- WASHINGTON (AP) -- Now, for today's global warming spot quiz. Economists
say reducing heat-trapping greenhouse gases that threaten the earth's climate
would:
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- a. Cost a family $112 a year.
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- b. Cost a family $2,700 a year.
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- c. Drive millions out of work.
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- d. Spur new energy technologies with
little job loss.
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- e. All of the above.
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- If you answered "e" you are
correct -- and probably confused, and with good reason.
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- Nearly a year ago, U.S. negotiators joined
in a historic agreement in Kyoto, Japan, that calls on 38 industrial nations
to curtail the flow of carbon dioxide and other greenhouse gases into the
atmosphere.
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- Since then, one of the most vexing questions
has been: "How much will it cost?"
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- While the science of global warming may
be uncertain, predicting the economic impact of addressing climate change
has been even more speculative. It has produced a pile of seemingly conflicting
assessments -- most by reputable economists.
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- "There's probably a stronger consensus
on the science side than there is consensus on the economic side,"
says John Holdren, professor of environmental policy at Harvard and an
adviser to the White House on climate issues.
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- No matter what the numbers, Yale economist
William Nordhaus says tackling climate change will pose a global challenge
likely "larger than all of the rest of today's world environmental
programs put together."
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- "In short, there are really big
stakes in this game," Nordhaus wrote in a review of studies on the
economics of global warming.
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- Carbon dioxide is the principal greenhouse
gas. Curtailing carbon emissions means burning less fossil fuels such as
coal and oil -- the energy foundations of industrial society.
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- Such a dramatic shift is certain to have
economic impact, analysts say -- but how much may depend largely on an
array of factors, from the amount of flexibility in compliance to how much
confidence one has in aggressive development of new energy technologies.
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- "There are smart and dumb ways to
do things. If you do it dumb, it's going to be very expensive. If you do
it smart, it's not going to be as expensive," says Holdren.
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- Clinton administration officials echo
that view, and insist the costs can be modest.
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- "We can meet the challenge of climate
change while still maintaining a strong economy," says Janet Yellen,
head of the president's Council of Economic Advisers. That would mean,
according to a White House analysis, a cost of as little as $23 per ton
of carbon reduced, or an estimated cost of $112 a year for the average
family.
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- "They assume there are vast opportunities
for cheap emissions reductions," says Raymond Kopp, an economist at
Resources for the Future, an environmental think tank. Indeed, the administration's
scenario assumes a large majority of emission reductions will come from
buying "pollution credits" from other countries under a worldwide
trading program, and not from actual emission reductions from U.S. industry.
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- Change the assumptions on the degree
of trading, and the cost numbers change dramatically, says Kopp.
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- He cites an analysis by the Pacific Northwest
National Laboratory that concludes climate change measures would cost $26
a ton of carbon reduced assuming worldwide emissions trading, but nearly
triple that cost if trading is limited to industrial nations. The number
soars to $108 a ton with no trading.
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- Several studies often cited by industry
predict even higher costs. A study by WEFA Inc., suggests costs as high
as $2,700 per household; another by Standard & Poors DRI predicts the
loss of 1.1 million jobs because of economic dislocations. Meanwhile, environmentalists
cite studies that project "overall economic savings" and little
job loss.
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- These wide-ranging numbers and conclusions
reflect a simple fact of economic analysis, says economist Robert Repetto,
who produced "a guide for the perplexed" on the cost of climate
change. He says economists use widely different assumptions when crunching
the numbers, and these assumptions dictate largely what emerges from the
analysis.
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- In addition to the degree of emissions
trading, other assumptions that can change the bottom-line numbers significantly
are timing (the earlier you start, the cheaper it is); expectations assumed
for development and acceptance of new energy technologies; and whether
a study assumes other environmental benefits such as cleaner air.
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- Some studies have focused solely on direct
energy costs, while others examine a wider ripple effect. Finally, few
studies attempt to address the total "cost-benefit" picture including
what economic costs may arise from doing nothing to stop global warming.
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- So it is not surprising one study by
the Energy Department can suggest modest cost (it assumed significant gains
from technology advancements), while another predicted a cost of $1,700
per household (assuming a crash program with few technological strides).
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- Nor is it strange that studies predicting
modest costs or even economic gain should be debated alongside studies
predicting soaring energy costs and loss of jobs and economic output.
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- They often are based on significantly
different assumptions.
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