"Waxman-Markey Creates $1.5 Trillion In Benefits"
Our guest blogger is Daniel J. Weiss, a Senior Fellow and Director of Climate Strategy at the Center for American Progress Action Fund.
A new analysis of clean energy legislation finds that it will produce likely economic benefits of $1.5 trillion. The finding by the New York University School of Law’s Institute for Policy Integrity explains that the Waxman-Markey American Clean Energy and Security Act (H.R. 2454) is “cost‐benefit justified under most reasonable assumptions about the likely ‘social cost of carbon.'” In “The Other Side of the Coin: The Economic Benefits of Climate Legislation,” the Institute for Policy Integrity finds that the “benefits of H.R. 2454 could likely exceed the costs by as much as nine-to-one”:
Using conservative assumptions, the benefits of H.R. 2454 could likely exceed the costs by as much as nine-to-one, or more. The estimated benefits do not include a significant number of ancillary and un‐quantified benefits, such as the reduction of co‐pollutants (particularly sulfur dioxide and nitrogen dioxide), the prevention of species extinction, and lower maintenance costs for energy infrastructure. Due to those limitations, the benefits estimates should be considered to be very conservative.
The cost-benefit analyses of environmental safeguards generally favor the costs since they are relatively easy to measure. The economic benefits, however, of reduced pollution are much harder to calculate. The price of a scrubber to reduce sulfur and particulate pollution from a coal fired power plant is easy to calculate, but it is much harder to account for the value of a protected stream or restored vista.
Even the federal government often projects costs while ignoring benefits of clean energy proposals. For instance, the Congressional Budget Office’s assessment of the American Clean Energy and Security Act notes that its analysis “does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change.”
The “social cost of carbon” is the “the monetary valuation of incremental damage from each ton of greenhouse gas emissions.” The new IPI analysis employs a recent Department of Energy estimate that the “monetary values of the benefits of carbon dioxide emission reductions, otherwise known as the Social Cost of Carbon (SCC) [are] …$19 per metric ton of carbon dioxide.” This estimate was developed by an interagency task force, and was employed in a Department of Energy rule for more energy efficient vending machines issued on August 31st.
Using the value of $19 per ton of carbon pollution avoided, the authors determined that the total midrange projection of Waxman-Markey’s benefits is $1.5 trillion total between 2012-2050. Projections estimate that the legislation would require $660 billion in investment during this time, which means that benefits are at least two times greater than costs:
At the SCC values preferred by the Department of Energy, the direct benefits of H.R. 2454 are more than double the costs. Using SCC values that have a more appropriately low discount rate built in (EPA’s 2% figures), direct benefits are nearly eight to nine times greater than costs.
Even these projections are very low because the estimated SCC employed in the analysis excludes the value of a number of important benefits. It excludes the reduction of other harmful pollutants released along with greenhouse gases from coal fired power plants, such as soot and mercury. It does not estimate the cost of fewer tropical diseases or respiratory ailments from smog, or less political unrest in volatile regions.
Special interests that defend the status quo and oppose clean energy programs are quick to trot out their studies predicting economic Armageddon due to enormously inflated costs. Never mind that most of these industry studies are riddled with false assumptions and ideologically driven guess work, and are often proven wrong over time.
Until now, advocates of progress have had few estimates of economic benefits of action. This is a credible estimate of the benefits of action, and it far outweighs the investment cost of building a clean energy economy. The Environmental Protection Agency must take the next step by conducting a more thorough, rigorous analysis of benefits to conclusively demonstrate that Americans will have a net economic benefit from clean energy and global warming legislation.