Serious Research Balances Costs and Environmental Benefits of Climate Policy

by: Jeffrey Frankel

Ten years ago this summer, President Clinton’s Council of Economic Advisers, of which I was a Member, responded to requests from Congress, which was then under Republican control, to explain in analytical terms what would be the economic effects of the Kyoto Protocol on climate change that had just been negotiated among the members of the UN Framework Convention on Climate Change. 

Our response was a document called the Administration Economic Analysis. It relied on some of the leading Integrated Assessment Models, and showed that the costs of Kyoto could be relatively low, provided that international trading of emission permits were freely allowed, and provided that developing countries participated in the system. Not zero costs, as wishful thinking by some techno-optimists would have it. Not prohibitive costs, as some skeptics would have it.   But moderate costs — relatively low if measures could be implemented sensibly.

Integrated Assessment Models are designed to assess both the economic costs and the environmental benefits of action to reduce emissions of greenhouse gases. For 15 years, the Energy Modeling Forum [EMF], under the leadership of John Weyant at Stanford University, has periodically brought together the modelers to compare results and exchange ideas. It was gratifying when we discovered that the economic model we had used to estimate costs was near the middle of the pack of ten leading academic models according to the EMF, in terms of the estimated impact on energy costs for example, contrary to suspicions that we must have low-balled the estimates.

Exactly ten years ago, in August 1998, I attended the Energy Modeling Forum’s annual workshop in Snowmass, Colorado, on Climate Change Impacts and Integrated Assessment. My assignment then was to explain the Administration Economic Analysis to this group. Unlike most American economists, I believe that something along the lines of the Clinton-Gore version of Kyoto offers the most promising path to address the problem of Global Climate Change.

A lot has changed in ten years. Popular awareness and support is much stronger now. Serious legislation to cap US emissions almost passed the Congress last spring. Both of the current presidential candidates say they support serious action to address greenhouse gas emissions — although they have trouble reconciling this position with their desire to respond sympathetically to popular displeasure over high energy prices.

I returned to the EMF Workshop a few weeks ago (July 28-August 1). My assignment this time was to try to answer the modelers’ question what they could do to make their research of maximum relevance and usefulness to Washington policy-makers. 

The Energy Modeling Forum has just posted on its website the presentations from this year’s Snowmass workshop. I remain highly impressed with the EMF and this community of scholars. They have made a lot of progress over the last ten years. They are pursuing research at its best: a good combination of unbiased science, healthy rivalry among teams, fruitful collaboration, and dedication to figuring out the most accurate possible answers to one of the most critical policy questions of our time, unencumbered by ideology. The climate change modelers genuinely cut across disciplinary boundaries, an accomplishment that is always sought by Deans and Foundations but is seldom realized in practice.