Low-income families in Minnesota face all kinds of financial challenges – paying for food, housing, transportation, child care, health care and the list goes on. And now a very substantial new challenge looms on the horizon: increasing energy-related costs. Discussions are underway at both the state and national level to institute a carbon cap to reduce greenhouse gas emissions. And those interested in low-income issues must start paying attention.
The goal of improving the quality of our air by curbing pollution is one we certainly support. But an unavoidable consequence will be rising energy costs – not just utility bills, but also higher costs for transportation and other consumer goods. The Center on Budget and Policy Priorities estimates that the poorest 20% of the population would see an increase in energy-related costs of $750 to $950 per year with a 15% reduction in emissions. That is a significant chunk of change for someone making an average of $13,000 a year.
Fortunately, we can both accomplish both goals of cleaning up our environment and helping families move out of poverty. I’m not going to get into all the details here, but basically, if the cap and trade system auctions off pollution allowances, then there will be resources available to hold low-income families harmless. If we give those allowances away for free, then families will still pay increased energy-related costs, and we will have no additional public resources to help them.
An auction could potentially raise a significant amount of money and there are lots of ideas for how that money should be used. Our goal is to ensure that as this process unfolds, low-income families are held harmless from rising energy-related costs they cannot possibly afford – and that any relief is distributed using mechanisms that will actually reach these families.
This is an issue the Minnesota Budget Project is just starting to get engaged in. But you can get more information on how climate change policies will impact low-income families from the Center on Budget and Policy Priorities. And you can read my testimony from last week on a cap and trade bill that is moving through the House and Senate.