Cutting Carbon Emissions at a Profit (Part I): Opportunities for the United States

Abstract

are found to be seriously incomplete. Each study omits one or several of four major cost-reducing policy options, resulting in cost estimates that are far too pessimistic.In the present study, these shortcomings are overcome through the integrated evaluation of all major cost-cutting policy options within a coherent least-cost framework. Three domestic policies-a national carbon cap and permit trading program, productivity-enhancing market reforms and technology programs, and recycling of permit auction revenues into economically advantageous tax cuts-are combined with international emissions allowance trading.This analysis shows that an integrated least-cost strategy for mitigating U.S. greenhouse gas emissions would produce an annual net output gain of roughly 0.4% of GDP in 2010 and about 0.9% of GDP in 2020. On a cumulative net present value basis, the United States would gain $250 billion by 2010 and $600 billion by 2020. International flexibility mechanisms (including emissions trading) are of only secondary significance in realizing these productivity, output, and welfare gains. (JEL Q43, Q48)

Postindustrialization and Environmental Quality: An Empirical Analysis of the Environmental State

“…First, in contrast to the expectations of the environmental sociologists of past decades -and in stark contrast to the claims by major political leaders of some nations -straightforward economic indicators such as the GDP prove not to have significant effects on CO 2 emissions in any of the multivariate analyses. At least for the relatively prosperous nations of the OECD, in other words, despite the apparent strength of the political leaders' convictions, the correlations between CO 2 emissions per capita and economic output per capita drop to insignificance once other variables are controlled, just as they do in recent economic assessments that correct the shortcomings of earlier models (see Krause et al 2002Krause et al , 2003.…”

Global Warming: Should Companies Adopt a Proactive Strategy?

“…Empirical studies have confirmed this optimistic view of the economic impacts of the Kyoto Protocol or have significantly tempered the alarmist prognoses from some politicians and managers. 8 Finally, some business coalitions have also declared themselves in favour of the Protocol. Such is the case with the World Business Council for Sustainable Development (WBCSD), a coalition of more than 1,000 managers of multinational companies such as Ford, BMW, Daimler-Chrysler, Corporate response to global warming remains a complex issue, requiring foresight and vision from managers Hewlett-Packard, Coca-Cola, Chevron-Texaco, Dow Chemical, Sony, Unilever and Toyota.…”

Limitations of integrated assessment models of climate change

“…The costs of climate policy depend heavily on how technology and its benefits over time are characterized (Worrell et al 2003). For example, Krause et al (2002Krause et al ( , 2003 include the efficiency-improving possibilities documented in the "5-lab study" (Interlaboratory Working Group 2000) to arrive at least-cost estimates of the economic costs of emissions reduction. Policy assessments typically include savings on energy bills and lower compliance costs, such as the benefits of new energy technologies, but overlook the potential for "non-energy" benefits, such as lower maintenance costs, increased production yields, safer work conditions, positive spill-over effects, and economies of scale and scope.…”