The Skywriter

Guest blog: ACCF and NAM's broken record

20
Aug

Guest blog: ACCF and NAM's broken record

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From guest blogger Kristen Sheeran, director of Economics for Equity and the Environment Network (E3), a nationwide network of more than 150 economists, developing new arguments for environmental protection with a social justice focus.

The American Council for Capital Formation and the National Association of Manufacturers are up to their old tricks again, promoting yet another industry funded study that supposedly demonstrates that the costs of a national climate bill like ACES will be too much to bear. Like a broken record that plays every time the American public comes close to implementing serious climate policy, they use the same old rhetoric of "reduced" jobs and incomes. This time, at least, no one seems to be listening.

The critiques of the model they use to produce their results are extensive and well-known to most economists. In short, it amounts to the following. First, they start with the assumption that the economy functions optimally, with all capital, labor, and energy fully and efficiently employed. By definition, then, any change in the economy brought by climate policy would yield a sub-optimal outcome. Second, the model captures none of the benefits of mitigating emissions, such as reducing coal use or lowering the risks of climate change related damages. Finally, they assume no change in technology or performance as a result of the policy, meaning that our options for reducing emissions stay the same, rather than improve, over time.

But even with these assumptions, their model generates results that are actually favorable, if interpreted fairly. Rather than hitting 23 trillion in GDP by mid 2030 without climate legislation, the economy reaches 23 trillion by early 2031 instead. Average household income rises to $120,483 in 2030 under climate legislation, rather than $121,731 without. Indeed, what their model predicts is not GPD loss so much as a slight postponement of economic activity into the future. Compared to the costs of inaction on climate change and the efficiency gains from reducing our fossil fuel energy use, this seems like an acceptable price to pay for the world’s wealthiest country.

In other words, behind their scare tactics lies the same conclusion that most economists have reached: reducing emissions is a cost that the US economy can afford. This was the finding of the non-partisan Congressional Budget Office (PDF), which estimated that ACES would cost the average American household only $175 per year, or roughly $.48 per pay. Because of provisions of ACES that offset costs for vulnerable households, households in the lowest income decile would actually see a $40 net benefit!

It is time for the American Council for Capital Formation and the National Association of Manufacturers to start singing a different tune. If they really want to scare the American public, they should promote the latest scientific findings about the risks of climate change. Now that is really frightening.

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