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Economic modeling meets carbon policies | Scorcher

Published: April 17, 2017 by Editorial Team

Sheldon Zakreski, The Climate Trust
Weekly Policy and Finance Update – April 17, 2017

When economic modeling meets carbon policies

Whenever new environmental policies are proposed it is necessary to establish what they will cost. Cue the economists. Economic models can quickly dominate climate policy discussions with insights ranging from a slight impact to economic damnation. The damnation piece is troubling. The Washington Post noted that the George W. Bush administration used an economic study citing costs of $350 billion to comply with the Kyoto Protocol as an example of how committing to climate reduction would mean the end of the American way of life as we know it. Yet the government spent that much by mid-2006 in the war on Iraq with barely a dent on the breakneck economic growth of the 2000s.

Back then, no one had enacted an economy-wide policy capping emissions. We now have actual experience with such policies, most notably in California, which has had a cap in place since 2013. The observant may have noted that the sky hasn’t fallen in California. However, this proof point hasn’t stopped modelers from playing chicken little. Such is the case with an FTI Consulting review on the economic effects of a policy capping emissions in Oregon. The study doesn’t find an immediate negative impact on Oregon’s economy, instead, it focuses on how bad things will be thirty years in the future.

The focus on economic modeling to predict future outcomes, ignores the long history of models consistently and grossly over-estimating the negative economic effects. Rather than fixating on theoretical models, it would be beneficial to look to the actual economic effects of policies in action—California’s cap or a sulfur emissions cap in the eastern U.S. These examples are perhaps a more instructive guide on the economic implications of capping greenhouse gas emissions in Oregon.

Research and Resources

Gaps in an Oregon Cap and Trade Analysis Must Be Addressed to Ensure Informed Policy Decisions.
Erik Wohlgemuth, LinkedIn, April 10, 2017

Top News Headlines

California Court Upholds Cap-and-Trade Ruling, Clears Way For Extension To 2030
Ecosystem Marketplace, April 7, 2017

Cap And Trade Is Off To A Good Start In Ontario. Now Let It Go To Work.
The Huffington Post, April 7, 2017

Gutting Climate Rules Will Slow Job Growth
The Huffington Post, March 28, 2017

Nothing But Clear Skies Blog

We Can Meet the U.S. Paris Commitment without Federal Support
Peter Weisberg, The Climate Trust, February 8, 2017

Low Carbon Policies Create Jobs and Spur a Healthy Economy
Kristen Kleiman, The Climate Trust,  March 20, 2017

Image credit: Flickr/Bemep