Cutting emissions has costs, economist warns

Cutting emissions has costs, economist warns

Sep 24 - McClatchy-Tribune Regional News - Dan Voorhis The Wichita Eagle, Kan.

Cutting greenhouse gases in the United States could cost each Kansas family thousands of dollars and the state of Kansas thousands of jobs.

That was the conclusion of Margo Thorning, chief economist for the American Council for Capital Formation, who spoke Tuesday to a select audience at the Wichita Country Club. Her talk was sponsored by Koch Industries.

She talked mainly about the Lieberman-Warner bill that died in the U.S. Senate in June. It would have introduced a cap-and-trade system for greenhouse gas emissions.

A similar effort almost certainly will come around again, she said, and when it does, people have to understand the costs.

In a cap-and-trade system, government sets limits for emissions. Companies that produce relatively little greenhouse gas could sell the right to produce more to heavy producers. That gives companies a financial incentive to reduce emissions.

The bill would have ratcheted up emission reductions each year until 2050.

Her study suggests that implementing the bill would have cost each Kansas household the equivalent of between $947 and $3,994 a year by 2020, and between $3,069 and $7,283 a year by 2030.

"If we impose a cap-and-trade system (such as the Lieberman-Warner bill), the whole economy will slow," she said.

People would pay more for gasoline, natural gas and electricity directly and higher prices for everything else as the increased cost of energy works its way through the economy.

Energy consumption is firmly linked to rising wealth, she said. If energy use is cut artificially, the economy must become more efficient in its energy use or face falling wealth.

"Energy is something we can't afford to take lightly," she said. "After all, each 1 percent increase GDP (gross domestic product) is accompanied by 0.3 percent increase in energy use."

Even if the U.S. were to cut its greenhouse gas emissions, most of its impact would be blunted by rising emissions in China and the developing world.

As solutions, she recommends:

Rewriting the tax code to speed up the ability of companies to write off investments in energy technology and research.

Promoting the transfer of energy conservation technology to the developing world.

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com.