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Much noise is made over varying calculations associated with climate legislation. There is the disinformation fed from fossil foolish interests misrepresenting the situation. And, there are official studies from government institutions like the Congressional Budget Office (CBO) and Environmental Protection Agency (EPA) that seek to do honest analysis but which are working within financial and policy analytical constraints that can create rather false pictures on the realities of complex systems-of-systems interactions.

Preliminary reporting from the EPA states that there will be minimal costs, if any, to action on climate change based on the proposed Senate legislation.

While this has been greated as great news by many calling for passage of a climate bill, this excitement masks the fundamental flaws of the CBO, EPA, and, sadly, even many environmental organizations' cost-benefit analyses related to action to mitigate climate change.

Right now, the United States is amid the challenge of seeking paths forward toward something approaching sustainability in our financial systems/structure, health system, and, even more fundamentally, our energy system(s) and the impact of our entire society on the climate's ability to support humanity.

Friday, Senator Barbara Boxer (D-CA), Chair of the Senate Environment and Public Works Committee, released the "chairman's" mark-up of the Kerry-Boxer Clean Energy Jobs and American Power Act (S. 1733).  And, later in the day, the EPA released a preliminary estimate that suggested that Kerry-Boxer would have about the same fiscal implications  as the Waxman-Marky American Clean Energy and Security (ACES) Act, which passed the House earlier this year.

A simplified (al beit accurate) statement is that all cost-benefit analyses should have four basic quadrants which, together, provide the basis for meaningful understand of the totality of the result. When it comes to legislation, these could be stated as follows:


  1. Cost of enacting bill

  2. Benefits of bill

  3. Costs of doing nothing

  4. Benefits of doing nothing


Again, clearly, that four-grid description is a simplification of the situation (are there really just two options? costs to who?), but a useful simplification.

When it comes to climate legislation, quite simply, the CBO and, in this case, the EPAare solely operating in the first box: the costs of enacting the piece of legislation. This is a limitation that is put on the EPA by legislative mandate, but a serious limitation nonetheless.

For example, the EPA did not consider the health care implications of fossil fuel pollution and how moving forward with global warming mitigation will, as a necessary corollary, drive down the pollution that is so seriously costing American society. (According to a study recently released by the National Academy of Sciences, this is a $120 billion / year cost. Oh, by the way, that study limited its examination to the use of fossil fuels and did not count implications of its production.)  Nor is there a valuing of the avoided risks of catastrophic climate change ... Nor is there a valuing of the strengthened dollar due to reduced oil imports. Nor ...  The list of absent material is extensive enough to fill multiple books.

Let us be clear, the EPA study team clearly recognized that there is a larger picture than their analysis.

While this analysis doesn’t quantify the impacts of higher temperatures and other effects of increasing GHG concentrations, the U.S. Global Change Research Program (in its June 2009 report, "Global Climate Change Impacts in the United States") described the impacts that we are already seeing and that are likely to dramatically increase this  century if we allow global warming to continue unchecked. In the report, it documents how communities throughout America would experience increased costs, including from more sustained droughts, increased heat stress on livestock, more frequent and intense spring floods, and more frequent and intense forest wildfires.

Thus, those involved in this mandated analysis to support Congressional decision-making explicitly acknowledge that their work does not provide an accurate window on costs and benefits of climate legislation. Even with the undue focus on "costs" (and absence of valuing of avoided / reduced risks), the EPA finds that the costs of action are minimal on individual and societal levels.  When one starts to count the excluded items, however, it quickly becomes evident to all open to honest analysis that the appropriate discussion focuses not on costs, but on benefits.

NOTE: Sadly, the constrained nature of the legislation (only targeting 20 percent reductions by 2020) and the giving away of likely $trillions of free allowances to serial polluters seriously erode the economic upside potential from climate legislation.  More principles-based legislation (scientifically sound; polluters pay; socially equitable) would lead to coming closer to maximizing that upside potential while reducing the downside risks.

Originally posted to A Siegel on Sun Oct 25, 2009 at 09:59 AM PDT.

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Comment Preferences

  •  And the economic literature ... (1+ / 0-)
    Recommended by:
    A Siegel

    ... is the mainstream economic analysis based on fairy tales and unicorn dreams - utilitarian psychology, debunked a century ago, and general equilibrium models, found to be flawed beyond repair in the 1970's, or as an alternative aggregated capital models, found to be flawed beyond repair in the 1960's, with those required to address the radical limitation of the Marshallian partial equilibrium models uncovered in the 1930's.

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    by BruceMcF on Tue Oct 27, 2009 at 04:40:47 PM PDT

    [ Parent ]

  •  Thanks (4+ / 0-)
    Recommended by:
    sberel, vcmvo2, A Siegel, trykindness

    This is a topic that really needs more light and to be pushed out to the public so that a true understanding of the costs can be had.

  •  You do great work, A Siegel. (1+ / 0-)
    Recommended by:
    A Siegel

    No loose ends.

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