NCPA - National Center for Policy Analysis

White House Underestimated Kyoto Costs, Studies Agree

June 24, 1999

If ratified by the Senate -- to which it has not yet been submitted -- the Kyoto treaty on global warming negotiated by the White House in 1997 would commit the U.S. to reducing greenhouse gas emissions by more than 30 percent, to 7 percent below their 1990 levels.

The Clinton administration claims the economic benefits of reducing emissions to 1990 levels by 2010 would roughly equal the costs of the required energy cuts.

But studies from the GAO, the Energy Information Administration and the Dallas Federal Reserve Bank determined that the administration significantly underestimated the costs involved.

  • The GAO analysis found that Department of Energy studies cited by the White House had relied on unsubstantiated assumptions concerning the future competitiveness of solar and wind power.
  • In addition, the GAO said the department did not consider the full economic costs of the proposed energy taxes, and it relied on implausible scenarios concerning the timeline for replacing powerplants and other capital equipment.
  • The EIA predicted that the Kyoto demands would increase gasoline prices 52 percent and hike electricity prices 86 percent, decrease gross domestic product by 4.2 percent, and lead to a 2.5 percent decline in personal disposable income.
  • The Dallas Federal Reserve study by Stephen Brown -- released by the National Center for Policy Analysis -- found the Kyoto accord requires between two and seven times more carbon dioxide reduction by the U.S. than is justified even under the most dire global warming predictions.

Moreover, the U.S. would have to reduce energy use by more than 30 percent below projections for 2010 -- equivalent to the total amount of energy used for transportation in 1996.

Brown determined that even using only the most economically efficient means, complying with Kyoto would reduce U.S. GDP by between 3 to 4.3 percent in 2010 -- a loss of $275.2 billion to $394.4 billion.

Source: H. Sterling Burnett (National Center for Policy Analysis), Investor's Business Daily, June 24, 1999.


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