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CBO vs. cap-and-trade

Doug Elmendorf, director of the Congressional Budget Office, has posted the five main conclusions CBO has come to with regard to efforts to deal with climate change. First, price emissions. Second, the price should start low and rise in a predictable and gradual way over time. Third, treat all emissions equally by bringing them all into the same system. Fourth, "leaving aside the effects of climate change," a bill meant to deal with climate change will probably lower GDP growth and employment by a "modest amount." Fifth, different households will be affected differently.

The CBO's decision to estimate the economic effect of climate-change policies against a baseline that does not include the effects of climate change is, to put it simply, very bad news for environmentalists. No one wants a carbon-pricing system for its own sake. It looks good only in comparison with a world in which we don't cut our carbon emissions and the climate transforms in drastic and unpredictable ways. But the CBO is comparing it with a world in which climate change doesn't exist at all. The result will be that CBO's analyses will show the costs of addressing climate change but not the benefits.

By Ezra Klein  |  May 20, 2010; 3:49 PM ET
Categories:  Climate Change  
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It's called a failure of imagination.

It's a problem that already caused 911, and now it's going to get us in even deeper doo doo.

Posted by: Lomillialor | May 20, 2010 4:36 PM | Report abuse

The only problem with Ezra's complaint is that the carbon emissions in the bill will make very little difference to global warming. (Especially if the CBO only scores US emissions!) So if you ask for a CBO statement that ends up saying you get a fraction of a degree benefit and that does nothing it doesn't really help much, does it?

Posted by: Hopeful9 | May 20, 2010 4:51 PM | Report abuse

It's unfortunate there won't be an "official" estimate on the benefits, but I guess that's what we have smart people in the press and academia for. As we saw with health care, whether it comes from the CBO or the latter groups, estimates on the benefits of climate policy will just be spun to death as liberal propaganda. The press will just have to do their job to put whatever information we have in its proper perspective.

Posted by: archamprog | May 20, 2010 4:59 PM | Report abuse

The National Academies just released three reports on climate change, with two more still to come.

I imagine these give a better estimate of the cost of inaction than anything the CBO would come up with.

I think the National Academies should have as much influence in the press as CBO reports, but I'm not sure they do.

Posted by: mschol17 | May 20, 2010 5:17 PM | Report abuse

The result is that you'll have to do a Granny-Smiths to Red Delicious comparison to balance the GDP drop from the program identified by the CBO with the CBO's deficit reduction numbers and outside estimates on the cost of climate change. I'm actually fine with this, since I don't think the CBO itself is equipped to estimate climate change costs.

Posted by: etdean1 | May 20, 2010 5:25 PM | Report abuse

"No one wants a carbon-pricing system for its own sake."

Yes, they really do. Where's the next outrageously profitable financial bubble going to come from? They screwed the pooch with mortgage based derivatives. They need a new, difficult-to-understand market for non-real product for which to create derivatives and make up prices, so they can loot companies and investors.

Posted by: Kevin_Willis | May 20, 2010 5:36 PM | Report abuse

What is it that you are talking about, Willis?

I'd say a carbon pricing system is good for its own sake as a revenue raiser. Then again, it would be just like the Senate to fail to regulate derivatives in their Financial Reform bill, and then have their Climate Bill scuttled by the unregulated derivatives market.

Posted by: etdean1 | May 20, 2010 5:40 PM | Report abuse

To address Hopeful9's point, I believe Ezra would like the CBO to score a scenario in which the cap and trade bill spurred the Chinese, Indians and Russians into taking substantial, painful actions and no other major countries cheated to take advantage of those heroic actions.

Posted by: ostap666 | May 20, 2010 5:52 PM | Report abuse

Kevin, ok, so maybe there are *some* people out there that want carbon-pricing for its own sake, but if they exist they are a tiny minority. If we want to raise revenue there are much more simple ways to do is (let's just raise the income tax rates). Pricing carbon is a policy dreamed up and specifically intended to address the negative effects of climate change. If you assume there are no negative effects from climate change, then there's very little reason for carbon pricing. Of course, if you assume there are no negative effects from climate change, you're up against the weight of the evidence.

Posted by: MosBen | May 20, 2010 7:33 PM | Report abuse

Recent research by Henrik Svensmark and his group at the Danish National
Space Center points to the real cause of the recent warming trend. In a
series of experiments on the formation of clouds, these scientists have
shown that fluctuations in the Sun's output cause the observed changes in the
Earth's temperature.

In the past, scientists believed the fluctuations in the Sun's output were
too small to cause the observed amount of temperature change, hence the need
to look for other causes like carbon dioxide. However, these new
experiments show that fluctuations in the Sun's output are in fact large
enough, so there is no longer a need to resort to carbon dioxide as the
cause of the recent warming trend.

The discovery of the real cause of the recent increase in the Earth's
temperature is indeed a convenient truth. It means humans are not to blame
for the increase. It also means there is absolutely nothing we can, much
less do, to correct the situation.

Thomas Laprade
Thunder Bay, Ont.

Posted by: snowbird1 | May 21, 2010 12:00 PM | Report abuse

Re: Svensmark

Posted by: mschol17 | May 21, 2010 1:44 PM | Report abuse

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