed to policies from the state and federal government to adopt cleaner fuels standards, more renewable energy generation, and other steps.

It also argued that the goals set forth by cap-and-trade would be too difficult to meet unless the price per metric ton of carbon ratcheted up drastically higher, to more than $100 per ton, which would make the program even more expensive.

“Historical analysis of the U.S. business cycle shows the economy is sensitive to increases in energy prices, and rising energy prices have been an important component of most recent major U.S. recessions,” the study concluded. “A cap-and-trade policy will increase the cost of energy throughout the Washington economy. As higher costs ripple through the economy, every business and household will feel the impact.”

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