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PRI's Environmental News Magazine

Climate Economics 101

Air Date: Week of February 16, 2007

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Congressional leaders want to know the dollars and sense of a climate change policy--what would it cost to cap global warming pollution, and what would it cost if we don't? Jeff Young follows the global warming money.

Transcript

CURWOOD: From the Jennifer and Ted Stanley Studios in Somerville, Massachusetts - this is Living on Earth. I’m Steve Curwood.

If you want to know what’s going on in politics, the saying goes, follow the money. And that’s now what’s happening to the Capitol Hill debate over how to respond to global warming. Democratic leaders in Congress say they want a strong bill on climate change this year, given some projections that inaction could lead to an economic meltdown. But any action on climate change is likely to result in some economic winners and losers, and business is now asking who would benefit and who would have to pay.

From Washington, Living on Earth’s Jeff Young has our report.

YOUNG: Call it the bucks and change of climate change: what’s the cost of capping greenhouse gas emissions—and what’s the cost if we don’t? Lawmakers dove into those complex questions in simultaneous hearings on Capitol Hill. Senate energy committee chairman Jeff Bingaman heard from former World Bank chief economist Sir Nicholas Stern. Stern made waves last fall with a report estimating how global warming would affect the global economy, something Bingaman says has been missing from the talk in Washington.

BINGAMAN: Now with the release of the report by Sir Nicholas Stern we are beginning to understand and to focus not just on the costs of action, but the costs of inaction.

YOUNG: At the high end Stern predicts climate calamities and mass dislocations of people that could drain up to 20 percent of the worlds economic output. Critics question the unorthodox methods Stern used to put such uncertain events into dollars and pounds. But even at the low end of his predictions unchecked climate change steals five percent of the world’s wealth. Stern says cutting carbon emissions would cost just one percent.

STERN: That will not slow growth. It is failing to act that will eventually damage growth. The message from the economics of climate change is clear: we must act strongly and we must act now.

YOUNG: While Stern spoke, leaders from corporate giants DuPont, BP, and Pacific Gas and Electric told senators on the Environment Committee they would welcome regulation of greenhouse gas emissions. DuPont CEO Chad Holiday says a carbon cap would encourage more businesses to save energy—and money— the way his has.

HOLIDAY: We have saved a 72% reduction in greenhouse gas emissions and 3 billion dollars cumulatively since the early 90s in lower energy costs and that’s going on today.

YOUNG: The companies formed the US Climate Action Partnership last month with environmentalists. Those partners want a law to cap greenhouse gas emissions and let industry trade pollution permits. The effort impressed one senator who could be a crucial swing vote: Republican John Warner of Virginia.

WARNER: When I see such an extraordinary cross section of America’s free enterprise system come and form a group like this, you’ve got my attention.

YOUNG: Warner’s state digs and burns coal and he is highly respected in his party. If he warms to a climate bill it would gain major momentum. But other Republicans attacked the companies in the climate partnership. Missouri Senator Kit Bond says the CEO’s are more interested in the bottom line than any lofty environmental benefit.

BOND: I have some questions when I see members of industry and business pursuing goals that are very harmful to other industries but profitable for them. Let’s not get that competitive advantage by sticking it to some people who are the least able to handle those costs.

YOUNG: Peter Darbee of PG&E bristled at Bond’s accusation.

DARBEE: The suggestion that we’re doing this to realize some form of monopoly profits or corner a market is totally without merit.

YOUNG: Whatever motivates a business leader’s decisions on climate change, it’s clear a cap on carbon emissions could decide who wins and loses in the business world. And that explains why lobbying on global warming is red hot lately. Scott Segal lobbies for the firm Bracewell and Guiliani, which represents power companies that burn a lot of coal.

SEGAL: I don’t think anyone was here fully out of a sense of altruism. I’m not saying they don’t believe that what they’re doing is right; I’m just saying that, ah, there are many economic motives that lie just below the surface in the climate debate.

YOUNG: One of Segal’s clients, power company TXU, wants to exempt power plants like the dozen the company plans in Texas. Other companies focus on how a carbon cap and trade system is set up—the tiniest details could mean millions of dollars. In short, companies that once lobbied to simply stop a climate change bill must now consider what happens if such a bill actually becomes law. And there’s a saying in the world of K-street lobbyists—if you’re not at the table you might end up on the menu.

For Living on Earth I’m Jeff Young in Washington DC

 

Links

The Stern Review

U.S. Climate Action Partnership

Senate Energy Committee hearing

Senate Environment Committee hearing

 

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