Carbon cuts will be cheap
Next week the Environmental Protection Agency is expected to announce new rules designed to limit global warming. Although we donít know the details yet, anti-environmental groups are already predicting vast costs and economic doom. Donít believe them. Everything we know suggests that we can achieve large reductions in greenhouse gas emissions at little cost to the economy.
Just ask the U.S. Chamber of Commerce.
OK, thatís not the message the Chamber of Commerce was trying to deliver in the report it put out Wednesday. It clearly meant to convey the impression that the EPAís new rules would wreak havoc. But if you focus on the reportís content rather than its rhetoric, you discover that despite the chamberís best efforts to spin things ó as Iíll explain later, the report almost surely overstates the real cost of climate protection ó the numbers are remarkably small.
Specifically, the report considers a carbon-reduction program thatís probably considerably more ambitious than weíre actually going to see, and it concludes that between now and 2030 the program would cost $50.2 billion in constant dollars per year. Thatís supposed to sound like a big deal. Instead, if you know anything about the U.S. economy, it sounds like Dr. Evil intoning ďone million dollars.Ē These days, itís just not a lot of money.
Remember, we have a $17 trillion economy right now, and itís going to grow over time. So what the Chamber of Commerce is actually saying is that we can take dramatic steps on climate ó steps that would transform international negotiations, setting the stage for global action ó while reducing our incomes by only one-fifth of 1 percent. Thatís cheap!
Alternatively, consider the chamberís estimate of costs per household: $200 per year. Since the average U.S. household has an income of more than $70,000 a year, and thatís going to rise over time, weíre again looking at costs that amount to no more than a small fraction of 1 percent.
One more useful comparison: The Pentagon has warned that global warming and its consequences pose a significant threat to national security. (Republicans in the House responded with a legislative amendment that would forbid the military from even thinking about the issue.) Currently, weíre spending $600 billion a year on defense. Is it really extravagant to spend another 8 percent of that budget to reduce a serious threat?
And all of this is based on anti-environmentalistsí own numbers. The real costs would almost surely be smaller, for three reasons.
First, the Chamber of Commerce study assumes that economic growth, and the associated growth in emissions, will be at its historic norm of 2.5 percent a year. But we should expect slower growth as baby boomers retire, making emissions targets easier to hit.
Second, in the chamberís analysis, the bulk of the reduction in emissions comes from replacing coal with natural gas. This neglects the dramatic technological progress taking place in renewables, especially solar power, which should make cutting back on carbon even easier.
Third, the U.S. economy is still depressed ó and in a depressed economy many of the supposed costs of compliance with energy regulations arenít costs at all. In particular, building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost.
You might ask why the Chamber of Commerce is so fiercely opposed to action against global warming, if the cost of action is so small. The answer, of course, is that the chamber is serving special interests, notably the coal industry ó whatís good for America isnít good for the Koch brothers, and vice versa ó and also catering to the ever more powerful anti-science sentiments of the Republican Party.
Finally, let me take on the anti-environmentalistsí last line of defense ó the claim that whatever we do wonít matter, because other countries, China in particular, will just keep on burning ever more coal. This gets things exactly wrong. Yes, we need an international agreement to reduce emissions, including sanctions on countries that donít sign on. But U.S. unwillingness to act has been the biggest obstacle to such an agreement. If we start taking serious steps against global warming, the stage will be set for Europe and Japan to follow suit, and for concerted pressure on the rest of the world as well.
Now, we havenít yet seen the details of the new climate action proposal, and a full analysis ó both economic and environmental ó will have to wait. We can be reasonably sure, however, that the economic costs of the proposal will be small, because thatís what the research ó even research paid for by anti-environmentalists, who clearly wanted to find the opposite ó tells us. Saving the planet would be remarkably cheap.
Paul Krugman is a columnist for The New York Times.