Climate-Change Policies Come with a Price Tag

Margo Thorning is senior vice president and chief economist of the American Council for Capital Formation.

As Congress considers far-reaching federal climate-change legislation, there has been far too little discussion on the economic costs such policies would impose at the state, local and household levels. Make no mistake: From a financial standpoint, the burdens for Minnesotans would be substantial.

Add to this that Minnesota is considering state-specific and regional-climate change proposals, and it is clear that it is time to have an honest discussion on the potential economic impact such policies would have on families, businesses and governments.

The primary federal legislation set for debate in Congress, the Climate Security Act of 2007 — sponsored by Sens. Joe Lieberman, an independent from Connecticut, and John Warner, a Republican from Virginia — would establish a cap on the emission of greenhouse gases resulting from economic activities. The federal cap seeks to stabilize the concentration of these gases, with the goal of reducing 2005 emission levels 63 percent by 2050.

Efforts at both the federal and state levels are undoubtedly motivated by sincere desires to pass on a cleaner environment to future generations. Yet, these efforts overlook critical economic realities that are likely to undermine an already weakened economy and reduce living standards for decades. The question for lawmakers is whether they believe the anticipated benefits can be achieved and at what economic costs.

The Lieberman-Warner legislation would involve dramatically curtailing the burning of fossil fuels, which are used in 86 percent of primary energy production nationally. Thus the effect of such caps would be to raise the price of energy, thereby discouraging its use. In that sense, the cap on emissions serves as a sizable tax on energy use.

Let’s consider the costs to the state economy should the federal bill alone become law. A recent American Council for Capital Formation and National Association of Manufacturers study conducted by the independent Science Applications International Corporation assessed the national and state economic impacts of Lieberman-Warner. Estimates for Minnesota include: 

  • Gross state product losses of up to $4 billion in 2020 and up to $12.6 billion per year in 2030.
  • Employment losses of up to 33,735 jobs in 2020 and up to 74,569 jobs in 2030.
  • Household income losses of up to $3,455 per year in 2020 and up to $8,201 per year in 2030.
  • Electricity price increases of up to 39 percent by 2020 and up to 153 percent by 2030.
  • Gasoline price increases (per gallon) of up to 67 percent by 2020 and up to 140 percent by 2030.
  • Natural-gas price increases of up to 38 percent by 2020 and up to 153 percent by 2030.

Read the rest of the commentary at Star Tribune

  • Jeff

    And what are the corresponding costs of not making these changes? How do they compare to the cost of the war?

  • As a fellow local Global Warming heretic, I’m glad to see others stand up against the preaching.

  • It’s convenient that you asked about the costs of not making the changes in question, since I’ve been working on a paper that touches on that. My article is specific to Minnesota and the recent MCCAG report on climate change mitigation. That report fails to quantify physical benefits or drawbacks in concrete terms that can be defined economically.

    It’s admittedly difficult to fix a price to unknowns that are purely the product of guessing and imagination, so I can’t be too hard on them for not coming up with any useful financial data, I suppose.

    We can figure out what it will cost to implement global warming mitigation plans, and there are estimates of the physical impact such changes would make (Kyoto, for example would cost up to 4% of the nation’s GDP and is estimated to reduce greenhouse gas emissions by as little as .02% IF all signatory nations met their targets by 2100). The big unknowns are what will happen if the Earth’s average temperature rises an average of 0.6 degrees Celsius in a hundred years, or if that will even occur. Using history as a guide, periods of warming have led to prosperity and longevity, so it looks to me like the likely cost of not implementing global warming mitigation could be a net gain, but that’s hard to quantify.

    Always in flux, the future is.

    Keep watching for more about costs and benefits.

  • Jason

    The awnser to Jeffs question is simple, cheaper energy costs that everyone can live with. If the costs of basic needs go to high the middle class and the less fortunate suffer the most.

    All for a knee jerk reaction to global climate change!!!

    As for the question of war, how can you put a price on a nations freedom?? THERE IS NO PRICE THAT IS TO HIGH!!

  • Jeff

    None of those things made a lot of sense. The parts that did went nowhere. Avoiding thinking about these things is not going to solve problems. And blind chest beating and buying into propaganda certainly doesn’t get anywhere. Unless you liked Germany in the 40s.

  • Jason

    O.K. let me be more specific for u. THERE IS NO MAN MADE GLOBAL WARMING!
    Sounds like you have already bought into the propaganda of GLOBAL CLIMATE CHANGE!

  • Angela

    Let’s pretend for a moment that global warming doesn’t exist. (Even though it does)
    Oil is not a renewable energy source. Eventually we will run out. Don’t you think making changes toward renewable energies such as wind, solar etc. makes sense? Change doesn’t happen over night and it will take time to implement new energy plans. Even if the planet doesn’t warm too much and we aren’t in a constant state of emergency (which we will be if we don’t make changes now) wouldn’t you like to breathe cleaner air? Don’t you want your great grandchildren’s children to be able to drink clean water? Jeff is right it’s time this country and this state starts spending money on our future to save lives instead of destroy them.

  • Exploring and implementing alterntaive forms of energy is very good. I am especially keen on Hydrogen. Rushing into government mandates for products that are not so good (like ethanol) and cause great economic harm is not good. It’s stupid. Especially given that the reason given to move into these shaky energies is, itself very shaky.

    If the Kyoto-boosters are to be believed, the Earth will warm an average of 0.6 degrees per century on our present course. Hardly an impending disaster. There are mountains of evidence to suggest that the warming is part of a natural cycle and unavoidable. There is also strong evidence to suggest that the warming trend has already ended and will now turn to cooling.

    The climate is as fickle as the weather, and we’d be crazy and foolish to turn back human progress and act against our own interests based on predictions of temperature a hundred years from now when we can’t even accurately pinpoint the temperature for next Wednesday.

  • William

    Angela’s apparently one of those who plugs her ears and goes “la la la la” when one of the thousands of esteemed climate scientists who say man made “global warming” or, “climate change” (depending on how abnormally cool the current month is) is crap. Maybe if Angela’s old enough to remember (doubtfu ) that the last run the leftists made at politicizing weather in the 70’s over the dire threat of “global cooling,” she can tell us all what happened to that myth. Incidently, the scare tactics were incredibly similar to the lastest Algore silliness.

    Here’s the truth: Leftists want desperatly to destroy western capitalism through regulations and taxation. They think they have an opening now, but it’s not going to hold.

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