Global warming costs, benefits debated

An international climate agreement requiring mandatory reductions of greenhouse gas emissions could lead to dramatic increases in consumer prices and unemployment in the U.S.

WEFA Inc., an economic consulting firm, reported that conclusion to the Global Climate Coalition, which is fighting the Clinton administration's plan to negotiate a global warming treaty at the United Nations Framework Convention on Climate Change slated for Kyoto, Japan, in December.

Study findings

Mary Novak, WEFA vice-president and project manager, said, "The national economic cost is high, and it is important to recognize that energy-producing states and export-dependent states will suffer a disproportionate share of the burden."

The study said mandatory emissions goals could result in a loss of gross domestic product equal to $227 billion (1992 dollars) in 2010 alone, assuming that 2010 emissions are held at 1990 levels.

Gail McDonald, GCC president, said, "What this report tells us loud and clear is that the administration is flat-out wrong when it says we could reduce greenhouse gas emissions effortlessly without any impact on our economy."

The report said energy-producing states such as Texas, Wyoming, Montana, Louisiana, Oklahoma, and West Virginia would suffer "severe economic disruption." It said Texas alone could expect a loss of economic activity equal to about $19 billion by 2010.

Separately, William Niskanen, chairman of the conservative Cato Institute, told a Senate Energy Committee hearing, "The major economic issues that underlie this treaty are not sufficiently understood."

Niskanen, who was on President Reagan's Council of Economic Advisers, said there is little reason to rush to a global warming decision, because the costs of doing nothing appear quite small.

He noted the proposed treaty would exempt poor countries, despite the fact they will soon produce about half of global carbon dioxide emissions.

Action urged

Meanwhile, the Union of Concerned Scientists (UCS) urged the Clinton administration to push for a treaty. It said, "The threat of global warming is very real, and action is needed immediately. It is a grave error to believe that we can continue to procrastinate."

UCS said most of the world's Nobel Prize winners in science, 98 out of 171, have signed the UCS statement calling for immediate action.

Henry Kendall, UCS chairman, said, "We need to speed the transition away from oil and coal while developing cutting-edge technologies involving wind, biomass, and solar power. A move to clean energy and energy efficiency will bring major benefits to both industrial and developing nations."

Interior Sec. Bruce Babbitt spoke to the UCS meeting in Washington, telling them treaty opponents are trying to use "the tobacco defense" by claiming that the science is inconclusive.

He said the global warming "phenomenon is clearly understood. The science is solid."

Babbitt said the Montreal Protocol, in which nations agreed to reduce chlorofluorocarbon use, can serve as a model for the Kyoto treaty, incorporating reduction targets, emissions trading, and payments to developing countries to help them reduce carbon use.

Auto industry reactions

Japanese automakers calculate they will be able to achieve a 15% improvement in the fuel efficiency of their domestic gasoline-powered passenger cars from fiscal 1995 to 2010, although they add that policy incentives will be required to enable the industry to meet goals the government will propose at Kyoto.

More automakers are adopting emission-reduction technologies such as direct gasoline injection engines and hybrid gasoline/electric systems. Such innovation will enable greater improvements in fuel efficiency than previously expected, the automakers say.

Achieving a 15% cut in fuel consumption will depend greatly on consumer willingness to opt for fuel-efficient cars, say officials of the Japan Automobile Manufacturers Association.

BP view

Meanwhile, British Petroleum CEO John Browne urged the world's governments, industries, and consumers to take the first steps toward dealing with possible catastrophic global climate change.

He said, "We need to take precautionary action now. We can't wait for a finished, polished solution that has unanimous endorsement. Just as the science of climate change is provisional, so too are the politics."

Browne said BP is setting targets to measure, report, and ultimately reduce carbon dioxide emissions from its operations.

BP said the process will take a few years to establish, but once in place, the targets and results will be independently verified and published.

BP also is working to develop its own internal emissions trading system to encourage cooperation between different business units and achieve targets at the lowest practical cost.

DOE study

The U.S. Energy Department released a report that said investment in energy efficiency and clean energy technologies can reduce U.S. emissions of greenhouse gases and produce energy savings that roughly equal or exceed the costs to implement them.

The study by five DOE laboratories, peer-reviewed by industry and academic specialists, demonstrates that the U.S. could hold down the costs of meeting climate change goals through technological solutions such as advanced natural gas turbines, biomass energy and biofuels, and energy-saving appliances.

It said the study concludes that progress in reducing greenhouse gas emissions can be achieved without increasing the nation's energy bill. It contends that many consumers and businesses could actually save money through reduced energy use and lower overall energy bills.

Energy Sec. Federico Pe?a said, "This analysis shows that what's good for the environment also can be good for the economy. Technology can and must play an important role in addressing climate change."

DOE said current projections suggest that a carbon emissions reduction of 390 million metric tons would be needed to reduce U.S. emissions in 2010 to 1990 levels. The study models a scenario that combines a vigorous national technology program with a domestic system of carbon trading to achieve the reduction.

The study concludes that such an approach could reduce emissions by as much as 390 million metric tons. The analysis does not consider international emissions trading and joint implementation that would lower the cost of meeting any emissions reductions. Moreover, the study is not a full macroeconomic analysis.

The study estimated the potential costs of the reductions at $50-90 billion/year. Costs in the study include incremental investments to deploy clean energy or energy efficient technologies by consumers and industry as well as those associated with hypothetical increases in energy prices.

Also, DOE said the energy cost savings resulting from the use of these technologies through 2010 total $70-90 billion/year. "This indicates that the clean energy investments could produce energy cost savings roughly equal to or greater than the costs of implementation, on a life-cycle basis."

William O'Keefe, chairman of the Global Climate Coalition, said the DOE report "perpetuates the self-contradictory myth that 'free lunch' technologies are readily available, if only we'd impose mandates on fossil fuel emissions so that consumers and industry would begin using them."

He noted that the DOE study admits that it would take a $25/ton carbon permit price on fossil fuels to reach the administration's goals.