August 31, 2016
That is what they warned, but they didn’t quite put it to readers that way. Instead the subhead warned that meeting President Obama’s goal of reducing emissions by 80 percent by 2050 would cost $5.28 trillion.
Yes folks, that sounds pretty scary. After all, $5.28 trillion over the next 34 years is bigger than a bread box, possibly much bigger.
Of course, it is unlikely that many of the WSJ’s readers have a clear idea of how big the economy will be over this 34-year period, so they are not likely to be in a good position to assess how much of a burden this would be. Since annual output will average more than $20 trillion a year (in 2016 dollars), this sum comes to about 0.9 percent of projected GDP. (This context is included near the bottom of the piece.) By comparison, the cost of the Iraq and Afghanistan wars at their peak was roughly 2.0 percent of GDP, implying that they imposed more than twice the burden on the economy as President Obama’s proposal to cut greenhouse gas emissions.
Another comparison that might be useful is the loss of potential GDP due to the austerity measures demanded by the Republican Congress and supported by many Democrats. In 2008, before the financial crisis, the Congressional Budget Office (CBO) projected that potential GDP in 2016 would 22.5 percent higher than in 2008. It now projects that potential GDP in 2016 is just 12.0 percent higher in 2016 than it was in 2008.
This decline in potential GDP is roughly ten times as large as the projected costs from meeting President Obama’s targets for greenhouse gas emissions. Even if just half of this cost was due to austerity (as opposed to a mistaken projection by CBO in 2008 or unavoidable costs of the crisis) then the cost of austerity would still be more than five times as large as the costs of meeting President Obama’s targets for greenhouse gas emissions.
And, as the piece notes, the estimates do not take account of any benefits from reduced damage to the environment. For example, we might have fewer destructive storms, flooding of coastal regions, and forest fires in drought afflicted regions.
It is also worth noting that the WSJ piece entirely focuses on the high-end estimate in the study, the low-end estimate is just over one quarter as large.
These are all reasons why readers might not take the conclusion of the piece very seriously:
“‘It’s a sad comment on the political debate. This will affect people’s children and grandchildren,’ Mr. Heal [the author of the study] said.”
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