The Congressional Budget Office (CBO) last week published a new issue summary examining the likely economic burden to be imposed by the reduction of greenhouse gas emissions. "The Costs of Reducing Greenhouse Gas Emissions" specifically discusses the economic costs of reducing greenhouse-gas emissions in the U.S., describing the main determinants of costs, how analysts estimate those costs, and the magnitude of estimated
costs. The brief also illustrates the uncertainty surrounding such estimates using studies of H.R. 2454, the American Clean Energy and Security Act of 2009 which was passed by the House of Representatives earlier this year.
The study found that the costs of reducing emissions would depend on several factors:
* The growth of emissions in the absence of policy changes;
* The types of policies used to restrict emissions;
* The magnitude of the reductions achieved by those policies;
* The extent to which producers and consumers could moderate emission-intensive activities without reducing their material well-being; and,
* The policies pursued by other countries.
After examining the incremental cost, aggregate cost and distribution of costs of greenhouse gas emissions reductions, CBO concluded that policymakers face a basic choice: "whether to adopt conventional regulatory approaches, such as setting standards for machinery, equipment, and appliances, or to employ market-based approaches, such as imposing taxes on emissions or establishing cap-and-trade programs. Experts generally conclude that market-based approaches would reduce emissions to a specified level at significantly lower cost than conventional regulations. Whereas conventional regulations impose specific requirements that may not be the least costly means of reducing emissions, market-based approaches would provide much more latitude for firms and households to determine the cost cost-effective means of accomplishing that goal."
The entire 12-page CBO report is available at
http://www.cbo.gov/ftpdocs/104xx/doc10458/11-23-GHG_Emissions_Brief.pdf
Thanks to Robert Rains at ASME for the information.

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