Why we overestimate the costs of climate change legislation
In the past weeks, there have been dueling reports on the cost of taking action to limit climate pollution and unleash a clean energy revolution. While the official studies show that the cost of action is less than a postage stamp a day for average families, those opposing action are citing reports that claim higher costs. David Roberts has a great post at Grist on why all of these studies likely overstate the costs and underestimate the benefits for one simple reason -- they don't take into account American innovation.
In the past weeks, there have been dueling reports on the cost of taking action to limit climate pollution and unleash a clean energy revolution. While the official studies show that the cost of action is less than a postage stamp a day for average families, those opposing action are citing reports that claim higher costs. David Roberts has a great post at Grist on why all of these studies likely overstate the costs and underestimate the benefits for one simple reason -- they don't take into account American innovation. For more read David's piece below.
Recent days have seen a flurry of blogospheric back-and-forth about the new CBO and EPA reports, and more generally about the costs and benefits of climate change legislation. As someone who believes the costs are overestimated and the benefits underrated, I thought I’d weigh in.
Here are three key questions:
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How available and affordable are low-carbon alternatives today?
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How available and affordable will they be in the future?
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Do the economic models used to project the cost of carbon regulations accurately reflect the answers to Nos. 1 and 2?
If the answer to No. 1 is “scarce and expensive” and the answer to No. 2 is “still scarce and expensive” then an extremely high price signal and much economic pain will be required to force providers to scale up alternatives and consumers to substitute them, especially in the short-term. That pessimism is endemic to official projections.
Luckily, those aren’t the right answers, at least I don’t think so. Cost-effective low-carbon alternatives are plentiful. Many remain unexploited not because they can’t compete in a free market, but because there isn’t one. A variety of market barriers, market failures, and behavioral failures plague the energy sector: monopolies, oligarchs, myopic accounting, misaligned incentives, perverse regulation, information bottlenecks, immature business models, cultural inertia, plain old bad habits. Underutilization of cost-effective clean alternatives is especially true in efficiency. Hell, recycled waste heat alone could generate 742 terawatt hours of power a year in the U.S., according to Lawrence Berkeley National Lab.
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