Myth: Pricing carbon will destroy the economy 3

Money

Legislators from dirty-energy producing states,  energy-intensive business lobbies, and conservative think tanks struggle to outdo one another with apocalyptic predictions about the effects of mandatory greenhouse gas emission reductions. See, for example, the Chamber of Commerce’s video showing children shivering in the cold (really). As climate legislation evolves this year, the rhetoric is ramping up again, led by the Wall Street Journal editorial page and doomsayers-for-hire at the Heritage Institute and the Chamber of Commerce.

The mainstream media passes along this kind of Chicken Littleism in gutless he-said she-said fashion, so the public rarely hears the truth: mainstream economists pretty well agree that the impact of a carbon pricing system on the economy will be modest.

Last year EDF did an analysis (PDF)  of six separate forecasts of the economic impact of a cap-and-trade, from leading nonpartisan academic and government agency sources. The median prediction was a hit to GDP growth of between 0.5 and 1 percent by 2030.  Instead of doubling by January 2030, U.S. GDP would, in the most pessimistic scenarios, double by ... July 2030. (Doooomed!)

Some analysts are even more optimistic, projecting climate targets will be met at net-zero cost or even with a boost to GDP. Perhaps they recall that economists wildly overestimated the cost of the last U.S. cap-and-trade program; the sulfur dioxide trading regime, designed to fight acid rain, came in about 90 percent cheaper than official projections.

Here’s a short list of things that will damage the economy far worse than tackling climate change: the current mortgage/banking/credit crisis, rising fossil fuel prices, competitive disadvantage in burgeoning global clean energy markets, and, oh yeah, climate change itself. Compared to the alternatives, reducing climate emissions looks like a spectacular bargain. (For more on this economic consensus, see Eric Pooley.)

David Roberts is staff writer for Grist. You can follow his Twitter feed at twitter.com/drgrist.

Related Stories

Advertisement
Advertisement
  1. Kenneth P. Green 's avatar

    Kenneth P. Green Posted 10:40 am
    03 Apr 2009

    Dave -I dare say that for every over-estimate of the cost of carbon reduction you can find from some industry group, I can find you one from a governmental agency or environmental advocacy group that is so ridiculously low-balled that it will incite outright laughter from any serious economist.California's recent experience with their cost estimates of AB32 is illustrative: agency analyses showed extremely low costs, and extremely high benefits for California's aggressive GHG reduction plan. But a panel of respected economists appointed (by the state itself!) to review the cost/benefit analysis condemned it - not a few reviewers, but ALL of them. Corporations have an incentive to overstate the costs of compliance, and underestimate benefits. Environmental groups and government agencies have incentives to understate the costs of compliance, and overstate benefits.You prefer EDF's analysis, but they're hardly a neutral observer, nor are you: you're both single-mission environmental advocacy groups, not independent legislative analysts office. I think it's fair to say that any cost estimate that EDF would put out would represent the absolutely lowest cost estimate it's possible to make, using assumptions that are almost certainly so blue-sky as to make a serious economist laugh out loud on reading through them.As for other things causing more economic harm, such as the financial crisis, you're right, they're probably bigger than the cost of carbon reduction. However, two, or three, or 10 wrongs don't make  a right. What you're saying now is "Heck, there's already so much wreckage, how can a little more hurt!" Not exactly critical thinking.

    Permalink

    1. David Roberts's avatar

      David Roberts Posted 3:33 pm
      03 Apr 2009

      Ken, I realize why it is to your advantage to characterize EDF's analysis as an advocacy document from an advocacy org, but as explained in the post, it is not. They merely chose six leading nonpartisan economic forecasts and averaged their predictions.Also, if you agree that corporate lobby groups are wildly overstating the costs of emission reduction, I look forward to you saying so publicly via AEI!

      Permalink

  2. amazingdrx's avatar

    amazingdrx Posted 8:56 am
    04 Apr 2009

    oh so you want to hear a widespread delusion do you? Check the latest "Real Time" with Bill Maher.Not once but thrice, a think tank wing nut repeats the lie, "solar costs 10 times what coal costs!", he wasn't challenged.  Can we get that video excerpt and transcript and a rebuttal?  It would be good.@amazingdrx

    Permalink

Add a Comment

You are not logged in. Thus, you cannot post a comment. If you have an account, log in. If you don't have an account, well, by all means go make one! Meet you back here in five.

Hello, Visitor!    Why not register?

Series Intro
Myth: Climate policy is primarily about putting a price on carbon 9
Myth: There is a "free market" in energy 4
Myth: Pricing carbon will destroy the economy 3
Myth: Tackling climate change requires fundamental technological breakthroughs 4
Myth: Solving climate change is primarily about finding cleaner sources of energy 20
Myth: Using less energy = sacrifice 8
Myth: Consensus on policy is possible even among those who disagree about climate change 0
Myth: Europe's experience shows that cap-and-trade can't work 1
Myth: Unlike cap-and-trade, a carbon tax is simple, immune to manipulation, & politically palatable 44
Myth: Democrats support good climate policy and Republicans oppose it 13
Myth: Climate policy must be simple 10
Myth: Waxman-Markey gives away 85 percent of allowances to polluters 16
Advertisement