Waxman-Markey clean air, clean water, clean energy jobs bill creates $1.5 trillion in benefits

As award-winning journalist Eric Pooley concluded in a comprehensive study of the media’s mistakes and biases during the Lieberman-Warner climate bill debate, “The press failed to perform the basic service of making climate policy and its economic impact understandable to the reader and allowed opponents of climate action to set the terms of the cost debate. The argument centered on the short-term costs of taking action-i.e., higher electricity and gasoline prices-and sometimes assumed that doing nothing about climate change carried no cost.” See How the press bungles its coverage of climate economics “” “The media’s decision to play the stenographer role helped opponents of climate action stifle progress.” The following repost from guest blogger Daniel J. Weiss, a Senior Fellow and Director of Climate Strategy at the Center for American Progress Action Fund, looks at a new study that aims to help address the flaw in economics coverage.

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.

Update: A new report by the Union of Concerned Scientists finds that “global warming inaction could cost the nation hundreds of billions by the end of the century.”

Here is some additional analysis from Stewart J. Hudson, President of the Emily Hall Tremaine Foundation:

This study is a great resource because of its singular focus””rather than look at benefit creation in the abstract, it examines legislation already passed in the U.S. House of Representatives, HR2454, and puts a numerical value on the social benefits that would occur once the legislation is fully implemented. Among the most important conclusions of the study:

˜ The social cost of carbon that it calculates … suggests that “the benefits of HR2454 could likely exceed the costs by as much as nine-to-one, or more.”

˜ The methodologies it employs, and the discount rates it assumes, lead it to underestimate rather than overestimate the benefits it identifies

˜ By focusing on actual legislation, rather than theoretical ideas, it makes the case that an even more ambitious approach to climate protection and clean energy would provide for an even more robust array of social and economic benefits to society

A report this important will always attract critics, and they might well take aim at the fact that the report looks at the global, rather than merely domestic distribution of the social benefits from climate protection.

This leads to an obvious critique””if costs borne by the United States create benefits that occur globally, is this study’s cost curve a reliable basis for affecting U.S. domestic policy? Said differently, won’t we end up paying for benefits we don’t receive?

That might seem like a reasonable question to ask, but there’s a flaw that makes it less than compelling. That’s because it assumes that other nations are simply free riding on the US efforts identified in HR2454. In point of fact (and this is a very important and underreported story) many other nations with whom we share the planet are already doing far more than we are on climate protection “¦ and are paying for social benefits that are distributed globally, rather than just within their borders.

In the vernacular, it’s difficult to see how critics can lay a glove on the findings of this study even thought it’s all but certain they will try to delegitimize its major findings. For those brave souls who read the study with an open mind the take away is this””even a conservative estimate of the other side of the coin demonstrates that the benefits of climate protection outweigh the costs; and the more of it we do, and do right, the better that benefit-cost ratio becomes, not just here at home, but around the world.