Dr. David Kreutzer of the Heritage Foundation, one of our favorites at The Chilling Effect, has a new analysis out on the dubious use of financial discounting in estimating the cost of cap and trade. The conclusion:

The EPA, with some very generous assumptions (doubling nuclear power output in 25 years, for example), projects that the Waxman-Markey energy tax will have an impact of $174 per household in 2050 in present discounted value. However, even using the EPA results shows that the inflation-adjusted impact per family of four would be much higher at $2,872 per year in 2050. Those are some very expensive postage stamps.

Again, though discounting is a useful tool for some financial calculations and when properly employed in cost-benefit analysis, it is not appropriate for giving an accurate picture of future prices. Saying cap and trade will cost a postage stamp per day is equivalent to saying the average new car today costs $562. It is clearly wrong.

Click through for the entire article if you’re interested in learning more about the problems Dr. Kreutzer addresses.

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