Climate 411

Cost of Inaction on U.S. Transportation

Sheryl CanterThis post is by Sheryl Canter, an online writer and editorial manager at Environmental Defense Fund.

A new fact sheet on costs to U.S. transportation and infrastructure surveys the many ways that global warming will cause disruption and damage if we don’t act to stop it.

Published by the Democratic Policy Committee, the fact sheet gives examples of known costs in different areas to give a sense of what the total might be – and it’s big. Here are just a few examples from the transportation sector:

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Posted in Economics / Read 6 Responses

How Much Will It Cost to Save the World?

Tony KreindlerThis post is by Tony Kreindler, Media Director for the National Climate Campaign at Environmental Defense Fund.

Last week, two reports came out that look at how much it will cost to drastically reduce the pollution that causes global warming. Both used economic models to project how the growth rate would change. One used a realistic set of assumptions, and the other stacked the deck with extreme assumptions.

But both of them look at only one half of the real question. They ask “How much will it cost?” (Answer: Surprisingly little). But we also have to ask, “What do we get in return for that investment?”

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Posted in Economics / Read 3 Responses

Do-It-Yourself Policy Simulation

Sheryl CanterThis post is by Sheryl Canter, an Online Writer and Editorial Manager at Environmental Defense Fund.

There’s no longer any serious disagreement about our need to reduce greenhouse gas emissions to stop global warming. The debate now is about the best way to go about it. Opponents claim that the cost of adopting a cap-and-trade system would be ruinous to the U.S. economy. Leading economists who have studied the issue say that’s wrong.

Now you can decide for yourself. Yale economics professor Robert Repetto synthesized the results of thousands of policy simulations from 25 economic models to identify the seven key assumptions that account for most of the differences in the models’ predictions. He then used this information to create a new Web site that allows you to choose your own assumptions.

Yale Model Results

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Posted in Economics / Comments are closed

Phone Calls from the Congressional Budget Office

Nat KeohaneThis 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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Posted in Economics / Read 3 Responses

CBO Report: The Real Story

Nat KeohaneThis 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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Posted in Economics / Read 4 Responses

The Real Cost of Climate Policy

Jon AndaThis post is by Jon A. Anda, President of the Environmental Markets Network at Environmental Defense. A version of this post was published in the Financial Times on December 4, 2007.

A November 28 column by John Kay in the Financial Times, "Climate Change: the (Groucho) Marxist approach", starts with a quote from Groucho Marx: "Why should I do anything for posterity? What has posterity ever done for me?" Groucho’s position may be morally indefensible, Kay says, but "[t]he problem of weighting the present and the future equally is that there is a lot of future." From an economic standpoint, valuing future people equally would require unrealistically great sacrifices by those living today.

There’s a problem with this argument. It’s based on a rather totalitarian belief in net present value (NPV) as the means to evaluate policy – a simple calculation of the benefits of action (the cost of doing nothing) minus the costs of action. If a 5 percent discount rate applied to base-case cost and damage estimates yields a negative NPV for policy, does that mean we reject it?

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Posted in Economics / Read 4 Responses