The Cost of Mitigating Climate Change (It’s Cheap)

June 22, 2014 in Sustainability

Henry Paulson, former Secretary of the Treasury, has on op-ed piece in today’s New York Times in which he looks at the potential costs of climate change from a risk management perspective. His conclusion is that the most conservative thing to do, the thing that will hold down the size of government and our national debt, is to act now to mitigate climate change while the costs are low and we have more time. His solution is a carbon tax, which he predicts will “empower the market to find the most efficient response” and will “create incentives to develop new, cleaner energy technologies.” He makes several comparisons to the risks that were ignored leading up to the economic crash of 2008 and makes a point of urging his fellow republicans to avoid the same mistakes that were made then.

Conservatives reaction to a carbon tax, cap and trade, or any other form of legislation to curb emissions is always to claim that it will be disastrous for industry and the economy. However two recent studies from the Intergovernmental Panel on Climate Change (IPCC) and the U.S. Chamber of Commerce dispute that. As I’ve noted before, the IPCC estimates that the costs of stabilizing CO2 is 0.6% to 1.3% of GDP. Perhaps you distrust the United Nations, so let’s take a look at what the Chamber of Commerce has to say. The chamber commissioned a study that was released in May. Deeply opposed to any form of energy or environmental regulation, they commissioned a report from an organization with similar attitudes – the Energy Institute. Their findings estimate the cost of carbon regulation at $51 billion per year through 2030. Now to you and me that’s a lot of money, but in the $21.5 trillion U.S. economy that comes out to 0.2%. To put that into personal terms, it amounts to about $1.20 per day per household.

I’m not saying that there is no downside. Jobs will be lost in extractive industries like coal and oil. I’ve been unemployed. I know what it’s like to worry about paying rent or buying groceries, and I’d like to see those who lose their jobs get retraining and even subsidized moves so that they can go to where the new jobs are located. But, I don’t think we should smother the planet in CO2 to save jobs that are going to be lost anyway or to hang onto that $1.20 per household. The times they are a-changin’ whether we like it or not. The goal should be to control that change to the benefit of as many people as possible. Acting now makes that easier to do.