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How a 50% renewable energy mandate will hurt the state’s economy

This morning, we launched our new report, Doubling Down on Failure: How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion.

In it, we report how enacting a 50 percent renewable energy mandate by 2030 would

  • Increase electricity costs by $80.2 billion to meet mandated renewable energy goals and maintain this electric system through 2050.
  • Cost each Minnesota household $1,200 per year through 2050.
  • Increase household electric bills by $375 per year, a 32% increase compared to 2017.
  • Destroy 20,950 jobs by 2050 and reduce Minnesota’s GDP by $3.1 billion every year to create temporary construction jobs.

How the numbers were crunched

This last calculation was done by me. At the press conference this morning, I was asked how.

Estimates of Minnesota households energy costs as percentage of after-tax income by income category gave us the average energy spend in each income category. Multiplying these by the number of households in each category, we get an estimate of total energy spending by each income category. This, in turn, gives an estimate of the share of Minnesota’s total energy spend by each income category. Taking the estimate of the cost to implement these mandates an apportioning it using these percentages, we can work out how much each household income group would have to pay. We then enter this into IMPLAN economic modelling software as a decline in household income in each category.

What the numbers mean

When the cost of something like energy rises, households will consume less of it and less of other things. They will go out to eat less, buy fewer new clothes, hold off on getting their car fixed. As a result, the restaurants, clothing retailers, and mechanics experience a loss of income. This is how we get job losses in sectors across Minnesota’s economy resulting from these energy price hikes.

You can find examples in the 1970s. Then, in 1973 and again in 1979, we had the ‘Oil Shocks’. Energy prices spiked. In real terms, people’s incomes had fallen. On both occasions, the economy tipped into recession.

John Phelan is an economist at the Center of the American Experiment. 

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