Memo to media: New Brookings study does NOT model Waxman-Markey, and, contrary to the Washington Times, it finds strong climate action would NOT hurt the economy

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"Memo to media: New Brookings study does NOT model Waxman-Markey, and, contrary to the Washington Times, it finds strong climate action would NOT hurt the economy"

Less than a postage stamp a day.  That’s what it will cost the average American to cut US greenhouse gases 83% in four decades and give the world a chance of avoiding catastrophic global warming while jumpstarting the transition to a clean energy economy.

The right wing likes to take economic analyses that don’t model the House clean energy and climate bill and then misrepresent the results to attack the bill — see, for instance, Exclusive: MIT Professor says GOP, Weekly Standard “misrepresentation” of his April 2007 study to project costs for Waxman-Markey is “inappropriate,” “silly” and “just wrong.”

The latest hit job is by The Washington Times, which abuses a new study by Brookings in a piece whose headline is exactly backwards, “Study: Cap and trade would hurt economy.”  You can see for yourself the devastating economic harm that Brookings projects strong climate policy would cause:

brookings-study

Yes, you need a magnifying glass to find any impact on GDP growth for decades.

Now, Brookings could not be clearer that the study doesn’t model Waxman-Markey.  Note the very first bullet point of its presentation on the study Monday (here):

Not an analysis of particular bills.

The study models a variety of scenarios, centered around a 20% cut in U.S. energy-related carbon dioxide emissions by 2020, 40% by 2040, and 83% by 2050

But it doesn’t look at the various clean energy provisions in the bill (or in the stimulus, for that matter).  It doesn’t model any of the cost containment provisions of the bill.  It just looks at brute-force emissions reductions over time similar to what Obama and Waxman-Markey propose.  And that’s probably why Brookings predicts a rather absurdly high price for CO2 permits in 2020 — $50 a ton, which is double CBO’s projection and triple EPA’s!

Even so, as the Brookings graph above shows that the bill’s impact on the economy is negligible — and Brookings assumes no offsets whatsoever.  The 83% reduction by 2050 is achieved through domestic emissions reductions and with no noticeable economic impact.

But how does The Washington Times spin this as harmful to the economy?  Here is their lede paragraph:

The Brookings Institution on Monday said cap-and-trade legislation to reduce carbon dioxide emissions would lower the nation’s gross domestic product in 2050 by 2.5 percent, compared with levels it would reach if the legislation is not implemented.

Well, yes.  But that is the entire impact cumulatively in four decades.

If we do nothing, GDP in 2050 will rise from some $13 trillion today to some $28 trillion in 2050.  If we eliminate the overwhelming majority of carbon dioxide emissions from the US economy in four decades, GDP will “only” be about $27.2 trillion in 2050.  The country will still be twice as wealthy.  We’ll just have to wait until 2051 to be as wealthy as we would have been in 2050 without the bill.

The Washington Times analysis is so bad — so biased for the status quo and against smart action — that for a minute I thought I was reading the Washington Post editorial page.  [Sorry, couldn't resist.]

The Brookings analysis is completely in line with every major independent economic analysis (see “Introduction to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar“).  Indeed, the study finds the total hit to “present discounted personal consumption” from 2010 to 2050 is about 0.4% (using a 4% discount rate) — or roughly $100 per person per year, a postage stamp a day.

And it is avowedly “Not a cost-benefit analysis.”  It never examines the tremendous economic benefit from jumpstarting the transition to a clean energy economy and joining the nations of the world sharply reduce greenhouse gas emissions and avoid catastrophic global warming.

A report issued by the left-leaning research organization said that if Congress passes something similar to President Obama’s or the House’s proposed plan, the economy would take the biggest hit around 2025.

Sorry, but you need a magnifying glass to find an economic hit by 2025 in the Brookings Study — and again, that’s using permit prices that are almost certainly 2 to 3 times higher than is actually going to happen.

Finally, Brookings over the years has become a very centrist organization, which is no doubt why they have put out a very middle-of-the-road analysis that seems to utterly ignore the various clean energy strategies advanced by President Obama and the “left leaning” Congress.

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8 Responses to Memo to media: New Brookings study does NOT model Waxman-Markey, and, contrary to the Washington Times, it finds strong climate action would NOT hurt the economy

  1. Modesty says:

    There’s something really misleading about these kinds of graphs that are—as you point out—based on analyses that don’t “examine[] the tremendous economic benefit from jumpstarting the transition to a clean energy economy and joining the nations of the world sharply reduce greenhouse gas emissions and avoid catastrophic global warming.”

    Putting this caveat/criticism/information in words–pointing this out with mere words–does not outweigh the impact of the image. I get that this graph is supposed to say “cost=postage stamp.” But still.

    Someone really does need to come up with some kind of powerfully visual way of representing this caveat in the actual graph.

  2. K L Reddington says:

    The last quarter adjusted annualized drop of 5.7% isd not only not reflected, but it is assumed that it and an even larger Q4 08 drop will be covered by offsetting increased growth. A scientif approach would be to change the numbers.

    We have had good growth for the last eight years. It may be 4 years before out GDP equals the GDP year ending 2008.
    GDP is still going down. It is falling much too much.

  3. Robert Brulle says:

    This analysis seems flawed to me in that:
    1. It doesn’t count the type of economic stimulus a transition to a zero carbon economy would bring.
    2. More importantly – the BAU scenario neglects the real costs that we will incur dealing with the unmitigated impacts of doing nothing about global warming. Has anybody estimated the actual costs that we will incur just to build up dikes around key infrastructure, the costs of property loss, agricultural impacts, the monetary costs of the destruction of coral reefs, transformation of the rainforest into a savannah, etc. etc. ? I would suspect that if these costs were accurately estimated as part of the BAU, it would be way more economically beneficial to address global warming now, and that the best case for a growing economy is under a zero carbon economy.

    Bob Brulle

  4. K L Reddington says:

    “If we do nothing, GDP in 2050 will rise from some $13 trillion today to some $28 trillion in 2050. If we eliminate the overwhelming majority of carbon dioxide emissions from the US economy in four decades, GDP will “only” be about $27.2 trillion in 2050. The country will still be “”””twice as wealthy””””. We’ll just have to wait until 2051 to be as wealthy as we would have been in 2050 without the bill.”

    America is not only not wealthy. We have more debt than assets. Are they saying this will double? I looked at the chart of budget deficits. Insolvency is really easy to see.

    The actuarial tables say our Social security system is severly underfunded. Maybe we can sell land.

  5. MarkB says:

    K L Reddington writes:

    “We have had good growth for the last eight years. ”

    Actually, U.S. economic growth for the recent 8-year period (2001-2008)has been the weakest in about 60 years. You’d have to go back to the period immediately following WW2 to find a period of weaker economic growth. 2009 won’t help either.

    http://www.bea.gov/national/xls/gdplev.xls

    Back to the discussion…One wonders why hack sources like WaTimes would bother to cover a Brookings study. Normally they can get enough material for their message by quoting the Heartland Institute or what not. The purpose of distorting Brookings (or MIT) is to convince moderate and liberal Americans.

    Does the Brookings study attempt to measure the true economic impact of doing nothing? This means much higher fossil fuel consumption (and more likely shortages as a result), greater national security costs, health effects of worse local environments, and of course the large problems of unmitigated global warming, which will have gradual effects over the long haul. I’ve found that because of the difficult of estimating these things, economic studies don’t make an attempt.

  6. K L Reddington says:

    http://greenhellblog.files.wordpress.com/2009/06/brookingscatbro.pdf

    A page from brookings 2012 to 2050 shows a 9 trillion dollar tax.

    reduce employment levels by .5% for the first decade. That is not reducing the unemployment rate. That is reducing the total employment or no less than a millioon people.

    Robert Brulle Says:

    June 9th, 2009 at 10:40 am
    This analysis seems flawed to me in that:
    1. It doesn’t count the type of economic stimulus a transition to a zero carbon economy would bring.

    I don’t think a zero carbon economy is possible. It creates hundreds of tons of carbon to build and install a wind tower. Even eating carbohydrates activates a carbon economy.

  7. Peter Wood says:

    “The Brookings Institution on Monday said cap-and-trade legislation to reduce carbon dioxide emissions would lower the nation’s gross domestic product in 2050 by 2.5 percent” — another was of look at this is that under the climate change legislation (and without taking into account the impacts of climate change), the time we achieve the amount of wealth that we expect to get in 2050 would be delayed by less than a year.

    What the study does suggest is that total costs would be lower under a carbon tax increasing according to the discount rate (Hotelling’s rule). This suggests that there would be significant benefits if the price floor was increased so that it played a much greater role in emissions reductions.

  8. Alex J says:

    K.L., if you want to be pedantic, the transition being sought is to a zero (or at least low) fossil carbon economy. Fossil fuels are the major source of accumulation, but clearly some will be used in the transition to alternatives. I think future generations might see that as a reasonable investment relative to today’s often wasteful usage.