EPA report shows US economy can grow while reducing harmful emissions
Early this year US Senator Joe Lieberman and the EPA Principal Deputy Assistant Administrator, Robert Meyers formally requested that the Environmental Protection Agency analyse the economic consequences of the Lieberman-Warner Climate Security Act of 2008 (S.2191). The act is designed to reduce U.S. emissions of greenhouse gases through the development of a market driven system of tradable allowances; an emissions trading scheme.
The final analysis(2MB PDF) has been revealed and it’s very good news. Lieberman and Warner have issued a press release summarising the findings:
“EPA’s detailed analysis indicates that the US can curb global warming without sacrificing economic prosperity,” Lieberman said. “We will examine the results closely for improvements that they might suggest for the bill.”
Warner said, “I am satisfied that EPA’s analysis demonstrates what we have long known: You can control greenhouse gas emissions in a manner that leaves the economy whole and is not burdensome on consumers.”
The Main Points
- The Climate Security Act’s cut in cumulative US greenhouse-gas emissions is deeper than one found earlier by EPA to be consistent with keeping global CO2 concentrations below 500 parts per million in 2100. [Slide 141] The finding assumes that other developed countries reduce their emissions by less than the US, and that the developing countries do not start making similar reductions until 2025. According to the Intergovernmental Panel on Climate Change, keeping the global concentration below 500 ppm greatly decreases the risk of severe global warming impacts in the US and elsewhere.
- Under the conservative assumptions described above concerning action by other nations, the Climate Security Act does not shift US greenhouse-gas emissions abroad. In EPA’s words, “no international emissions leakage occurs.” [see Slide 5 of the PDF linked above]
- Under the same conservative assumptions, the Climate Security Act causes US exports of energy-intensive products (e.g., steel, cement) to developing nations to increase and causes US imports of energy-intensive products from developing nations to decrease. [see Slide 83]
- Under the Climate Security Act, US gross domestic product grows by 80% from 2010 to 2030. That is just one percentage point less than the growth in the absence of the bill. [see Slide 61]
- Under the Climate Security Act, average annual per-household consumption in the US grows by 81% from 2010 to 2030. That is just two percentage points less than the growth in the absence of the bill. [see Slide 65]
- EPA notes, “The economic benefits of reducing emissions were not determined for this analysis,” [Slide 3] and “While the models do not represent benefits, it can be said that as the abatement of GHG emissions increases over time, so do the benefits of the abatement.” [see Slide 108]
- The Climate Security Act’s allowance price and financial support for carbon capture and sequestration (CCS) make that technology a commercial reality in the US by 2015 - several years earlier than in the absence of the bill. [see Slide 4]
- One of the effects of the accelerated CCS deployment is to drive natural gas out of the electricity sector, to the benefit of manufacturers who use natural gas. [see Slide 57]
- Under the Climate Security Act, the price of an emission allowance is $22 in 2015 and $46 in 2030. [see Slide 24] This is significantly lower than allowance price predictions made by models which ignore the recent Energy Independence and Security Act, artificially limit technology deployment, and ignore technology incentives and cost-saving provisions of the bill.
- Under the Climate Security Act, increases in average US electricity prices materialize slowly and gradually. Even forty years after enactment, those prices reach a level only 18% higher than the 2005 level. [see Slide 55] Over that period, the bill directs more than US$1 trillion to lowering and offsetting US consumers’ actual energy costs.
Note that this explicitly does not include any economic benefits arising from a move to clean-tech, or the inherent efficiencies exposed by moves to reducing greenhouse gas levels. I would expect that if you factor those in too then we’d see something more akin to a new golden age of prosperity for all. But I am an optimist.
This report puts to rest the old myth that severing the link between energy production and greenhouse gas emissions, and as a consequence putting a stop to, and even reversing the global warming trend, is not going to ruin the economy at all. The UK’s Stern Review, Australia’s Ross Garnaut Report and now this study of the US economy all point to the same conclusion. The job has to be done, it can be done, and it will be done. And the economy need not suffer. The old lies have been exposed once and for all. — DS
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