Climate Experts Focus on Long-Term Strategy at Center Symposium

Center Research Finds U.S. Savers at Disadvantage

Climate Experts Focus on Long-Term Strategy at Center Symposium

The cost of stabilizing emissions in the near term would impose a heavy burden on U.S. households and industry, according to new studies presented by leading climate policy experts at an ACCF Center for Policy Research-sponsored symposium held on September 23. The studies called for a long-term approach to climate mitigation if the science indicates action is needed, rather than the stringent near-term reductions in CO₂ required under the Kyoto Protocol.

Climate Change Policy: Practical Strategies to Promote Economic Growth and Environmental Quality, the 1998 environmental policy symposium sponsored by the ACCF Center for Policy Research, is a part of the Center's multi-year research project on tax and environmental policy issues. The Center will release a book containing the edited proceedings of the forum in early 1999.

Keynoters Address Climate Policy

Keynoting the Center's symposium were the Honorable Joe Knollenberg (R-MI) and Dr. Arthur Fletcher. A member of the House Appropriations Committee, Rep. Knollenberg served on the congressional delegation that monitored the climate negotiations in Kyoto and will serve in a similar capacity at the November talks in Buenos Aires. In his remarks, Rep. Knollenberg stressed the need to prevent "backdoor" implementation of the Kyoto Protocol, which has not been ratified by the Senate, through regulatory action.

Dr. Fletcher, chairman of the National Black Chamber of Commerce, has been honored as the "Father of the Affirmative Action Enforcement Movement." 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 inner-city neighborhoods. But, he added, increasing government regulation, through unsound climate mitigation or other regulations, would further harm these communities and retard the progress of the small businesses that provide jobs there.

The Kyoto Treaty: Economic and Environmental Consequences

Richard Richels, director of global climate change research, EPRI, in a paper co-authored with Alan S. Manne, professor emeritus, operations research, Stanford University, estimated U.S. GDP losses from implementing the Kyoto Protocol at between $20 billion and $90 billion annually in 2010 and between $45 billion and $105 billion annually in 2020. A strategy in which CO₂ emissions gradually depart from the baseline would stabilize concentrations at a fraction of the cost, he concluded.

Responding were Jeffrey A. Frankel, member, President's Council of Economic Advisers, and Richard Schmalensee, Gordon Y Billard Professor of Economics and Management, Massachusetts Institute of Technology. Dr. Margo Thorning, senior vice president and director of research for the ACCF Center for Policy Research, moderated the panel.

The Role of Energy in the U.S. Economy

John R. Moroney, professor of economics at Texas A&M University, analyzed the reduction in macroeconomic productivity growth that would occur if the United States were to reduce fossil fuel usage to the Kyoto target of 7 percent below 1990 levels.

Noting that fossil fuels account for 85 percent of total U.S. energy consumption, Professor Moroney said that "reaching the Protocol's target would require reducing total fossil fuel use by 15 percent and total energy use by 13 percent from current levels. This would cut productivity growth by one-half, resulting in an overall standard of living 15 percent lower than otherwise."

Respondents were Joyce Y. Brinner, principal in the Analytic Consulting Group of Standard & Poor's DRI, and Micheal Buckner, director of research for the United Mine Workers of America.

Panel moderator J. Jon Doggett, senior director, governmental relations, American Farm Bureau Federation, shared a new study by the Heartland Institute on "The Kyoto Protocol and U.S. Agriculture" with participants. The Protocol could cost the average farmer between one-quarter and one-half his or her annual income, Mr. Doggett noted.

Removing the Obstacles for Long-Term
Technological Innovation to Reduce CO₂ Emissions

Jae Edmonds, technical leader of economic programs with Pacific Northwest National Laboratory, and Jim Dooley, senior researcher, presented a paper co-authored with colleague Sonny Kim, senior research scientist. Dr. Edmonds stated that "analysis of various greenhouse concentration scenarios and promising technology developments suggests that a portfolio of technologies, including fuel cells and carbon capture and sequestration, could allow the economy to rely less heavily on carbon-neutral technology and significantly lower the cost of emissions mitigation." Increased R&D investment in energy-efficient technologies will be needed, Mr. Dooley added.

Professor Manne and Thomas G. Marx, director of economic studies, General Motors Corp., were discussants for the study. The panel was moderated by Rae Cronmiller, environmental counsel, National Rural Electric Cooperative Association.

Tradable Permits for CO₂ Emissions:
Obstacles to a Functional International System

A. Denny Ellerman, executive director, MIT Center for Energy and Environmental Policy Research, told participants that before any system of international or domestic trading can occur, two problems need to be resolved: how to allocate carbon emission permits and how to distribute the resulting revenue. Conflict over issues such as equity and distributions of wealth reveal a fundamental lack of consensus on the nature of the climate change problem and suggest action is not imminent, he concluded.

David Harrison, Jr., vice president of National Economic Research Associates, and W. David Montgomery, vice president, Charles River Associates, responded to the paper. The panel was moderated by LaVaughn M. Henry, climate change and regulatory economics manager, Worldwide Public Policy Office, Ford Motor Company.

Technological Development and CO₂ Reduction in
Energy Use: Outlook for Near-Term Progress

Henry D. Jacoby, Pounds Professor of Management, Massachusetts Institute of Technology, criticized the Administration's focus on short-term CO₂ reductions. "The search for cleaner technology for the long run must be a central element in the global response to the threat of climate change," he said.

Professor Jacoby critiqued the U.S. Department of Energy's "Five-Labs" study of technology options widely cited in current discussions, and its uses and misuses as a guide to policy. "There is no technological fix in the short run of a decade or so, as implied by the Five-Lab Study. Science does not run on the policymakers' clock; technologies take time to develop; markets for new consumer devices and industrial processes require time to evolve."

Responding to the paper were Elmer C. Holt, senior economist, Office of Policy and International Affairs, U.S. Department of Energy, and Ronald J. Sutherland, senior economist, American Petroleum Institute. Dr. Thorning moderated the panel.

Special reports summarizing the papers presented at the September 23 symposium are available on the Center's Web site, www.accf.org. Printed copies of the special reports may be obtained by contacting the ACCF Center for Policy Research at 1750 K Street, NW, Suite 400, Washington, D.C. 20006-2302; telephone: 202/293-5811; fax: 202/785-8165; e-mail: info@accf.org.

Center Research Finds U.S. Savers at Disadvantage

At a press conference on September 15, Representatives Kenny Hulshof (R-MO) and Dennis Kucinich (D-OH) made the case for their bill, the Saving Advancement and Enhancement Act (SAVE) Act of 1998 (H.R. 3215). SAVE, which garnered bipartisan support in the House, promotes saving by exempting the first $400 of interest and dividends received by married couples or $200 by single taxpayers.

ACCF president Mark Bloomfield and senior vice president and chief economist Margo Thorning joined the two congressmen at the press conference to discuss a new international survey on the taxation of saving in twenty-four industrialized and developing countries underwritten by the ACCF Center for Policy Research, the economic research and education affiliate of the American Council for Capital Formation.

The Hulshof/Kucinich bill was one of the key capital formation provisions of the "Taxpayer Relief Act of 1998" (H.R. 4579), the $80 billion, five-year tax cut bill passed by the House on September 26 but not acted upon by the Senate and therefore not part of the tax measures signed into law by President Clinton.

This issue of Capital Formation includes a new special report, "Small Saver Incentives: An International Comparison of the Taxation of Interest, Dividends, and Capital Gains," published by the ACCF Center for Policy Research. For additional copies, please contact the ACCF Center for Policy Research.