Deafening broadsides have been fired recently as widely varying estimates of the cost to the US economy of implementing "cap and trade" Climate Change mitigation legislation have been released in the last few weeks. The Environmental Protection Agency (EPA) was asked by US Senators Lieberman and Warner to estimate the economic cost of S. 2191, "America's Climate Security Act of 2007", the bill they co-sponsored aimed at reducing greenhouse gas emissions impacts. The EPA's analysis carefully spelled out its assumptions in reaching its conclusions, employing 10 scenarios which considered the development and availability of mitigating technologies and levels of international actions on Climate Change. Supporters of the legislation hailed the results of EPA's analysis as evidence that the caps proposed would not necessarily damage US economic growth prospects, pointing to results predicting minimal differences in Gross Domestic Product (GDP) growth for S. 2191 implementation versus a reference scenario without the bill. A "high-technology" adoption scenario is key in this view to meet Climate Change challenges, providing a technology lever to "robust" economic growth in the period considered. Meanwhile, opponents of the legislation urge a closer scrutiny of the EPA's analysis, seeing nearly a trillion dollars in annual costs by the year 2030 with a 44% increase in average electricity prices versus the reference case.

A second study funded by the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) assessing the economic costs of S. 2191 was released. The independent study conducted by the Science Applications International Corporation concluded harsher impacts on the nation's GDP would ensue from passage of the legislation, predicting annual declines in GDP rising to as much as $669 billion by 2030 with electricity price increases as high as 129%.

Both the NAM-ACCF and the EPA conclusions hinge on the costs and availability of new technologies to address Climate Change. The EPA's most "optimistic" scenarios foresee the near-term development and deployment of significant new nuclear capacity, and the capability of Carbon Capture and Storage (CCS) from fossil-fueled power facilities. Some experts predict that deployable CCS technology is nigh on hand; others say it's 20 to 30 years Apraway. Similarly, the first new nuclear plants in the US will take years to permit and build; wider deployment may take many years beyond that. For these technology options to have even the glimmer of a chance of being ready in the near future requires significant investments and funding decisions to be made to assure the timely deployment of first commercial plants in-service, so that lessons can be learned and technological advances made to bring down costs for subsequent generations of power plants. Likewise, incentives are needed for optimization of current renewable energy technologies to bring down their costs so that these can meet their potential. A host of varying infrastructure to support new power generation and carbon sequestration capacity must be also be sited, permitted and constructed. Thus, Climate Change mitigation will come with considerable up-front costs; but scientists and academics warn that the real costs of inaction on global warming could be even greater.

April 4, 2008

Submitted by R. Campbell