Greenhouse Gas Cuts Can Be Easy on Wallets

Greenhouse Gas Cuts Can Be Easy on Wallets



April 2008  - The overall cost of capping 
greenhouse gases for the average American family will amount to less than 
one percent of household budgets over the next two decades, finds a new 
analysis released Monday by the nonprofit Environmental Defense Fund. 
The anticipated cost to the U.S. economy of reducing emissions is small, 
even difficult to measure against projected economic growth, but the most 
expensive policy by far is to do nothing at all. 
"We can afford an ambitious climate policy for just pennies on the dollar. 
It's a small investment that will pay off in cleaner air, new jobs, and a 
safer world," said Nathaniel Keohane, PhD, director of economic policy and 
analysis at Environmental Defense Fund, EDF, and a former associate 
professor of economics at the Yale School of Management.
       
"Not acting now just means paying a heavier price later as we try to 
manage the consequences of unchecked climate change," he said. 
President George W. Bush has kept the United States out of the Kyoto 
Protocol, which requires an average cut of 5.2 percent of greenhouse gases 
below 1990 levels by 2012, because of concerns that it would be bad for 
the U.S. economy. 
The president was particularly concerned about the U.S. ability to compete 
in the global marketplace against emerging economies such as China and 
India with no such restrictions. 
But increasing scientific evidence of rapid climate change has persuaded 
many, including about half the U.S. states and some of the largest U.S. 
corporations, that a national cap-and-trade system for greenhouse gases is 
desirable sooner rather than later. 
Formed in January 2007, the U.S. Climate Action Partnership, USCAP, 
includes corporations such as Dow, Dupont, Siemens, Alcoa, Ford, General 
Motors, Duke Energy, and PepsiCo, and six large environmental groups, 
including Environmental Defense. 
In its "Call for Action" last month USCAP says it recognizes that "a 
robust, market-based cap-and-trade approach is the best way to contain the 
cost of reducing greenhouse gas emissions over the long term. At the same 
time, it recognizes additional cost containment measures may be needed to 
guard against excessively high and volatile allowance prices." 
The Environmental Defense study, "What Will it Cost to Protect Ourselves 
From Global Warming?," is the first comprehensive analysis of the leading 
economic modeling of cap and trade legislation to combat climate change. 
The forecasting models surveyed were performed by five of the most highly 
respected economic modeling groups in government and academia at the 
Energy Information Agency, Research Triangle Institute, Harvard, the 
Massachusetts Institute of Technology, and Pacific Northwest National 
Laboratories. 
The analysis shows that a cap-and-trade policy to cut greenhouse gas 
emissions responsible for global warming is consistent with long-term 
economic growth. 
The total number of jobs impacted by climate policy in the manufacturing 
sector over 20 years is substantially below the number of jobs created and 
destroyed in the sector every three months, the study shows. 
And household electricity and natural gas bills rise by only a few dollars 
a month over the next few decades, well within the rise and fall 
homeowners already experience. 
"Our gross domestic product is projected to reach $26 trillion in January 
2030. If we capped greenhouse gases, according to these studies, the 
economy would hit that same mark by April," Keohane said of the models 
analyzed in his report. 
None of these models takes into account the high costs of inaction. Each 
looks only at one side of the ledger - the costs of reducing emissions, 
rather than the benefits of avoiding the consequences of unchecked climate 
change. 
"It's important to keep in mind that these forecasting models compare 
climate policy to a business-as-usual case that doesn't take the costs of 
climate change into account," said Keohane. "If we fail to take action on 
global warming, the future will be anything but business as usual." 
According to a recent study by the University of Maryland, runaway global 
warming will impact every economic sector and every region of the country, 
straining public budgets and impacting jobs and competitiveness. 
The EDF study focuses on cap-and-trade programs that would cut U.S. 
emissions by 60% or more below current levels by the year 2050 - including 
the Lieberman-Warner Climate Security Act (S. 2191) currently before the 
Senate. 
A key feature of the report is its broad scope. "The cardinal rule about 
economic models is: Never trust any single number," Keohane said. "No one 
model alone is a useful guide to the future, because they all make 
different assumptions about the factors that drive the economy." 
"The models don't agree on much about what the future will look like, but 
they do agree that the impact of climate policy will be small," he said. 
An appendix to the report offers a detailed "Consumer's Guide to Economic 
Models," discussing the strengths and limitations of the economic models 
surveyed, as well as the key assumptions behind them. 
The new Environmental Defense Fund analysis is available online at 
http://www.edf.org/climatecosts.

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