NCPA - National Center for Policy Analysis

Global Warming Treaty Would Not Be Cost Free

July 2, 1999

In support of the 1997 Kyoto global warming treaty, the administration has cited an analysis by five research laboratories at the Department of Energy which claimed that the economic benefits of reducing greenhouse gas emissions to 1990 levels would roughly equal the costs.

Many analysts argued that the five-lab study was critically flawed.

For instance, a September 1998 Government Accounting Office analysis found that the five-lab study had relied on unsubstantiated assumptions about the future cost competitiveness of wind and solar power and did not consider the full economic costs of the energy taxes it proposed.

On the other hand, a 1998 Energy Information Administration study found that 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.
  • And reduce personal disposable income by 2.5 percent.

Furthermore, a 1999 NCPA study by Steven Brown of the Dallas Federal Reserve Bank found that without any offsets or international trading of emissions credits, cutting emissions 7 percent below 1990 levels would reduce U.S. GDP by 3.6 percent to 5.1 percent in 2010 -- a loss of $330.2 billion to $467.8 billion, or $1,105 to $1,565 per capita.

But even with offsets and credits, Brown found that compliance would require the U.S. to reduce emissions by approximately 3 percent below 1990 levels, reducing U.S. GDP by 3 percent to 4.3 percent in 2010, a loss of $275.2 billion to $394.4 billion, or $921 to $1,320 per capita.

Source: H. Sterling Burnett (NCPA Senior Policy Analyst), "Dispelling the Myth of a Cost-Free Global Warming Treaty" Brief Analysis No. 298, June 30, 1999, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.

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