Global Warming Policies Will Hurt Low-Income Americans the Most: Study

Global Warming Policies Will Hurt Low-Income Americans the Most: Study
January 1, 1998



Even before the ink was dry on the recently signed Kyoto Protocol, evidence was mounting that the far-reaching initiative could cause devastating economic dislocations.

According to Mary Novak, senior vice president of WEFA, Inc., a macroeconomic forecasting firm, taking early action to reduce greenhouse gas emissions would be counterproductive both economically and environmentally. “Dramatically increasing energy costs [in the United States] without equivalent participation by developing countries would substantially reduce U.S. economic performance, with little or no global environmental benefits,” she writes.

“Stabilizing carbon emissions at 1990 levels by 2010 would, through its impact on energy costs, act as a series of mini-shocks on the U.S. economy, much like the Arab oil embargo and the Iranian oil crisis,” the WEFA study observes. “The plan would permanently reduce economic performance; GDP would be 2.4 percent lower in 2010 and 1.7 percent lower in 2020 than baseline estimates. The total loss of income per household would average almost $30,000 over the 2001-2020 time period.”

“It would also put the U.S. economy at a competitive disadvantage, and reduce resources available for needs such as education, health care, and aid to low-income households,” the WEFA study continues. “Households would be squeezed between higher costs for essential goods and services and lower income. Further, unless developing countries participate in the plan, the impact on global carbon emissions would be small.”

The WEFA study, “Global Climate Change Policies: The Impact on Economic Growth, U.S. Consumers, and Environmental Quality,” was completed and released before the Kyoto climate change conference got underway. Its findings are all the more significant in light of the fact that the analysis assumes a plan to stabilize U.S. emissions of greenhouse gases at 1990 levels by 2010. However, at Kyoto, the Clinton administration agreed to reduce U.S. output of greenhouse gases to 7 percent below 1990 levels by 2012. The economic impact of the Kyoto Protocol will be even more dramatic than predicted by the WEFA study.

“Stabilizing emissions at 1990 levels will require that consumers and businesses pay for a permit to consume energy, effectively causing energy prices to rise,” the study notes. “To meet the target emission level, domestic tradeable carbon permit fees of $200 per metric ton would be required by 2010. Consumers would see energy price increases of 30 to 55 percent over baseline projections by 2010, and 40 to 90 percent by 2020.”

The study sees few, if any, offsetting environmental benefits to be achieved by the global warming initiative. “Even if the United States and other developed countries were to meet the ambitious goal of stabilizing emissions at 1990 levels, the impact on greenhouse gas concentrations would be minuscule,” the study points out. “Due to population increases, economic expansion, and an increasing reliance on commercial fuels, the developing countries, which are not required to reduce carbon emissions, will sharply increase their carbon emissions.”