A Small Price to Pay: US Action to Curb Global Warming Is Feasible and Affordable

The recent Kyoto Protocol mandates that the United States cut its emissions of heat-trapping gases to 7 percent below 1990 levels by the period 2008–2012. This report examines the feasibility and cost of potential US actions to reach this target. We conclude that: 

• Claims that compliance with the Kyoto Protocol would be prohibitively expensive and would seriously harm the American economy are sharply overblown.
• The United States can make significant reductions in its greenhouse-gas emissions, with overall economic savings or at a modest cost.
• Opponents of action ignore the potentially large economic costs of climate change, as well as the fact that global warming could produce numerous social, demographic, and political dislocations that cannot be easily quantified in an economic model.
• Steps to reduce emissions of carbon dioxide, the most significant heat-trapping gas, would produce considerable health and environmental co-benefits from reductions in dangerous air pollutants.
• The United States can meet all or most of the Kyoto Protocol’s mandated emissions reductions through domestic actions that will have zero or negative net costs. There are many viable options for reducing the use of high-carbon fuels, especially coal and oil. Additional savings may be available through the emissions-trading mechanisms in the Kyoto Protocol, but the United States need not rely on those provisions to achieve its commitment.
• Because most of its initial carbon-reduction steps will have low or no cost, our nation’s competitive position in most industries would be largely unaffected.

To reach these conclusions, the Tellus Institute and the Union of Concerned Scientists surveyed and compared a series of studies from the past 10 years that examine the future prospects for energy-efficient and low-carbon fuel technologies. These analyses—from the US government’s national energy laboratories, the National Academy of Sciences, the Office of Technology Assessment, and private and nongovernmental energy research organizations—evaluated policies and measures that would help to overcome market barriers and promote the development and adoption of these technologies. Our survey of these studies shows that great technological potential exists for the United States to significantly reduce its carbon dioxide emissions. In many cases, the resulting savings on energy bills from the use of more efficient measures would outweigh the cost of implementing those measures. Moreover, the same measures that would reduce carbon dioxide emissions would also yield other significant environmental and public health benefits.

The report also compares the findings in two of the more recent studies with the US target under the Kyoto Protocol. In this comparison, we account for changes in business-as-usual projections of energy use and carbon emissions made by the Energy Information Administration since the completion of these studies. When adjusted for these new baselines, the first of the two studies—Policies and Measures to Reduce CO₂ in the US (Tellus 1997, 1998)—indicates that the United States would be able to cut its emissions to 13 percent below 1990 levels in 2010, thereby surpassing its Kyoto target, while at the same time still realizing net economic savings. The results of the second study, Scenarios of US Carbon Reductions (DOE 1997) by five US national laboratories, would take the United States about three-quarters of the way toward achieving the Kyoto target. The shortfall could then be made up by either adding other cost-effective carbon-reduction measures or by using emissions trading and other flexibility mechanisms in the Kyoto Protocol.

The results obtained by the technology-based studies discussed in this report differ from the predictions of climate policy skeptics and of some conventional economic models. We believe, however, that the technology-based studies provide a more realistic view of the economics of climate change abatement and should be given greater credence. To provide support for this perspective, this report points out key weaknesses in those studies that claim climate change action will be economically prohibitive. For example, such "top down" studies often assume that our nation is already in "the best of all possible worlds." These studies fail to acknowledge that market barriers can be overcome with targeted policies and also fail to account for the large potential of technological innovation and diffusion. In addition, most of these studies implausibly assume that carbon reductions can only be achieved by imposing high energy taxes, without other taxes being reduced to compensate for these increases. Finally, they fail to account for the enormous costs of climate change itself, or for the ancillary benefits of measures that reduce carbon emissions.