In 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:
- 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.
- NEMS typically makes the most pessimistic assumptions in each of the areas analyzed by Repetto.
- 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.
- 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:
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:
- Climate Change Education Efforts ($90,000)
- Climate Environmental & Economic Research ($90,000)
- Climate change ($90,000), and
- 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.