Wrong Again 2: Delayers cry wolf with same old Garbage In, Garbage Out economic model

gigo.gifIn Part 1, Dan Weiss explained why the “new” study by The National Association of Manufacturers and the American Council for Capital Formation on the Lieberman-Warner Climate bill is just a rehashing of the analyses of the Clean Air Act sulfur trading program that were proven wrong by reality, which is to say by the ingenuity and technology of entrepreneurs.

I have some further comments, since ACCF is one of the leading oil-industry-funded denier/delayer groups, since the economic model they use is the same one that the Energy Information Administration (EIA) has used over to make one wrong-headed prediction after another, since NAM/ACCF misrepresent their own study’s results — and since I otherwise needlessly suffered through the NAM/ACCF press call this morning.

Let me start by making this post useful for readers who already know this study is bunk by strongly recommending a terrific website that allows you to do your own economic analysis of greenhouse gas mitigation. The website, “See for Yourself,” is based on the work of one of very best economists in this area, Robert Repetto, who showed that the economic models used in the climate debate give different results primarily because of the assumptions they make in seven different areas.

NAM/ACCF use the EIA’s National Energy Modeling System” (NEMS). That should be reason enough to ignore it. Let me make four points about NEMS:

  1. I’m not sure the EIA has ever made an accurate long-term prediction using this model. Certainly if you go back a mere 2 years, their projection for the price of oil today is off by a factor of two. But for as long as anyone can remember, they have incorrectly projected oil and gas prices, among others things. If you look up the saying, “Never right, never in doubt,” they have a link to EIA.
  2. NEMS typically makes the most pessimistic assumptions in each of the areas analyzed by Repetto.
  3. When I was at the DOE, the engineers and analysts in my office were so distressed at how EIA modeled energy efficiency and renewable energy technologies, we convened numerous meetings to try to get them to change. We didn’t succeed. What kinds of things do they do? Well, when NEMS was showing much more wind generation coming online then the EIA thought reasonable, they just went back inside the model and artificially capped the amount of wind generation possible.
  4. To see what others think about NEMS, google “EIA NEMS flaws” [not in quotes].

I would call NEMS “pseudo-economics,” but I think that is redundant.

As for the NAM/ACCF study, it is strictly garbage in garbage out. On the press call, we learned the “model calculates the [carbon] price needed to force down US energy use.” Energy efficiency? Fuggeddaboutit. NEMS is a “no pain, no gain” approach, as I pointed out earlier in a post on the EIA’s own dubious modeling of the costs of meeting Kyoto.

We also learned the study built in “realistic assumptions about how quickly we will have new technology and nuclear power.” I kid you not. If you think “$1.6 million in ExxonMobil funding since 1998 = realistic assumptions” then I have some carbon dioxide offsets to sell you for $228/ton ($836/ton of carbon!) — the “low cost” estimate of the model for 2030.

Fundamentally, the study tells you what greenhouse gas mitigation would cost if your two mains strategies for reducing emissions were a high carbon price and lots of nuclear power. Think of it as modeling Sen. McCain’s approach to climate.

Even so, the study summary makes the same old typically misleading statements about the results:

“Among the findings are:

In fact, jobs rise steadily from throughout the modeled time period as does household income. As does GDP. Yes, they are all reduced compared to projected growth absent the legislation, but they still all rise sharply. You might be surprised to learn that:

  • More than 20 million new jobs are created between now and 2030.
  • Household income soars by more than $40,000 (!) by 2030.
  • GDP in 2020 is only about 1% less than it otherwise would have been.

The fact that we get such spin from ACCF is no surprise given that they are one of the major groups funded by industry to spread confusion and disinformation on global warming. Their ExxonMobil funding by itself doesn’t mean their work is disinformation. But ExxonMobil is probably the major funder of deniers/delayer-1000s in this country, and ACCF received its biggest grant in 2005, so they must be doing something to make their funders happy. By the way, the 2005 grant went to:

  1. Climate Change Education Efforts ($90,000)
  2. Climate Environmental & Economic Research ($90,000)
  3. Climate change ($90,000), and
  4. General Operating Support ($90,000).

So no big mystery why they put out such crap. The only mystery is one anyone would believe their conclusions.

2 Responses to Wrong Again 2: Delayers cry wolf with same old Garbage In, Garbage Out economic model

  1. Ronald says:

    That kind of analysis happens all the time in politics as elsewhere.

    Many times, I’ll read that President Reagan’s economic policy made a huge change in our economy with millions of jobs created and economic greatness for all time. But what really happened. 20 million jobs created during the 1980’s which is good. But there were 20 million jobs created in the 1970’s and since they started from 80 million employed in 1970 to 100 million employed in 1980, the job creation rate was greater in 1970’s. Actually the job creation rate was greater in the 1970’s and 1990’s than in the 1980’s. And most certainly the 1970’s and 1990’s greater job growth that 2000’s. Inflation was down in the 1980’s from the 1970’s, but credit President Carter’s nomination of Volker as the Federal Reserve chairman and his tight money policy for the reduction of that. Reagan just continued Carters monetary policy.

    That’s not to argue that the misinformation is only from one side. But I do wish figuring things out would be easier. That’s not our world though.

  2. J4zonian says:

    While we’re talking about arguments in this and in part 1, how bout if we marvel for a moment on the fact that these people–who make their living innovating, coming up with new products and new uses for old products and marketing things no one in their right minds would buy–have spent uncountable billions of dollars during our lifetimes fighting innovations, changes and new products the public and government have decided would make life better for people. Possible even, for some people.

    They continue to do this even though it’s been proven again and again and again–ozone, sulfur, seatbelts, air bags, catalytic converters, lead paint and SUVs vs. fuel-efficient hybrids–that they can make as much or more money doing the right thing than not.

    Why would they do that? It is beyond rationality.

    I don’t know about you but what it makes me think is that we in this country need some sort of collective therapy, and none of our climate, constitutional, corporate power, ecology, crime, war, health, food, “moral decline” or other problems will be solved until we get it.