The latest White House estimate of the costs of complying with the Kyoto global warming treaty assumes the replacement of every coal-fired power plant in the U.S. with gas generation by 2008, according to an analysis of the estimate by Charles River Associates. White House economic advisor Janet Yellen last week issued an update of an earlier paper on the costs of Kyoto compliance, concluding that reducing greenhouse gas emissions to the levels required by Kyoto protocol would cost a mere $7 billion to $12 billion per year in 2008-2010.
The Global Climate Coalition, an industry-backed group that opposes U.S. ratification of the treaty, commissioned the CRA review of Yellen's work. CRA said, "The administration has assumed extremely rapid replacement of coal-fired power plants by new natural gas plants by 2008. This is a very
optimistic assumption about how rapidly large change in natural gas infrastructure and power generation can be achieved, and there is some inconsistency between a very low permit price and achievement of these assumed changes."
Among other problems with the Yellen estimate is that it assumes worldwide trading of CO2 among all countries, at $14-23 per ton, says CRA. Under this scenario, the U.S. would be purchasing over 80 percent of its permits from abroad, rather than making reductions in emissions here. This level of trading drew fire from environmentalists, who prefer that U.S. industry reduce emissions directly.
The GCC, sounding a bit green itself, noted that the U.S. would "spend billions of dollars to purchase emissions credits - mainly in Russia - to offset our own inability to meet the goals set by the protocol. That is, instead of actually cutting back on our own greenhouse emissions, mainly carbon dioxide, we will be forced to make a massive transfer of wealth to other countries that are actually producing less greenhouse gases than they were in 1990."
CRA's estimate, using "perhaps more realistic assumptions about technology, fuel substitution, and the scope of international trading," is that permits will cost about $170 per ton. "In such circumstances," says the report, "GDP losses at least 10 times the costs derived by the administration could occur, with similarly greater impacts on families, jobs, and businesses -- increasing the average household's energy bill by about $850 per year and gasoline prices by almost $.50 per gallon. Such impacts are consistent with the findings of others who have analyzed the likely impact of complying with the Kyoto protocol."
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