What Will It Cost To
End Global Warming?
By H. Josef Hebert
Associated Press
WASHINGTON (AP) -- Now, for today's global warming spot quiz. Economists say reducing heat-trapping greenhouse gases that threaten the earth's climate would:
a. Cost a family $112 a year.
b. Cost a family $2,700 a year.
c. Drive millions out of work.
d. Spur new energy technologies with little job loss.
e. All of the above.
If you answered "e" you are correct -- and probably confused, and with good reason.
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.
Since then, one of the most vexing questions has been: "How much will it cost?"
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.
"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.
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."
"In short, there are really big stakes in this game," Nordhaus wrote in a review of studies on the economics of global warming.
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.
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.
"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.
Clinton administration officials echo that view, and insist the costs can be modest.
"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.
"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.
Change the assumptions on the degree of trading, and the cost numbers change dramatically, says Kopp.
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.
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.
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.
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.
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.
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).
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.
They often are based on significantly different assumptions.