Climate Change Policy: Practical Strategies
to Promote Economic Growth and Environmental Quality
A monograph published May 1999 by the ACCF Center for Policy Research.
ISBN: 1-884032-09-5
Introduction
For more than a decade, the ACCF Center for Policy Research has sponsored
groundbreaking research on environmental policies to encourage capital
formation and enhance environmental quality. The economic impact of policies
to address the potential threat of climate change has been the focus of
numerous analyses by top climate change scholars from academia and the
private sector underwritten by the Center. This volume contains the proceeding
of the Center's policy conference, Climate Change Policy: Practical Strategies
to Promote Economic Growth and Environmental Quality, held September 23,
1998, at the National Press Club in Washington, D.C.
Six new studies on various aspects of climate mitigation policy were
presented at the forum. Professor Alan S. Manne of Stanford University
and Dr. Richard G. Richels of EPRI analyzed the U.S. and global economic
costs of ratifying the Kyoto Protocol, assessed the significance of the
Protocol's flexibility provisions, and evaluated the Protocol's approach
(sharp near-term reductions in greenhouse gas emissions) in the context
of the Framework Convention on Climate Change's long-term goal of stabilizing
atmospheric concentrations. Professor Manne and Dr. Richels conclude that
if the Protocol is implemented, U.S. GDP would be between $45 and $105
billion smaller annually by 2010 and that discounted global consumption
losses through 2100 could total between $1 trillion and $2.5 trillion
(1990 dollars). In contrast to the Kyoto Protocol, a least-cost strategy,
in which CO2 emissions gradually depart from the baseline, would stabilize
concentrations at a fraction of the cost.
The economic impact of the Kyoto Protocol (which requires the United
States to reduce CO2 emissions to 7 percent below 1990 levels by 2008-2012)
was also analyzed by Dr. John R. Moroney of Texas A&M University using
a different modeling technique than Professor Manne and Dr. Richels. Professor
Moroney's analysis shows that complying with the Protocol would translate
into a 1.8 percent decline in energy use per worker each year between
now and 2010, thereby cutting U.S. productivity growth by one-half and
reducing U.S. living standards by 15 percent below projections. Manufacturing,
personal and commercial transportation, and the electric utility sectors
would be especially hard hit and everyone would feel the effects of the
Protocol.
U.S. agriculture would also be adversely affected by the Protocol, according
to the study by Mr. Terry Francl of the American Farm Bureau Federation,
Mr. Richard Nadler of K.C. Jones Monthly, and Mr. Joseph Bast of The Heartland
Institute. The study was presented at the forum by Mr. J. Jon Doggett,
senior director of government relations at the American Farm Bureau Federation.
Because U.S. agriculture accounts for nearly one-fifth of U.S. greenhouse
gas emissions, compliance with the Protocol could increase U.S. farm production
expenses by $10 to $20 billion annually and depress annual farm income
by 24 to 48 percent. Higher energy prices would also mean higher consumer
food prices, a decline in agricultural exports, and a wave of farm consolidations
Massachusetts Institute of Technology Professor Henry D. Jacoby analyzed
the uses and misuses of technology development as a component of climate
policy for the Center's forum. He concludes that the current misplaced
focus on short-term climate polices is a product both of domestic political
exigencies and a badly flawed technical analysis. A prime example of this
is the U.S. Department of Energy study prepared by five national laboratories
in late 1997. The Department's Five-Labs study assumes-incorrectly-that
technical solutions are readily at hand. Also, it wrongly suggests that
a short-term technology fix is easily available at little or no cost.
Worse, Professor Jacoby concludes, is that advocates of short-term CO2
emissions targets under the Framework Convention on Climate Change are
using this study to justify the subsidy of existing technologies, diverting
resources from the effective long-term technology response that will be
needed if the climate picture darkens.
International trading of CO2 emissions could sharply reduce the cost
of cutting global emissions, according to climate policy experts such
as Dr. A. Denny Ellerman of the Massachusetts Institute of Technology.
His study finds that the creation of an international emissions trading
system would need to start at home. If a functioning national system of
emissions were in place, there is every reason to believe that it would
extend first to Annex I parties, and eventually to non-Annex I parties
who see the value of participating more fully in the benefits of emissions
trading. The real problem-even in a domestic trading system-is not monitoring
and enforcement, which would exist in any case, but the allocation of
permits, which is fundamentally a political issue. Current concerns about
such issues as equity and distributions of wealth reveal a basic lack
of consensus on the nature of the climate change problem and suggest action
is not imminent, Dr. Ellerman concludes.
A long-run strategy for addressing the potential threat of climate change
was presented by Dr. Jae Edmonds, Mr. James Dooley, and Dr. Sonny Kim
of Pacific Northwest National Laboratory. Their study suggests that a
portfolio of technologies aimed at carbon mitigation and adaptation will
be needed for the twenty-first century. Near-term emissions mitigation
can be modest and still meet all but the most stringent caps on atmospheric
greenhouse gas concentrations. Including fuel cells and carbon capture
and sequestration technologies among the technology options significantly
lowers the cost of emissions mitigation. Some of these technologies, such
as soil sequestration, are currently available; others, however, need
more research to reduce their cost. The authors conclude that if greenhouse
gas concentrations must be stabilized, the recent decline in public and
private OECD-nation funding of energy research and development must be
reversed to lay a robust foundation for twenty-first-century energy technologies.
Keynoting the Center's symposium were Representative Joe Knollenberg
(R-MI) and Dr. Arthur A. Fletcher. A member of the House Appropriations
Committee, Representative Knollenberg served on the congressional delegations
that monitored the 1997 climate negotiations in Kyoto and the November,
1998, talks in Buenos Aires. In his remarks, Representative Knollenberg
stressed the need to prevent "back-door" implementation of the
Kyoto Protocol, which has not been ratified by the Senate, through regulatory
action.
National Black Chamber of Commerce Chairman Dr. Arthur A. Fletcher, who
has been honored as the "father of the affirmative action enforcement
movement," is a leading private-sector voice on the impact of environmental
regulation on urban economic renewal and development. Dr. Fletcher explained
that empowering small business is the key to the development of depressed
neighborhoods. But increasing government regulation, he added, through
unsound climate mitigation or other regulations, would further harm these
communities and retard the economic progress of the small businesses that
provide jobs there.
The consensus reached by the noted climate policy scholars who participated
in the Center's conference on climate change policy is clear. Given the
need to sustain U.S. economic growth to address such challenges as a growing
population, the retirement of the baby boom generation, and a persistent
trade deficit, policymakers need to weigh carefully the Kyoto Protocol's
negative economic impacts and its failure to engage developing nations
in meaningful action. Adopting a thoughtfully timed climate change program-based
on science, improved climate models, and global participation-is essential
to U.S. and global economic growth.
The ACCF Center for Policy Research is grateful to our presenters and
respondents for their contributions that made this symposium and book
possible.
The Center will continue to focus its attention and resources on economic
growth through sound tax and environmental policies. We look forward to
sharing new information, analyses, and proposals with you, and welcome
your thoughts and inquiries about this and all other ACCF Center for Policy
Research programs.
Charls E. Walker
Chairman
Mark A. Bloomfield
President
Margo Thorning
Senior Vice President and Director of Research
|
