In his New York Times column today, Paul Krugman writes: “I cringe when “green economy” enthusiasts insist that protecting the environment would be all gain, no pain.” We feel his pain. But then Krugman goes on to write:
Consumers would end up poorer than they would have been without a climate-change policy. But how much poorer? Not much, say careful researchers, like those at the Environmental Protection Agency ….
But the EPA made some revealing assumptions about the relationship between carbon emissions and economic growth in their study. Specifically, to keep the costs of emissions reductions as low as possible, the Obama EPA assumed a GDP growth rate of 2.5% per year. But to keep their deficit projections as low as possible, earlier this month the Obama OMB assumed a 3.3% growth rate.
University of Colorado professor Roger Pielke crunches the numbers on what the smaller growth rate would mean for the average American:
Starting with the GDP figures in the President’s Budget and applying the different GDP growth rates leads to a difference in the size of the economy of $1.22 trillion between the President’s Budget projections and the EPA analysis of Waxman-Markey.
How much is $1.22 trillion? About $11,000 per U.S. household (assuming 115 million households). This number [obviously] gets larger in the out years if GDP growth rates exceed the 2.5% assumed by EPA. Adding in the costs of addition emissions reductions would make this number considerably larger.