Cost Estimate of Global Warming Bill Involves Unrealistic Assumptions

Published August 9, 2010

Proponents of nationwide carbon dioxide restrictions are claiming a new report from the U.S. Energy Information Administration (EIA) shows restricting CO2 emissions will have few negative effects on the U.S. economy. A closer look at the report, however, shows EIA’s cost estimates depend on several key assumptions that have little chance of occurring in the real world.

The implausibility of the assumptions means U.S. consumers would be stuck with much more expensive restrictions than proponents claim.

EIA reports the Kerry-Lieberman global warming bill would reduce U.S. gross domestic product 0.2 percent during the next 25 years, reducing average household income by more than $200 per year. Proponents of the restrictions claim this is good news, amounting to “less than a dollar a day.”

But although an annual bill of more than $200 per family per year qualifies as a significant amount of money to most people, even this number drastically underestimates the bill’s likely costs. To push the cost of compliance down toward $200 per family per year, EIA assumed most of the carbon dioxide reductions would come as a result of substantial increases in the use of nuclear power, natural gas power, and clean coal power.

However, the same environmental activist groups that champion carbon dioxide restrictions such as the Kerry-Lieberman bill vigorously oppose all three power sources the EIA envisions as reducing carbon dioxide emissions. Achieving carbon dioxide reductions primarily through wind and solar power, which proponents of Kerry-Lieberman would insist on doing, would be far more expensive than the costs of producing power through nuclear power, natural gas, and clean coal, as envisioned by EIA.

Moreover, the carbon dioxide reductions contemplated by EIA would occur only on paper. Many of the emissions reductions assumed by EIA would not occur in the United States but would instead be in the form of emissions credits U.S. emitters would purchase from foreign emitters. Real-world experience in places such as Europe and China shows these schemes are riddled with fraud and produce few actual reductions in emissions.

James M. Taylor ([email protected]) is managing editor of Environment & Climate News.