Senate weighs cost of acting, and not acting, on emissions

For those who think the battle over US carbon emissions legislation is already in full swing, this past week was a reminder that it's just beginning. The central debating point: the numbers.

How much will it cost American taxpayers to curb US carbon-dioxide emissions? Or, conversely, how much would it cost to just drop the blinds, turn up the air conditioner, and not do much at all? The answer to the question of economic impact - far more than the issue of polar-bear survival - will determine the outcome of the climate bill battle, political observers say.

On May 20, government witnesses told the Senate Energy and Natural Resources Committee how much the leading climate change legislation - the Lieberman-Warner bill (also known as "America's Climate Security Act") - is likely to cost the US economy in terms of economic growth:

• As much as 3.8 percent of the Gross Domestic Product (GDP) - about $983 billion annually - under a high-cost scenario that cuts CO2 emissions by 40 percent by 2030, according to the Environmental Protection Agency. The consensus among climate scientists is that the US and other nations need to cut their emissions by 80 percent by 2050 to avoid the worst effects of climate change.

• By as little as 1 percent of GDP - $64 billion per year, on average - between 2010 and 2030, the Energy Information Administration reported.

• Some $669 billion annually by 2030 and the loss of 3 million to 4 million jobs, says a study unveiled this month by the National Association of Manufacturers (NAM).

"Any way you look at it," said Keith McKoy, a NAM vice president, in a statement, "Lieberman-Warner will result in major disruptions of our economy, soaring energy prices, and millions of lost jobs. "The urge to do something without a thorough and thoughtful analysis must be resisted."

But inaction also has a cost.

A 2006 British study by Nicholas Stern, who heads that nation's Government Economic Service, estimated the global cost of doing nothing would at 5 to 20 percent of the world's annual gross domestic product - similar to the impact of a major world war or economic depression.

On May 23, two Tufts University economists detailed the cost to the United States alone of inaction on climate. Overall, they estimate the impact at about 3.6 percent of GDP - an enormous hit - by the year 2100. In the "business as usual" scenario, hurricane damage, real estate losses, higher energy costs, and fresh-water demands alone would cost the nation about 1.8 percent of its annual GDP, or about $1.9 trillion each year by 2100.

"We think it's clear that the cost of doing nothing is far higher than the cost of taking action," says Dan Lashoff, director of the Natural Resources Defense Council's climate center, an environmental group that sponsored the Tufts study. "There's an inherent bias in most of the dire projections of economic damage because these models do a poor job of anticipating the innovation that will occur in the marketplace - in alternative energy development, for instance - so they end up overestimating the cost."

But another, third point of view, is that all of these projections should be taken with a grain of salt - or maybe a pound of it.

"It is difficult, and some would consider it unwise, to project costs up to the year 2030, much less beyond," Larry Parker, an energy specialist at the Congressional Research Service told the Senate May 20 in his testimony.

Already, Mr. Parker said, "tenuous assumptions" that current regulatory standards would remain stable are "becoming unrealistic" and the prospect of unforeseen events, such as technological breakthroughs, are looming.

Clearly the cost of the Lieberman-Warner climate bill will ultimately be determined by how the US economy responds to the technological challenges posed by the demand to reduce carbon emissions. A few of the large, but highly uncertain cost factors, include:

• The cost to build a considerable amount of low-carbon electric-generating capacity.

• The viability of incentives to produce adequate schemes for carbon capture and storage.

• The role that carbon offsets and credits will play in buying time for companies to develop cost-effective ways to reduce emissions.

• The answer to the question, "Will other nations, including China and India, consider the US steps credible enough to follow suit?"

"Long-term cost projections are at best speculative and should be viewed with attentive skepticism," energy expert Parker said. Then, quoting Lincoln Moses, the first administrator of the Energy Information Administration under President Carter, he offered the reminder: "There are no facts about the future."