Climate action imposes upon social welfare

Claim:

“Even under the most optimistic assumptions, every study we examined predicts huge welfare costs in terms of consumption. A lower estimate involves a drop in consumption of 0.8%-1% below the business-as-usual scenario in every year starting in 2008 and going into the future, which represents a huge decrease in social welfare.”

– From The Cost of Climate Regulation for American Households, a report published by the George C. Marshall Institute, March 2, 2009

Truth:

This report claims to be a meta-analysis review of several studies on the economic impact of the Lieberman Warner Climate Security Act from last year’s Congress.

The studies covered in the Marshall Institute report include those from:

• The Massachusetts Institute of Technology
• The Environmental Protection Agency
• The Environmental Investigation Agency
• The American Council for Capital Formation and the National Association of Manufacturers (joint study)
• The Charles River Associates
• The Heritage Foundation’s Center for Data Analysis
• The Clean Air Task Force

The Marshall Institute report gives equal weight to all these studies, including those studies by the Charles River Associates, the Heritage Foundation and ACCF/NAM, which have been widely discredited for faulty economic modeling and assumptions.

The report considers the percentage change in consumption rather than gross domestic product as the most important welfare indicator and then claims:

“Even under the most optimistic assumptions, every study we examined predicts huge welfare costs in terms of consumption. A lower estimate involves a drop in consumption of 0.8%-1% below the business-as-usual scenario in every year starting in 2008 and going into the future, which represents a huge decrease in social welfare.”

In fact, the EPA, MIT and EIA numbers for 2015 loss in consumption were all around 0.4%. In other words, the Marshall report ignores the data from the most credible studies.

They then continue to use the upper range of their own over-inflated 0.8-1% increase to apply a “balanced growth equivalency” lowering of the consumption – i.e. they estimated what a 1% loss in consumption would be for an average household of four.

And, to further inflate the cost number, they start counting in 2008, years before a climate bill would even come into place.