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The More Climate Regulation, The Better? A Report…

| Monday November 16th, 2009 | 1 Comment

lawbooksA new report out of UC Berkeley argues the stricter the regulation of greenhouse gases, the better it is for state economies, from California to Connecticut, and everywhere in between.

The report, entitled “Clean Energy and Climate Policy for U.S. Growth and Job Creation,” argues that improvements in energy efficiency, as well as a government mandated shift away from fossil fuels, will result in increased income for Americans, and higher job growth, as less income is spent on energy and new technologies spur industry.

From the report:

By aggressively promoting efficiency on the demand side of energy markets, alternative fuel and renewable technology development on the supply side can be combined with carbon pollution reduction to yield economic growth and net job creation. Indeed, a central finding of this research is that the stronger the federal climate policy, the greater the economic reward.

The Berkeley report contradicts industry-sponsored studies, and a developing strain of conventional wisdom, that argue the cost of capping greenhouse gases would have a dampening effect on growth. Instead, the net effect is a benefit: the report calculates Americans could earn $488 – $1176 more a year by 2020, and the country would enjoy an additional .4 to .9 percent boost to job growth by the same date.

How can this be?

By reducing our dependency on imported oil and gas, consumers, and the nation as a whole saves money, money which can then be spent on other domestic economic activity. The same holds for efficiency measures: spend less on your energy bill and you have more to spend at the mall. States in the “heartland,” aka “the real America,” actually spend more of their income on imported fossil fuels, according to the report, and thus have more to benefit from reducing their consumption.

Contrary to what is commonly assumed, comprehensive national climate policy does not benefit the coasts at the expense of the heartland states. In fact, heartland states will gain more by reducing imported fossil fuel dependence because they are generally spending a higher proportion of their income on this low employment, high price risk supply chain. Demand side policies make a bigger difference for more carbon-dependent states, and carbon reduction opportunities represent riper and lower hanging fruit.

Of course, one reason for reduced consumption of fossil fuels under pending climate legislation is that they would cost more, thus the counter argument of economic harm from climate regulation.

Competing Claims

The Berkeley study weighs a lot of factors, many of which are only lightly summarized, if at all, in the final report. It shouldn’t come as a surprise then that it only adds to a cacophony of competing claims about GHG regulation.

For a perhaps more neutral analysis, the non-partisan Congressional Budget Office has estimated that the Waxman-Markey climate bill, passed by the House last summer, would cost the average household $176 a year by 2020 — hardly a devastating levy. If the Berkeley study — and others like it — hold any water at all, that increased cost could be outweighed by broad economic benefits.

Oh, and in case you’ve forgotten: we get to save the planet, too.

The Berkeley report was co-authored by David Roland‐Holst and Fredrich Kahrl of Berkeley in collaboration with Madhu Khanna of the University of Illinois, Urbana‐Champaign and Jennifer Bakka of  Yale University.


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  • http://www.recyclematch.com Brooke

    This doesn’t surprise me at all. There are so many efficiencies to be gained in the US. It is bound to make us stronger if we focus on being more efficient in what we are doing today, and redirecting resources to where we are struggling for innovation.