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NATIONAL CENTER FOR POLICY ANALYSIS
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Kyoto Would Harm U.S. Economy

Daily Policy Digest

Global Warming Issues

Wednesday, August 15, 2001

Despite substantial international pressure, President Bush announced in March that the Kyoto Protocol for the control of greenhouse gas emissions was unacceptable to the United States. He said the protocol's requirements were fundamentally unfair because they exempt developing countries from the emissions reduction scheme and would impose high economic costs on the United States. For example, the Energy Information Administration, the official forecasting arm of the Department of Energy, predicts meeting the Kyoto greenhouse gas limits would:

Increase gasoline prices by 52 percent and electricity prices by 86 percent.

Decrease Gross Domestic Product by 4.2 percent.

Reduce personal disposable income by 2.5 percent.

In addition, economist Stephen Brown of the Dallas Federal Reserve Bank compared the estimated costs and benefits in terms of reduced human and environmental harm caused by global warming if the U.S. met its Kyoto commitments. Brown found:

For the United States, marginal cost equals marginal benefit at about 14 percent of the CO2 reduction required by the Kyoto accord.

Thus Kyoto requires about seven times more CO2 reduction by the United States than is cost-justified.

Under pessimistic assumptions, compliance with Kyoto would reduce U.S. GDP by from 3.6 percent to 5.1 percent, representing a loss of $1,105 to $1,565 per person, per year by 2010.

Under the most optimistic assumptions, compliance with the Kyoto accord would reduce U.S. GDP by from 3 percent to 4.3 percent, representing a loss of $921 to $1,320 per person, per year by 2010.

Finally, emission reductions under Kyoto will have at best a negligible effect on global warming because developing countries are not obligated to cut their emissions -- and developing countries produce nearly half of all greenhouse gases.

Source: H. Sterling Burnett, "Reality and Climate Change Policy," Brief Analysis No. 367, August 15, 2001, National Center for Policy Analysis.

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