The Corner

Nice Try

Kevin Drum impressively combines two of the arguments that I have predicted carbon-emissions advocates will employ when confronting the economics of global warming in a single short blog post. He cites an EPA study, “suppressed” by those raging crazies at the OMB, that Drum says shows that emissions reductions on light-duty vehicles in the U.S. will produce benefits that far outweigh their costs. Drum says of this report that:

“Far outweigh,” by the way, turns out to mean about $2 trillion. Not bad for a bunch of tree huggers.

This struck me as kind of amazing, since this is something like half of the total theoretical net benefit that the most respected carbon-tax advocates assert would be created for the entire world from a perfectly designed, harmonized and implemented global carbon tax.

If you click through the supplied link, you can read the first 150 pages of this EPA report, which, as a service to my readers, I did. (I’ve got to get a new gig.)

You can find the $2 trillion estimate right there in a table on page 101. As you work your way through the analytical assumptions, however, you find that (i) this assumes a 3% discount rate, which is nice work if you can get it, and (ii) even more amusingly, counts the benefits attributable to the whole world, not just residents of the United States. At this discount rate the report estimates the total economic benefit of avoiding one ton of CO2 emissions to be $40. How much of this the U.S. portion? $1. So more than 95% of the “benefit” in this cost-benefit analysis accrues to people outside the U.S. who aren’t paying the freight.

Why didn’t the State Department sponsor this, as it sounds like the most generous foreign aid program in history? The EPA wants us to raise the price of gas so that we can help people not yet born all over the world with a problem that might develop several decades from now.

Jim Manzi — Jim Manzi is CEO of Applied Predictive Technologies (APT), an applied artificial intelligence software company. Prior to founding APT, Mr. Manzi was a Vice President at Mercer Management Consulting where ...

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