Why Dealing With Climate Change Won't Bankrupt Us

Studies that try to predict the economic impacts typically fail to foresee game-changing advances.

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A controversy has broken out in the utility industry over a prediction of how much it might cost the nation to address climate change. It seems that some of the power companies, notably those with less coal in their portfolios, think an Edison Electric Institute-sponsored study exaggerated the downside, with its prediction that there would be a 1 percent to 1.6 percent reduction in GDP by 2015 and 2 percent to 2.5 percent thereafter if Congress adopted the bill sponsored by Republican Sen. John Warner of Virginia and independent Sen. Joseph Lieberman of Connecticut.

Expect more tussles over climate cost-benefit analysis ahead, says Daniel Weiss, director of climate strategy at the Center for American Progress. He argues that most cost-benefit studies of global warming solutions will overestimate the costs and underestimate the benefits, because they are incapable of seeing the dynamic technological progress that inevitably will occur in the future. "These studies base their cost assumptions on existing technologies and practices, which means that they do not account for the vast potential for innovation once binding reductions and deadlines are set," he says.

When I read Weiss's piece, I was immediately reminded of a long-forgotten study by the U.S. Office of Technology Assessment, which found that is precisely what occurred over the years with the regulations that were put into place to protect workers. Since OTA was eliminated as one of the early acts of the "Contract with America" Congress elected in 1994 and its old studies are not easily accessible, and since a piece I wrote on this study for the National Law Journal in November 1995 cannot readily be found on the Internet, I searched and found an article by a labor economist summarizing the OTA's findings here. In brief:

1. Cotton dust. The textile industry fought for years against rules to protect workers from "brown lung" disease, arguing they would be too costly. In fact, the rules cost the industry only one third of what was predicted, because instead of building expensive enclosures it invested in much-needed new machinery that didn't permeate the factory air with cotton dust.

2. Formaldehyde. Metal foundries were able to meet the Occupational Safety and Health Administration standard limiting worker formaldehyde exposure at nearly half the projected cost. They switched to newly developed low-formaldehyde resins, instead of overhauling ventilation systems as they complained they would have to do.

3. Vinyl chloride. The plastics industry had to pay only one quarter what it projected to reduce worker exposure to vinyl chloride, a carcinogen that is a basic building block of its production. Again, industry argued it would have to overhaul its ventilation and reactors, but instead a new technology was developed for "stripping" vinyl chloride emissions out of the air.

Once the nation begins tackling the global warming problem in earnest, it's a good bet that there will be similar innovations that render moot the weighing of dollars and cents we are doing today.

global warming
energy policy and climate change

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