(CNSNews.com) -- The non-partisan Congressional Budget Office (CBO) released a report on Monday saying that the climate change legislation being considered by Congress could reduce the purchasing power of the middle class and shrink or slow the economy. The report, "The Costs of Reducing Greenhouse-Gas Emissions," says market-based regulations such as a cap and trade scheme would boost the cost of emission-intensive activities. In turn, household incomes would shrink along with consumer consumption and savings, real wages would fall, the supply of labor would shrink, and economic investments would be discouraged because of rising production costs.
In general, with cap and trade, the government would set a ceiling (cap) on how much carbon a company could emit during its production process. If a company's emissions went above that cap, it could purchase (trade) carbon credits, the proceeds of which would be redistributed by the government to help foster more environmentally friendly companies.
The House of Representatives passed H.R. 2454, the American Clean Energy and Security (ACES) Act, in June. The Demcrats' bill would create a system of carbon allowances that become more costly over time. The goal is to reduce CO2 emissions 80 percent by 2050 (compared with 2005 levels).
The Senate has not yet approved a climate change bill.
The CBO said if the House bill is enacted, it could shrink real Gross Domestic Product up to 3.5 percent by 2050. The "CBO concluded that H.R. 2454 would slightly reduce real GDP--by roughly 0.25 percent to 0.75 percent in 2020 and by between 1.0 percent and 3.5 percent in 2050," reads the report.
The Gross Domestic Product is the total market value of all goods and services in the United States over any year.