What Does the Trump Victory Mean for Climate Change Policy?

 

Those of you who have read my previous essay at this blog, “This is Not a Time for Political Neutrality” (October 9, 2016), know that my greatest concerns about a Trump presidency (then a possibility, now a certainty), were not limited to environmental policy, but rather were “about what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on his “own words in a campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagrees with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”

That’s a broad indictment, to be sure, but whatever real expertise I may have is actually limited to environmental, resource, and energy economics and policy, and so that has and will continue to be the real focus of this blog, “An Economic View of the Environment.”  With that in mind, I return today from last month’s brief immersion in partisan politics to discuss climate change policy.

Yesterday, an editor at The New York Times asked me to write a 500-word essay giving my view of what the Trump victory will mean for climate policy.  This morning, my very brief essay was published under the headline, “Goodbye to the Climate.”  Given the brevity of the piece, it does not touch on many issues and subtleties (I come back to that at the end of today’s blog post), but rather than take the time to expand it, I want to get this to you quickly, and so I am simply reproducing it as it first appeared in the Times (along with an interesting group of other essays, under the overall heading, “What Happened on Election Day:  How the election and Donald Trump’s victory looks to Opinion writers.”

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The New York Times

Goodbye to the Climate

By Robert N. Stavins

Donald J. Trump once tweeted that “the concept of global warming was created by and for the Chinese in order to make U.S. manufacturing noncompetitive.” Twitter messages may not be clear signs of likely public policies, but Mr. Trump followed up during the campaign with his “America First Energy Plan,” which would rescind all of President Obama’s actions on climate change.

The plan includes canceling United States participation in the Paris climate agreement and stopping all American funding of United Nations climate change programs. It also includes abandoning the Clean Power Plan, a mainstay of the Obama administration’s approach to achieving its emissions reduction target for carbon dioxide under the Paris agreement.

What should we make of such campaign promises? Taking Mr. Trump at his word, he will surely seek to pull the country out of the Paris pact. But because the agreement has already come into force, under the rules, any party must wait three years before requesting to withdraw, followed by a one-year notice period.

Those rules would seem to be mere technicalities. The incoming Trump administration simply can disregard America’s pledge to reduce carbon dioxide emissions by 26 to 28 percent below the 2005 level by 2025. That is bad enough. But the big worry is what other key countries, including the world’s largest emitter, China, as well as India and Brazil, will do if the United States reneges on its pledge. The result could be that the Paris agreement unravels, taking it from the 97 percent of global emissions currently covered by the pact to little more than the European Union’s 10 percent share.

In addition, Mr. Trump’s Environmental Protection Agency probably will stop work on regulations of methane emissions (a very potent greenhouse gas) from existing oil and gas operations. Undoing complex existing regulations, such as the Clean Power Plan, will be more difficult, but a reconstituted Supreme Court will probably help President Trump when that plan inevitably comes before the court. Also, the new president will most likely ask that the Keystone XL pipeline permit application be renewed — and facilitate other oil and gas pipelines around the country.

On the campaign trail, Mr. Trump promised to “bring back” the coal industry by cutting environmental regulations. That may not be so easy. The decline of that industry and related employment has been caused by technological changes in mining, and competition from low-priced natural gas for electricity generation, not by environmental regulations. At the same time, Mr. Trump has pledged to promote fracking for oil and gas, but that would make natural gas even more economically attractive, and accelerate the elimination of coal-sector jobs.

If he lives up to his campaign rhetoric, Mr. Trump may indeed be able to reverse course on climate change policy, increasing the threat to our planet, and in the process destroy much of the Obama legacy in this important realm. This will make the states even more important players on this critical issue.

Robert N. Stavins is a professor at Harvard, where he directs the Harvard Project on Climate Agreements.

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Given the brevity of the piece, it is not intended to be comprehensive of the many implications for climate change policy of the Trump victory (nor the implications of the Republicans continuing to hold majorities in both houses of Congress).

And I did not get into the many subtleties of the issues I identified.  At a bare minimum, these would include:

  • the possibility of the new administration trying to bypass the four-year delay involved in dropping out of the Paris climate agreement by taking the one-year route of dropping out of the overall United Nations Framework Convention on Climate Change (UNFCCC) – signed by President George H.W. Bush and ratified by the U.S. Senate in 1992;
  • federal “climate change policies” that have been bipartisan and are therefore much less likely to be repealed, such the latest CAFE and appliance efficiency standards, and the recently extended wind and solar tax credits; and
  • the myriad of sub-national climate change policies, ranging from AB-32 in California to the Regional Greenhouse Gas Initiative in the northeast (It’s not a coincidence that there’s a high – although not perfect – correlation between the states Secretary Clinton won in the election and the location of the most ambitious climate change policies).

On another occasion, after I’ve had an opportunity to reflect more calmly and carefully on the implications of the forthcoming Trump presidency for environmental, natural resource, and energy policy, I will return to this topic.  But for now, I have to prepare for my trip in a few days to Marrakech, Morocco, for the annual UNFCCC negotiations.  Given the election results, my meetings there may be quite strange, if not surreal. I hope to write about that in my next essay at this blog.

A Key Moment is Coming for the IPCC’s Future

About six month ago, I posted an essay at this blog (The IPCC at a Crossroads, February 26, 2015) highlighting some of the challenges faced by the Intergovernmental Panel on Climate Change (IPCC), which plays an important role in global climate change policy around the world. [In previous essays at this blog, I wrote about problems with the IPCC process (Is the IPCC Government Approval Process Broken?, April 25, 2014) and about its significant merits (Understanding the IPCC: An Important Follow-Up, May 3, 2014; The Final Stage of IPCC AR5 – Last Week’s Outcome in Copenhagen, November 4, 2014)].

A Key Moment to Think About the Future of the IPCC

Now is an important moment to think carefully about the path ahead for this much-maligned and much-celebrated organization, because in early October of this year, the 195 member countries of the IPCC (who together constitute this “intergovernmental panel”) will meet in plenary in Dubrovnik, Croatia, to elect a new Chair, who will lead the IPCC’s Sixth Assessment Report (AR6). There are some excellent candidates for the chairmanship. I hope they see (and read) today’s essay.

As I’ve said before, the IPCC is at a crossroads. Despite its many accomplishments, this institution, like many large institutions, has experienced severe growing pains. Its size has increased to the point that it has become cumbersome, it sometimes fails to address the most important issues, and – most striking of all – it is now at risk of losing the participation of the world’s best scientists, due to the massive burdens that participation entails.

In February of this year, we (Harvard) co-sponsored a three-day workshop on the future of international climate-assessment processes in Berlin, Germany, to take stock and reflect on lessons learned in past assessments – including those of the IPCC – as a means to identify options for improving future assessments. The workshop (titled “Assessment and Communication of the Social Science of Climate Change: Bridging Research and Policy”) was co-organized by: Fondazione Eni Enrico Mattei (FEEM, Italy), the Harvard Project on Climate Agreements (USA), the Mercator Research Institute on Global Commons and Climate Change (MCC, Germany), and the Stanford Environmental and Energy Policy Analysis Center (USA).  The workshop was funded, in part, by the Alfred P. Sloan Foundation.

How Can the IPCC and its Procedures be Improved?

In an essay published in the Review of Environment, Energy and Economics (“Assessment and Communication of the Social Science of Climate Change: Bridging Research and Policy.”), Carlo Carraro (FEEM), Charles Kolstad (Stanford), and I offered our thoughts on the path ahead, drawing on our reflections on the Berlin workshop. We described a set of challenges and opportunities facing the IPCC, and provided options for future improvements. Here are some excerpts in five key areas.

1.  The IPCC could better integrate and coordinate across IPCC Working Groups, as well as enhance interaction between scientists and governments.

The scoping process could include more interaction between governments and scientists, driven by policy questions governments want answered and issues scientists feel need addressing. More experts could be involved in the process leading up to scoping meetings so that draft outlines going into scoping meetings might better reflect broad scientific consensus.

Feedback among policymakers, scientists, and other stakeholders during the assessment process could be improved. A lack of coordination and discussion between policymakers and scientists during the scoping and writing process has sometimes led to controversies and misunderstanding at the Summary for Policymakers (SPM) government approval sessions, which might have been avoided through earlier consultation

The Chair of the IPCC could enhance coordination among Working Groups. The Chair could improve coordination between Working Groups at multiple stages of the assessment process, including in the preparation of the Synthesis Report (SYR).

Special Reports could be developed to more flexibly target emerging issues, develop closer interactions between Working Groups, and inform future Assessment Reports. Shorter reports would be easier to produce and involve shorter turnaround times.

2.  The IPCC could enhance its interface with social scientific disciplines and communities.

Involving experts from a more diverse set of social-scientific communities in the scoping process, prior to scoping meetings, could enhance the quality of the Working-Group outlines and reports. Scholars from a wider range of fields might contribute to the scoping process by suggesting policy-relevant questions and by indicating which questions from policymakers are most amenable to response.

The IPCC leadership could strengthen engagement with relevant research communities that may initiate research projects and consortia to address gaps of knowledge identified in the IPCC scoping or assessment processes. Such recommended research might then be evaluated and incorporated as appropriate into Assessment Reports.

Consider establishing more formal interfaces with professional societies and national academies of sciences to facilitate identification of authors from various scientific disciplines, including social sciences, during the author selection process. This could facilitate the task of the Bureau, Coordinating Lead Authors (CLAs), Technical Support Units (TSUs), and governments in identifying and recruiting the most appropriate disciplinary mix of scientists for the IPCC.

3.  The IPCC could increase its efforts to facilitate the contributions of expertise from developing countries.

Selecting CLAs and LAs on the basis of scientific skills, capability, and reputation is paramount, but it is also important to reflect the perspectives of both developed and developing countries. Today, excellent scholars are available from all regions of the world.

The IPCC could invite authors from developing countries with less regard to where they are currently based. There are a significant number of scholars of international repute from the developing world living and working outside their countries of origin. These scholars could contribute significantly to IPCC reports

New partnerships, including with national, regional, and international academies of sciences, could support the author-nomination process. The academies might support CLAs, TSUs, and national focal points in identifying excellent researchers from a diverse set of geographic regions.

The IPCC could facilitate efforts of other organizations to build scientific expertise in developing countries. While the IPCC does not have the mandate to finance or execute such capacity-building efforts, the IPCC could recognize and support other international organizations that help develop stronger developing-country scientific expertise.

4.  The IPCC could increase the efficiency of its operations and ensure scientific integrity through organizational improvements.

 Preparing IPCC Reports is a complex management operation. Operational aspects of the Assessment-Report process could be improved significantly in a number of ways:

The IPCC should ensure that Chair and Co-Chairs of the Working Groups are selected early in the assessment cycle, and particularly before the scoping meetings, in order to enable careful preparation of the overall assessment process. Having the Chair and Co-Chairs engaged in the process from the beginning would also help foster a more deeply-shared vision between IPCC leadership and governments of the ultimate assessment products.

The IPCC could improve the efficiency of TSUs, which is essential for effectively managing the Assessment-Report process. The functioning of the TSUs requires frequent and intense face-to-face collaboration among staff and with the Co-Chairs. This requires maintaining a single TSU for each Working Group, physically located in a single geographic location under the authority of the Working Group Co-Chairs, with clearly assigned responsibilities. Geographic balance can be increased via global searches for qualified professionals, including from developing countries, to serve on the TSU staff.

Work organization, in particular of Lead Author (LA) meetings, could be greatly improved. Inefficient organization and high workload significantly reduce the incentives for researchers to contribute to the IPCC process. Frequent LA meetings are putting a high travel burden on authors, and the IPCC could reduce the number and length of LA Meetings (LAMs) and use means of remote collaboration, communication, and organization. Chapter Science Assistants (CSAs) provide critical support for chapter teams, facilitating the functioning and organization of work between and during LAMs. The IPCC could allow them to participate in all meetings and provide dedicated funding streams for CSAs for all chapters. The money saved by holding fewer and briefer LAMs could partly be dedicated to this purpose.

Consider expanding the definition of conflict of interest to include not only economic conflicts, but also conflicts due to institutional affiliation. For example, authors, Bureau members, Working Group leadership, and other IPCC personnel with dual roles as national negotiators could be identified as having a potential conflict of interest. Also, authors who work for an organization that aims to influence climate policy might be defined as having a potential conflict of interest. While this expanded definition need not preclude these individuals from working with the IPCC, public disclosure of the potential conflict of interest should help assure the integrity of the IPCC process. It could be valuable to have such an expanded definition in effect early in the AR6 process.

5.  Outreach and communications could be strengthened.

The SPMs, as well as the Technical Summaries (TS), are widely considered by non-experts to be difficult to access and understand. It would be difficult to change the SPM process, given its negotiated character. However, the IPCC could consider engaging expert science communicators to help produce more concise TSs, making them more accessible to policymakers and the general public. In addition, re-naming the TS as “Executive Summary” could more accurately characterize this component of the Assessment Reports and draw the interest of a broader readership.

The impact of IPCC publications on the UNFCCC process may have suffered from not being more closely aligned in terms of timing. The IPCC could consider synchronizing the IPCC Assessment cycle with the UNFCCC negotiation schedule.

Next Steps

My co-authors and I are continuing to develop our thinking on these and other issues associated with the functioning of the IPCC. Whereas some commentators have argued that the IPCC has outlived its usefulness (or is irreparably broken), I prefer to resist the temptation to “throw out the baby with the bathwater.” Instead, I welcome your thoughts on how the IPCC and its procedures can be improved.

What are the Benefits and Costs of EPA’s Proposed CO2 Regulation?

­On June 2nd, the Obama Administration’s Environmental Protection Agency (EPA) released its long-awaited proposed regulation to reduce carbon dioxide (CO2) emissions from existing sources in the electricity-generating sector.  The regulatory (rule) proposal calls for cutting CO2 emissions from the power sector by 30 percent below 2005 levels by 2030.  This is potentially significant, because electricity generation is responsible for about 38 percent of U.S. CO2 emissions (about 32 percent of U.S. greenhouse gas (GHG) emissions).

On June 18th, EPA published the proposed rule in the Federal Register, initiating a 120-day public comment period.  In my previous essay at this blog, I wrote about the fundamentals and the politics of this proposed rule (EPA’s Proposed Greenhouse Gas Regulation: Why are Conservatives Attacking its Market-Based Options?).  Today I take a look at the economics.

Cost-Effective, Perhaps – but Efficient?

The proposed rule grants freedom to implementing states to achieve their specified emissions-reduction targets in virtually any way they choose, including the use of market-based instruments (the White House has referenced cap-and-trade in this context, although somewhat obliquely as “market-based programs,” and state-level carbon taxes might also be acceptable – if any states were to include them in their plans to implement the regualtion).  Also, the proposal allows for multistate proposals and for states and regions to establish linkages among their state and multi-state market-based instruments.  Some questions remain regarding the temporal flexibility (banking and borrowing) that the proposed rule will allow, but it’s reasonable to conclude at this point that although EPA may not be guaranteeing cost-effectiveness, it is allowing for it, indeed facilitating it.  As Dallas Burtraw of Resources for the Future has said, the proposed rule ought to be judged to be potentially cost-effective.

Cost-effectiveness (achieving a given target at the lowest possible aggregate cost) is one thing, but economists – and possibly some other policy wonks – may wonder if the proposal is likely to be efficient (maximizing the difference between benefits and costs).  This is a much higher mountain to climb, and a particularly challenging one for a regional, national, or sub-national climate-change policy, given the global commons nature of the problem.

The Challenge of this Global Commons Problem

GHGs mix globally in the atmosphere, and so damages are spread around the world and are unaffected by the location of emissions.  This means that any jurisdiction taking action – a region, a country, a state, or a city – will incur the direct costs of its actions, but the direct benefits (averted climate change) will be distributed globally.  Hence, the direct climate benefits a jurisdiction reaps from its actions will inevitably be less than the costs it incurs, despite the fact that global climate benefits may be greater – possibly much greater – than global costs.

(An Aside:  This presents the classic free-rider problem of this ultimate global commons problem:  It is in the interest of no country to take action, but each can reap the benefits of any countries that do take action.  This is why international, if not global, cooperation is essential.  See the extensive work of the Harvard Project on Climate Agreements.)

On June 2nd, EPA released its 376-page Regulatory Impact Analysis (RIA) of the proposed “Clean Power Plan” rule, the same day it released the 645-page proposed rule itselfAn RIA is essentially a benefit-cost analysis, required for significant new Federal rules by a series of Executive Orders going back to the presidency of Jimmy Carter, and reaffirmed by every President since, including most recently President Obama.

Given the fundamental economic arithmetic of a global commons problem, it would be surprising – to say the least – if EPA were to find that the expected benefits of the proposed rule would exceed its expected costs, but this is precisely what EPA has found.  Indeed, its central estimate is of positive net benefits (benefits minus costs) of $67 billion annually in the year 2030 (employing a mid-range 3% discount rate).  How can this be?

Two Answers to the Conundrum

First, EPA does not limit its estimate of climate benefits to those received by the United States (or its citizens), but uses an estimate of global climate benefits.

Second, in addition to quantifying the benefits of climate change impacts associated with CO2 emissions reductions, EPA quantifies and includes (the much larger) benefits of human-health impacts associated with reductions in other (correlated) air pollutants.

Of course, even if benefits exceed costs at the given level of stringency of the proposed rule, it does not mean that the rule is economically efficient, because it could be the case that benefits would exceed costs by an even greater amount with a more stringent or with a less stringent rule.  However, if benefits are not greater than costs (negative net benefits), then the rule cannot possibly be efficient, so I will stick with the all-too-common Washington practice and simply ask whether the analysis indicates a winner or a loser at the proposed rule’s given level of stringency.  In other words, the question becomes, “Is the proposed rule welfare-enhancing (even if it is not welfare-maximizing)?”

Now, let’s take a look at the numbers from these two key aspects of EPA’s economic analysis and the issues surrounding the calculations.

U.S. versus Global Damages

There are surely ethical arguments (and possibly legal arguments) for employing a global damage estimate, as opposed to a U.S. damage estimate, in a benefit-cost analysis of a U.S. climate policy, but until recently all Regulatory Impact Analyses over several decades had focused exclusively on U.S. impacts.

In a recent working paper, “Determining the Proper Scope of Climate Change Benefits,” Ted Gayer, Vice President and Director of Economic Studies at the Brookings Institution, and Kip Viscusi, University Distinguished Professor of Law, Economics, and Management at Vanderbilt University, review the history of RIAs, including their virtually exclusive focus on national impacts (defined by geography or U.S. citizenship) in benefit and cost estimates of regulations.

In the context of a conventional RIA, it does seem strange – at least at first blush – to use a global measure of benefits of a U.S. regulation.  If this practice were applied in a consistent manner – that is, uniformly in all RIAs – it would result in some quite bizarre findings.  For example, a Federal labor policy that increases U.S. employment while cutting employment in competitor economies might be judged to have zero benefits!

Another example, this one courtesy of Tim Taylor via Ted Gayer:  Under global accounting, if a domestic climate policy had the unintended consequence of causing emissions and economic leakage (through relocation of some manufacturing to other countries), that would not be considered a cost of the regulation (and with diminishing marginal utility of income, it might be counted as a benefit)!

On the other hand, a counter-argument to this line of thinking is that the usual narrow U.S.-only geographic scope of an RIA is simply not appropriate for a global commons problem.  Otherwise, we would simply restate in economic terms the free-rider consequences of a global commons challenge.  In other words, a domestic-only RIA of a climate policy could have the effect of “institutionalizing free riding,” to quote my Harvard Kennedy School colleague, Professor Joseph Aldy.  Of course, if global benefits are to be included in a regulatory assessment, it can be argued that global costs (such as leakage) should also be considered.

I leave it to legal scholars and lawyers to debate the law, and I defer to the philosophers among us to debate the ethics, but let’s at least ask what the consequences would be for EPA’s analysis if a U.S climate benefits number were used, rather than a global number.  For this purpose, we can start with EPA’s estimates (from Table ES-7 on page ES-19 and Table ES-10 on page ES-23 of its Regulatory Impact Analysis of the proposed rule) for 2030 benefits and costs, using a mid-range 3% real discount rate.  The estimated (global) climate benefits of the rule are $31 billion.

In order to think about what the domestic climate benefits might be, we can turn to the Obama administration’s original calculation of the Social Cost of Carbon in 2010, where the Interagency Working Group estimated a central global value for 2010 of $19 per ton of CO2, and noted (and explained in more detail in a subsequent scholarly paper by several members of the Working Group) that U.S. benefits from reducing GHG emissions would be, on average, about 7 to 10 percent of global benefits across the scenarios analyzed with the one model that permitted such geographic disaggregation.

(The Interagency Working Group also suggested that if climate damages are simply proportional to GDP, then the U.S. share would be about 23%.  However, given the IPCC’s prediction of highly unequal geographic distribution of climate change effects worldwide, combined with the exceptionally heterogeneous nature of climate sensitivity among the world’s economies, which vary from those with trivial reliance on agriculture to those dominated by their agricultural sectors, I find the argument behind this second approach unconvincing.)

Taking the midpoint of the Obama Working Group’s 7-10% range, U.S. damages (benefits) may be estimated to be 8.5% of global damages, which would reduce the $31 billion reported in the new RIA to about $2.6 billion, which is considerably less than the RIA’s estimated total annual compliance costs of $8.8 billion (assuming that the states facilitate cost-effective actions).  This validates the intuition, explained above, that for virtually any jurisdiction, the direct climate benefits it reaps from its actions will be less than the costs it incurs (again, despite the fact that global climate benefits may be much greater than global costs).

There are plenty of caveats on both sides of this simple analysis.  One of the most important is that if the proposed U.S. policy were to increase the probability of other countries taking climate policy actions (which I believe is probably the case), then the impacts on U.S. territory of such foreign policy actions would merit inclusion even in a traditional U.S.-only benefit-cost analysis.  More broadly, although it has been traditional to use a U.S.-only benefits measure in RIAs, the current guidelines for carrying out these analyses from the Office of Information and Regulatory Affairs of the U.S. Office of Management and Budget (Circular A-4) requires that geographic U.S. benefit and cost estimates be provided, but also allows for the optional inclusion of global estimates.

Pending resolution (or more likely, discussion and debate) from lawyers and philosophers regarding the legal and ethical issue of employing domestic benefits versus global benefits in a climate regulation RIA, it is essential to recognize that there is an even more important factor that explains how EPA came up with estimates of significant positive net benefits (benefits exceeding costs) for the proposed rule (and would have even if a domestic climate benefits number had been employed), namely, the inclusion of (domestic) health impacts of other air pollutants, the emissions of which are correlated with those of CO2.

Correlated Pollutants and Co-Benefits

The Obama Administration’s proposed regulation to reduce CO2 emissions from the electric power sector is intended to achieve its objectives through a combination of less electricity generated (compared with a business-as-usual trajectory), greater dispatch of electricity from less CO2-intensive sources (natural gas, nuclear, and renewable sources, instead of coal), and more investment in low CO2-intensive sources.  Hence, it is anticipated that less coal will be burned than in the absence of the regulation (and more use of natural gas, nuclear, and renewable sources of electricity).  This means not only less CO2 being emitted into the atmosphere, but also decreased emissions of correlated local air pollutants that have direct impacts on human health, including sulfur dioxide (SO2), nitrogen oxides (NOx), particulate matter (PM), and mercury (Hg).

It is well known that higher concentrations of these pollutants in the ambient air we breathe – particularly smaller particles of particulate matter (PM2.5) – have very significant human health impacts in terms of increased risk of both morbidity and mortality.  The numbers dwarf the climate impacts themselves.  Whereas the U.S. climate change impacts of CO2 reductions due to the proposed rule in 2030 are probably less than $3 billion per year (see above), the health impacts (co-benefits) of reduced concentrations of correlated (non-CO2) air pollutants are estimated by EPA to be some $45 billion/year (central estimate)!  (By the way, I assume that the co-benefits estimated by EPA are based upon a comparison with a business-as-usual baseline that includes the effects of all existing EPA and state regulations for these same local air pollutants.  If not, the RIA will need to be revised.)

The Bottom Line

The combined U.S.-only estimates of annual climate impacts of CO2 ($3 billion) and health impacts of correlated pollutants ($45 billion) greatly exceed the estimated regulatory compliance costs of $9 billion/year, for positive net benefits amounting to $39 billion/year in 2030.  This is the key argument related to the possible economic efficiency of the proposed rule from the perspective of U.S. welfare.  If EPA’s global estimate of climate benefits ($31 billion/year) is employed instead, then, of course, the rule looks even better, with total annual benefits of $76 billion, leading to EPA’s bottom-line estimate of positive net benefits of $67 billion per year.  See the summary table below.

The Obama Administration’s proposed regulation of existing power-sector sources of CO2 has the potential to be cost-effective, and if you accept these numbers, it can also be welfare-enhancing, if not welfare-maximizing.

That said, I assume that proponents of the Obama Administration’s proposed rule will take this assessment of EPA’s Regulatory Impact Analysis as evidence of the sensibility of the rule, and opponents of the Administration’s proposed actions will claim that my assessment of the RIA provides evidence of the foolishness of EPA’s proposal.  So it is in our pluralistic system (not to mention, in the context of the political polarization that has gripped Washington on this and so many other issues).

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Benefits and Costs of EPA’s Proposed Clean Power Plan Rule in 2030

(Mid-Point Estimates, Billions of Dollars)

Climate Change Impacts

Health Impacts (Co-Benefits) of Correlated Pollutants plus …

Domestic

Global

Domestic Climate Impacts

Global Climate Impacts

Benefits
  Climate Change

$ 3

$ 31

$3

$31

  Health Co-Benefits

$45

$45

Total Benefits

$ 3

$ 31

$48

$76

Total Compliance Costs

$ 9

$ 9

$ 9

$ 9

Net Benefits (Benefits – Costs)

– $ 6

$ 22

$ 39

$ 67

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