Why is the global economy constrained by the energy cost of energy?
Union of Concerned Scientists, 2 BRATTLE SQUARE, CAMBRIDGE, MA 02238-9105
No sooner was it announced that the US would pursue legally binding commitments to reduce heat-trapping gas emissions at the international climate change talks last July, than the Administration's position was attacked by industry and science skeptics who benefit from the status quo. One of the critics' main arguments is that taking action to reduce greenhouse gas emissions is too costly -- our economy will be seriously harmed, they argue; the American standard of living will be lowered; and untold numbers of people will be thrown out of work.
In the face of this unrelenting mantra of a ruined economy, several prominent US economists -- including Nobel Laureates Kenneth Arrow of Stanford University and Robert M. Solow of the Massachusetts Institute of Technology -- developed a mechanism to counter these negative -- and unfounded -- assertions. Thus, they crafted and circulated the "Economists' Statement on Climate Change" to rally professional economists in support of the IPCC's (Intergovernmental Panel on Climate Change) conclusions and to publicly assert the economic viability of climate change mitigation strategies. The recruitment letter soliciting signers explains: "As the climate debate unfolds, it is imperative that public policy be guided by sound economics rather than misleading claims put forward by special interest groups."
The "Economists' Statement on Climate Change" will be released at a press conference this Thursday, February 13, 1997. 2000 economists have signed on to the statement, including six Nobel Laureates. The statement (text below) champions the conclusions of the IPCC report, asserts the economic feasibility of greenhouse gas reductions without harming the American economy, and recommends market-based policies:
We the undersigned agree that:
I. The review conducted by a distinguished international panel of scientists under the auspices of the Intergovernmental Panel on Climate Change has determined that "the balance of evidence suggests a discernible human influence on global climate." As economists, we believe that global climate change carries with it significant environmental, economic, social, and geopolitical risks, and that preventive steps are justified.
II. Economics studies have found that there are many potential policies to reduce greenhouse-gas emissions for which the total benefits outweigh the total costs. For the United States in particular, sound economic analysis shows that there are policy options that would slow climate change without harming American living standards, and these measures may in fact improve U.S. productivity in the longer run.
III. The most efficient approach to slowing climate change is through market-based policies. In order for the world to achieve its climatic objectives at minimum cost, a cooperative approach among nations is required -- such as an international emissions trading agreement. The United States and other nations can most efficiently implement their climate policies through market mechanisms, such as carbon taxes or the auction of emissions permits. The revenues generated from such policies can effectively be used to reduce the deficit or to lower existing taxes."
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-- The six Nobel Laureates are: Kenneth J. Arrow, Stanford University; Gerard Debreu, University of California at Berkeley; John C. Harsanyi, University of California at Berkeley; Lawrence R. Klein, Pennsylvania State University; Robert M. Solow, Massachusetts Institute of Technology; and James Tobin, Yale University. The project's five organizers are: Arrow and Solow, plus Dale W. Jorgenson, Harvard University; Paul R. Krugman, Massachusetts Institute of Technology; and William D. Nordhaus, Yale University.
-- The organizational impetus behind the economists' effort comes from Redefining Progress, a non-partisan, non-profit public policy organization based in San Francisco. For information about "Redefining Progress" or how to sign onto the statement, contact: "Redefining Progress" at 1 Kearny Street, 4th floor, San Francisco, CA 94108 (415)781-1191.