Economists say deep cuts to greenhouse gas won't mean deep cuts to economy

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Debate about global warming policy is simmering in Congress as the House and Senate consider climate bills backed by California lawmakers. The question is whether a big effort to move away from energy that produces “greenhouse gases” will wreck the economy. KPCC’s Molly Peterson says there’s a new study that says it won’t.

If you’ve heard the name Rajendra Pachauri before, chances are it’s because of Al Gore. They shared the Nobel Peace Prize two years ago. Pachauri leads the Intergovernmental Panel on Climate Change, or IPCC. Its reports have sparked talk about how to keep “greenhouse gases” at acceptable levels in the planet’s air.

Studies show atmospheric carbon dioxide now hangs just under 390 parts per million. As head of the IPCC, Pachauri analyzes the state of climate science – he's not supposed to have opinions about policy. But speaking simply as a human being, he says getting the carbon dioxide number lower is a good idea.

"There is a school of thought now which suggests if you want to avoid the worst impacts of climate change, you essentially have to stabilize the concentration of greenhouse gases of 350 parts per million, " Pachauri continues. "Now, that would clearly bring us to a temperature increase of perhaps 1.5 degrees Celsius. And I expect a number of countries are going to put this forward."

A new study aims to figure out how much it would cost to lower carbon from 390 parts per million down to 350. It’s from the Economics for Equity and the Environment Network.

The Network’s chief is economist Kristin Sheeran. She co-authored the study. She says doing what’s needed to get down to 350 could hit the world’s gross domestic product with a loss of several hundred billion dollars "...which at first glance can certainly create sticker shock. But when you begin to put it in context, it’s not that much at all. It would be basically like skipping a year’s growth in the United States and then resuming."

Tufts University economist Frank Ackerman co-authored the review of current economic literature. He says getting carbon down to the 350 parts per million level wouldn’t cost as much as worriers think. "The estimates of what it costs to do something about it have been relatively stable for quite a while," Ackerman says. "I don’t think it’s going to be costless, but it’s not at all prohibitive."

Ackerman says thinking about the economic implications of climate reminds him of an insurance policy you’d buy to protect your house from a fire or an earthquake. "The argument for climate protection is somewhat similar. We need to have a crash program to get going on climate protection, not because we’re exactly certain of what will happen in the next three decades but because we can’t be certain that bad things won’t start happening."

This area of study is new. Frank Ackerman says one thing economists don’t do well is factor in how government incentives grow new technology. Take microchips, for example. "We have those because in the ‘50s and ‘60s, when no one else could afford to buy them, the Pentagon had preposterously demanding specifications of what they wanted to buy," he points out. "Cost was no object. They bought it. The free market didn’t think of miniaturizing electronics all by itself."

Ackerman says government climate and energy policies that encourage innovation could ease a transition away from an economy dominated by carbon fuel. And even if the science is wrong, and the dangers to the climate are not as dire or as immediate as feared, economist Kristin Sheeran says the risks in reducing greenhouse gases are small. "We would have spent on greening our economy, making it more efficient, investing in ways that increases jobs and increases productivity," she speculates. "The downside risks to investing too much to stabilize the atmosphere, there’s just no comparison."

Sheeran and Frank Ackerman say they understand why people worry about the cost of climate policies in California. But they say there’s no proof cutting a lot of carbon from the atmosphere will cut chances for a stable economy, either.