Climate 411

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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This 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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This post is by Keith Gaby, communications director for the national climate campaign at Environmental Defense.

When politicians hesitate to act on global warming, one of the concerns we hear is that cutting the pollution that causes global warming could cost too much. More and more evidence is piling up to show that’s just not true. For one, we have to take into account the cost of not doing anything.

But just as important, the cost of doing what we need to is much less than people fear. A study released today by researchers at McKinsey & Company shows how much is already in our reach.

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This post is by Gerald Karnas, Florida Climate Project Director at Environmental Defense.

Florida stands to lose big-time unless Congress enacts strong climate legislation, soon. The longer Congress delays, the harder climate change will hit Floridians. Damage to just three sectors—tourism, electric utilities, and real estate—together with hurricane damage would shrink the state’s gross domestic product by more than 5 percent by the end of this century.

That’s the key conclusion of a new report by Tufts University economists. Environmental Defense commissioned the report and is helping to launch it today via a press conference in Tallahassee.

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

It’s no surprise the U.S. Chamber of Commerce opposes the Lieberman-Warner bill (see their new ad). They’ve been one of the loudest voices against global warming action for years.

The problem is, their claim that a firm climate bill will cripple our economy is simply wrong. See our previous post on Green Technologies for a more realistic assessment of the costs. There is also a cost to inaction. A recent study by the University of Maryland found that the most expensive option is to do nothing.

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