Climate 411

This post is by Nat Keohane, Ph.D., director of economic policy and analysis at Environmental Defense Fund.

Last Friday, the U.S. Chamber of Commerce sponsored a panel discussion on the economic impact of climate change legislation. I was on the panel, along with Bob Shackleton of Congressional Budget Office, Francisco de la Chesnaye of Environmental Protection Agency, Margo Thorning of American Council for Capital Formation, and Anne Smith of CRA International.

In responding to questions about my recent study of how climate legislation will impact the economy, I made two key points:

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This post is by Nat Keohane, Ph.D., Director of Economic Policy and Analysis at Environmental Defense Fund.

We just released a new report on how climate change legislation will impact the economy [PDF]. There have been many recent cost estimates, but ours provides something unique. To put the numbers in perspective, we looked at model projections in the context of government data on jobs, consumer expenditures, electricity consumption, and so on.

The models – all from highly respected, independent sources – don’t agree on much. But they do agree on one thing: the overall impact on the economy will be very small.  All the models project that, over the next twenty years, the cost of climate policy will be just a few months of economic growth.

The good news coming out of this study is that we can afford ambitious cuts in global warming pollution.

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This post is by Nat Keohane, Ph.D., Director of Economic Policy and Analysis at the Environmental Defense Fund.

My February 21 post, CBO Report: The Real Story, caught the attention of the folks at the Congressional Budget Office (CBO). Last Wednesday, I received a call from Terry Dinan, the senior analyst at CBO who wrote the report. A little while later I got a second call, this time from Peter Orszag, the Director of CBO.

In particular, they didn’t like the attention-grabbing paragraph at the top that said:

…a careful reading reveals the report to be a theoretical exercise with no real-world relevance. It highlights the drawbacks of a version of cap-and-trade that no one advocates, and bases its efficiency analysis on a faulty premise.

I stand by what I wrote, as I’ll explain in a moment. But a call from the Director of CBO is fairly attention-getting, as well. Moreover, Dinan and Orszag are smart and well-respected economists, and my conversations with them helped to sharpen my own thinking. So I thought I’d explain a couple of points in more detail.

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This post is by Nat Keohane, Ph.D., Director of Economic Policy and Analysis at Environmental Defense.

The Congressional Budget Office (CBO) released a report this month on Policy Options for Reducing CO₂ Emissions [PDF]. It concludes that a carbon tax reduces emissions more efficiently than cap-and-trade.

But a careful reading reveals the report to be a theoretical exercise with no real-world relevance. It highlights the drawbacks of a version of cap-and-trade that no one advocates, and bases its efficiency analysis on a faulty premise.

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