No. 101 - State Greenhouse Gas Programs: An Economic and Scientific Analysis (summary html)
State greenhouse gas programs aimed at reducing emissions to 7 percent less than 1990 levels could cost the average state government $3.2 billion in direct expenses and lost revenues, or 28.6 percent of an average state government’s entire 2001 revenues. Consumers would have to pay even more: approximately $10,000 a year per household in higher prices and lost income. The benefits of reducing emissions are likely to be nonexistent, and even worst-case scenarios suggest benefits are an order of magnitude less than the expected cost. The scientific basis of global warming theory is too uncertain to justify state greenhouse gas reduction efforts. If policymakers want to "do something" about the possible threat of global warming, they should direct their efforts at encouraging sequestration and adaptation and repealing laws that discourage energy conservation.
1. Many states are attempting to reduce greenhouse gas emissions.
Twenty-five state legislatures considered bills in 2002 that would seek to reduce anthropogenic (man-made) emissions of gases (typically carbon dioxide) thought to contribute to “global warming,” a possibly destabilizing warming of the Earth’s atmosphere. Four states now have laws that cap carbon dioxide emissions from utilities, and 13 require utilities to provide a specific percentage of their power generation from renewable sources by specified dates. Programs in other states aim to reduce emissions from transportation or to encourage sequestration (removing carbon dioxide from the air and storing it underground).
2. Existing greenhouse gas programs are expensive and would be difficult to replicate.
New Jersey’s program highlights the immense cost of reducing carbon dioxide emissions. The state’s tax on utility bills costs residents and businesses some $358 million a year, or $55 for every ton of greenhouse gas emissions averted. Other costs include the higher cost of energy from alternative sources and the loss of jobs and income due to “leakage” of economic activity to other states and countries.
Oregon and New Jersey were able to cap greenhouse gas emissions from utilities because of their unusual circumstances: Oregon has large hydroelectric resources, and New Jersey was able to increase its reliance on nuclear power. Neither solution seems sustainable. States without significant hydroelectric or nuclear power resources probably would regret following the lead of these two states. California’s effort to reduce emissions from cars and trucks is unlikely to reduce emissions significantly, would cost up to 50 times as much as alternative methods, and probably violates federal law.
The deceptive manner in which a renewable energy mandate was adopted in Texas and alternative transportation schemes were launched in California and Georgia suggests the public is opposed to paying higher prices or surrendering mobility to “help stop global warming.”
|Possible Cost of State Greenhouse Gas Programs
(to reduce emissions to 7 percent below 1990 levels)
|State||% of 2001
3. Economic analysis reveals state programs would be immensely costly.
Econometric models show a national program to reduce U.S. greenhouse gas emissions to 7 percent below 1990 levels by 2012 would cause states to lose $116 billion a year in revenues. Such a program would destroy 2.4 million jobs and $375 billion in annual economic output by 2010.
States that try to reduce emissions on their own incur costs 10 times as great as would result from a national program because businesses and residents would find it easier to move to nearby states with lower energy costs or less burdensome regulations, and because states would have to rely on more costly regulatory approaches.
The average state government would have to spend approximately $530 million a year ($55/ton) to implement a comprehensive greenhouse gas program and would lose $2.6 billion a year in revenues, for a total annual cost of $3.2 billion. This is 28.6 percent of an average state government’s revenues.
Consumers and businesses in an average state would pay a staggering $21.8 billion a year more for goods and services due to the higher cost of energy and migration of businesses and commerce to other states and countries. The cost to the average household could be $10,000 a year, as much as two or three months of take-home pay. The table on this page highlights the projected impact of greenhouse gas programs on selected states.
4. The benefits of greenhouse gas programs would be small or even nonexistent.
Reducing greenhouse gas emissions produces little or no benefit to American consumers and businesses. If left unaddressed, by 2060 global warming is likely to have a small (0.2 percent of GDP) positive effect on the U.S. economy and a small (1 to 2 percent of GDP) negative effect on the global economy. After discounting for the fact that the benefits would begin to occur 50 years or longer in the future, the benefit of reducing emissions today is an order of magnitude less than the cost.
If even a small part of the money spent trying to reduce carbon dioxide emissions were spent instead on fighting hunger or disease in Third World countries, millions of lives could be saved. If left to wage earners here in the U.S. to spend, this would mean a significantly better quality of life for most families.
5. Why reducing greenhouse gases is so expensive.
“Free” energy conservation opportunities do not amount to more than a small percentage of the reductions in energy use called for by advocates of greenhouse gas reductions. Reducing greenhouse gas emissions is costly because increases in the emissions of other countries or states offset some or all of a state’s reductions; complying with regulations costs four to six times as much as the least-costly solution; higher energy prices slow economic growth; alternative fuels are expensive and rarely used; and retiring capital prematurely costs many billions of dollars.
Mandating lower emissions from cars and trucks is not a promising route to travel. Car and truck manufacturers will simply lower the average fuel economy of cars sold outside the state, cancelling any reduction in emissions. Mandating higher fuel efficiency leads consumers to buy heavier or more powerful vehicles or to travel more.
State-level programs cannot exploit low-cost opportunities to reduce emissions outside the state’s borders or across industry lines. An emission permit trading program in a single state is unlikely to attract significant participation, and therefore unlikely to significantly reduce the cost of reducing greenhouse gas emissions. Even a national program is likely to be beset by litigation due to questions of measurement, verification, and enforcement.
6. Scientific analysis shows global warming theory is too uncertain to justify greenhouse gas reduction efforts.
There is no reliable evidence that global warming is occurring. The temperature record regularly referred to in media reports is inaccurate and contaminated by urban heat island effects. More reliable satellite and weather balloon data show no warming trend. Most scientists are familiar with these data and do not believe human activities are threatening to disrupt the Earth’s climate: More than 17,000 scientists have signed a petition disputing alarmist predictions of catastrophic climate change.
The reports of the Intergovernmental Panel on Climate Change contain much valuable and credible information about climate change, but they have been misrepresented to policymakers and the general public. The reports themselves – as distinguished from the “summaries for policymakers” – express great uncertainty about the underlying dynamics of the global climate and skepticism that accurate forecasts are possible. They include among their contributors many prominent “skeptics” who do not believe global warming is a threat.
A small amount of warming, should it occur, would be beneficial to human health, agriculture, and wildlife. Carbon dioxide is a natural fertilizer, so higher concentrations in the air have beneficial effects on forests and agriculture. Most warming is likely to occur in the coldest regions of the world and during winter months.
State programs to reduce anthropogenic greenhouse gas emissions will have no measurable effect on the global climate for decades or even centuries to come. The problem is not greenhouse gas emissions but concentrations, which require massive reductions in emissions to change, and even then would change very slowly. There is no scientific or economic reason to reduce emissions now, at a high price, rather than wait for technology and science to produce lower-cost opportunities.
7. Recommendations to policymakers.
States facing record budget deficits due to lower-than-expected revenues in 2002 and 2003 should not adopt greenhouse gas reduction programs that cost taxpayer dollars, destroy jobs, and do nothing to protect the environment. A strong case can be made for repealing programs already in place.
Three alternatives to reducing greenhouse gas emissions that avoid the pitfalls of those efforts are:
- Repeal laws that discourage energy conservation: Obsolete or overly specific building codes often prohibit the use of building designs, such as geodesic domes, that conserve construction material and reduce heating requirements. Zoning ordinances often prohibit solar panels for hot water or electric power generation and multiple land uses that would reduce the need to travel. Command-and-control environmental regulations often stymie the development and use of the lowest-cost emissions control technology.
- Encourage sequestration: States can encourage farmers to sequester greater amounts of carbon dioxide by including the latest research and tips on low-till techniques in their seminars and other agricultural programs. Where appropriate, farmers who use these techniques should get credit for the beneficial effects on neighboring streams. Similarly, forestry can play a much bigger role in battling global warming by allowing responsible logging, reducing fire risks, and planting more trees.
- Encourage adaptation: Carefully targeted investments can be made to public infrastructure where they are needed. For example, higher sea levels, should they occur, could be addressed by modest improvements to dikes and seawalls in some areas, and by relocating homes and businesses in other areas. This cost – spread out over the course of a century – would be a small fraction of the cost of attempting to prevent climate change through energy taxes or emission caps. Making infrastructure stronger and more efficient is often the right thing to do regardless of climate considerations.
Based on Joseph L. Bast, James M. Taylor, J.D., and Jay Lehr, Ph.D., “State Greenhouse Gas Programs: An Economic and Scientific Analysis,” Heartland Policy Study #101 (Chicago, IL: The Heartland Institute, February 2003). Printed copies of the 80–page study are available for $20 each; the full text is also available on The Heartland Institute’s Web site in Adobe Acrobat PDF format.
Copyright 2003 The Heartland Institute. Nothing in this Heartland Executive Summary should be construed as reflecting the views of The Heartland Institute, nor as an attempt to aid or hinder the passage of legislation. Permission is granted to reprint or quote from this Executive Summary, provided appropriate credit is given.
- Policy Study (pdf)
- State-Specific Impact Statements (pdf)