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The U.S. Senate is now working on a bill that would require cuts in greenhouse gas emissions, and the opposition is pulling out all the stops to block its passage. Check out TV spot created by the U.S. Chamber of Commerce (www.uschamber.com). It first shows a family bundled up in its freezing house. The father then cooks his egg over candles, and jogs to work in his business suit, joining other men running down a traffic-free road. If the legislation, known as the Warner-Lieberman bill, is passed, the ad warns, Americans won’t be able to afford heating their homes or driving their cars.
Putting aside the fact that the U.S. actually would be a healthier place if more people walked, bicycled, or took public transportation to work, the ads raise a deeper question.
Just how much would implementing the bill cost? To quote from the Chamber, "If this bill becomes law, 3.4 million Americans will lose their jobs. American GDP will decline by $1 trillion. And American consumers will be forced to pay as much as $6 trillion to cope with carbon constraints."
Sounds pretty ominous. But where did those numbers come from? The Chamber cites the Senate testimony of Anne Smith, vice president of CRA International, a consulting firm (www.crai.com/bio.asp?profid=6538).
But where did Smith get those numbers? That's what Senator Lieberman (D-CT), co-sponsor of the bill, wanted to know. After all, the answers that come from the economic models CRA is known for depend heavily upon a whole host of assumptions. If the model assumes, for instance, that new technology won't be developed quickly, then the costs of reducing greenhouse gas emissions would be much higher than if the model expects more rapid innovation.
So Lieberman sent a letter to Smith, asking for the assumptions and details behind the numbers. Sorry, she said, can't do it. "I have received your request for documentation of the MRN-NEEM model runs used in my testimony...and I will be happy to comply," she wrote. "This will take a little time, however, since CRA has not yet prepared a comprehensive report on [the bill] and therefore I have nothing 'off the shelf' that I can send."
Hmm. Opponents of the bill are citing these numbers as established fact. Yet they can't even explain how those numbers were generated?
Of course, no one can accurately predict the costs of a bill like this, which would affect all parts of the economy with its emissions limits. But the lesson of past regulation is that the eventual costs are almost always less than the affected industries claimed they would be -- sometimes far less. And even in the current debate, there are plenty of more believable numbers. Take this new report from Citigroup (www.incr.com/NETCOMMUNITY/Document.Doc?id=163). It looked at just one sector -- autos -- which would have to increase gas mileage in order to reduce carbon dioxide emissions. The conclusion: far from costing jobs and putting automakers out of business, higher fuel economy standards "surprisingly—[would generate] some growth in variable profits for most automakers."
The lesson: take the claims of huge costs with a large helping of salt.
BusinessWeek correspondents John Carey and Mark Scott, cover the green scene, keeping on top of the business aspects of energy, the environment and climate change, as well as the technologies, policies, markets and people that are shaping how the earth's resources will be used in the century ahead.