So, Reuters took a look at the EPA's economic analysis of the Lieberman-McCain Climate Stewardship Act (so I didn't have to!). In case your memory is hazy, the CSA is a cap-and-trade bill that would cut emissions 65% by 2050. Here's the nut:
The EPA found that the Climate Stewardship and Innovation Act of 2007 would shave up to 1.6 percent, or $419 billion, off a baseline forecast for U.S. gross domestic product in 2030 and up to 3.2 percent, or $1.332 trillion, by 2050.
That is, by any reasonable measure, a modest price to pay. Even so, I bet it overestimates the cost.
I'll offer this open wager to anyone willing to take it. I'll bet $1,000 (which is rich for me, believe me) that if a cap-and-trade similar to or stronger than the CSA is implemented by 2012, the net effect on GDP will be a positive in 2030 .
Takers?
Emphasis in the original.
This is the sort of bet I'd like to take. But in the end I think the question is much, much too complicated to be economically optimistic about. Pretend for a moment that everything runs as is--business as usual--until 2012 at which point we cap emissions. At that point, every unit of carbon (etc.) that industry is prevented from burning because of the cap will cost it a certain average amount of profit. That amount doesn't have to be huge, and will certainly drop over time, but if the adjustment is to happen quickly, it will require months, if not years of preparation. When people say that we lack the political will to pass legislation like CSA, a big part of what they mean is that major industries are not ready to at least acquiesce to certain realities. And I don't get the sense that we can expect a quick rebound unless those companies move beyond the point acquiescence to the point at which they embrace what they'll be faced with moving forward.
Comments