Cost estimates of controlling GHG emissions provide something for everybody

Computer model forecasts of the economic impact of legislation to reduce US greenhouse gas emissions are driven by, and no smarter than, the assumptions upon which they are based.

"The economic impacts can change significantly under alternative assumptions regarding costs and the availability of new technologies," the Energy Information Administration noted. Or, put another way, worst-case assumptions in, worst-case results out, and so-forth.

Later this spring, the US Senate should take up a climate change bill (S. 2191), sponsored by Senators Joseph Lieberman, Independent-Connecticut, and John Warner, Republican-Virginia, that would reduce US greenhouse gas emissions 70% below 2005 levels by 2050 and establish a market-driven emissions trading system. The debate will be informed, or misinformed, by conflicting computer-generated cost estimates that will support the arguments of advocates on all sides of the issue.

The US Environmental Protection Agency last month released its analysis of S. 2191, with no less than 10 scenarios and outcomes based on different assumptions regarding the availability of technology and other factors. Not surprisingly, Lieberman and Oklahoma Republican Senator James Inhofe, a fierce opponent of caps on GHGs, were able to take from the EPA analysis what he needed.

"EPA's detailed analysis indicates that the US can curb global warming without sacrificing economic prosperity," Lieberman said. On the other hand, Inhofe, who has pronounced global warming a "hoax," said the analysis "exposes Lieberman-Warner for what it is: a job killer."

The Clean Air Task Force earlier this year released a report analyzing the same bill and forecast a relatively minor impact. Last month, the National Association of Manufacturers and the American Council for Capital Formation issued an analysis of Lieberman-Warner that forecast a virtual economic Armageddon.

Still to come is a model run by the Energy Information Administration, and another run by EPA specifically modeling the impact of the 2007 energy act.

This entry is based on the Regulation & the Environment column in Platts Oilgram News. The column is one of four columns published weekly in Oilgram News on different subjects. The Regulation & the Environment column deals with the impact of environmental regulations and their influence on the industry. The other columns are At The Wellhead, New Frontiers, and PetroDollars.