Price for Global Warming Curbs Unclear
Must the fight against global warming cool the U.S. economy, bringing widespread layoffs and soaring gasoline prices and heating bills?
American business and industry leaders say the answer is yes--and they warn of those dire consequences even under the relatively mild U.S. proposal for trying to curtail global warming.
Representatives of 166 nations are meeting in Kyoto, Japan, this week and next to try to negotiate a pact to curb rising temperatures, and many of those nations say the U.S. position does not call for enough reductions in the emissions blamed for causing them.
The United States’ reluctance to agree to more stringent proposals is driven by concern that American business and workers would be at a competitive disadvantage if limits on so-called greenhouse gases force the country to go on an energy diet. But are those concerns valid? The quest for a simple answer has become the central and most frustrating issue underlying the talks.
Few U.S. experts believe that any economic study or computer analysis can accurately predict what would happen to the domestic economy under the various proposals being considered in Kyoto.
Perhaps the best answer is provided by Robert Repetto, who approached the question by reviewing 162 global warming economic studies.
“The worst-case prediction is that the [U.S.] economy in 2020 would be less than 2 1/2% smaller than it otherwise would be,” said Repetto, who conducted the review for the World Resources Institute, which researches environmental and economic issues.
Translation: If the U.S. economy grows by an average of 2.5% a year, the effect of enforcing restrictions would be the equivalent of skipping a year of growth between now and 2020. Rather than reaching a specific economic rung by 2020, Repetto said, that growth point would be achieved in 2021.
The best case? “It’s close to cost-less, if we pursue technology aggressively and successfully,” said Everett Ehrlich, a former undersecretary of Commerce who now runs a business and economics consulting firm.
But those conclusions mask what is truly a bizarre debate among U.S. business, government and environmental communities, with none of those involved able to agree on even the language or terms of the argument. “People are going around making wildly divergent claims,” Repetto said.
In one sense, perhaps that is understandable. Robert Stavins, a professor of public policy at Harvard’s John F. Kennedy School of Government and an economist by training, used an example to illustrate the potential for mistakes and the uselessness of such an exercise.
He suggested thinking back to 1897 and to the experts who may have pondered the cost of solving environmental problems that the world’s greatest city was likely to face over the next half a century. “They would be worrying about the horse manure building up in central London,” he said.
In the current debate, the most negative predictions were produced in studies completed for fossil-fuel industries most likely to suffer under restrictions--those dependent on sales of coal and oil.
The most optimistic numbers emerged from the work of environmental groups and industries most likely to benefit from the proposal, among them those dependent on increased use of solar power, for example.
At the heart of the issue lie coal and oil, which fuel the economies of the industrialized and much of the developing world. When the fuels are burned, their carbon wafts into the atmosphere where it forms an invisible shield, much like the glass of a greenhouse, that traps Earth’s heat. This has led to fears that too much carbon may already be responsible for rising temperatures--a phenomenon about which there remains some argument--and, if unchecked, could lead to a thaw in the polar icecaps, rising sea levels, floods, drought caused by disrupted weather patterns and a spread of tropical diseases into formerly temperate zones.
Representatives of the petroleum industry say the only way to trim America’s appetite for gasoline is to impose a tax that increases prices at the pump. They then spin out economic models that show whopping price increases based on the higher taxes.
Not so, say environmentalists and others. They argue that greater reliance on other forms of fuel, among them combinations of hydrogen and electricity, can bring a significant reduction in the amount of carbon spewed into the atmosphere by automobiles and trucks. That side, in turn, makes economic calculations based on those assumptions--and comes up with a far smaller price increase, if any.
The auto industry is also raising strenuous objections to the Kyoto talks, arguing that tough limits would force them to make modifications that would raise auto prices.
But critics point out that the auto industry has a long history of complaining about environmental restrictions, then meeting technological challenges while continuing to make profits. Examples include the imposition of catalytic converters, the phasing out of leaded gas and the introduction of air bags.
Similarly, there is an unresolved dispute over the cost associated with two elements that make up the heart of the Clinton administration’s proposal:
Companies or countries could buy permission to exceed their emissions limits. They would do so by turning to countries or companies that have not reached their emissions ceilings and purchasing the unused amount. Companies in the richer, industrialized countries also could gain emissions permits by investing in projects to reduce emissions in less developed nations.
Representatives of industries opposing the Clinton plan say the permits could trade at $100 or more for a ton of carbon emitted into the atmosphere; environmentalists think the cost could be much less.
On the other side are those predicting that technological advances and careful husbanding of existing resources can assuage the appetite for carbon-rich fuels. As Amory Lovins, director of research at the Rocky Mountain Institute, in Snowmass, Colo., put it: “Saving energy is cheaper than buying energy.”
