Low-Cost Strategies for Coping with CO 2 Emission Limits (A Critique of “CO 2 Emission Limits: an Economic Cost Analysis for the USA” by Alan Manne and Richard Richels)

Abstract

Manne and Richels (Manne and Richels, 1990) have developed a useful modelling framework for evaluating the potential economic impacts of alternative strategies for coping with greenhouse wanning. Their estimate is that the discounted present value of economic consumption losses arising from a 20% reduction in CO2 emissions through the next century is in the range of $0.8 to $3.6 trillion. This critique shows that the options for reducing C02 emissions through energy demand reduction and energy supply shifts are much broader than those considered by Manne and Richels in the initial run of their model. The possibilities are so diverse with both present and future technologies, that the minimum C02 emissions constraint penalty estimated by Manne and Richels may well prove to be too high - and the possibility of a negative penalty cannot be ruled out. Manne and Richels are correct in arguing that a vigorous R&D program is needed to keep economic consumption losses associated with constraints on C02 emissions at low levels, and that waiting for clarification of the scientific issues relating to the greenhouse warming before launching such R&D efforts would be unwise, but the priorities for R&D implicit in the initial run of their model are much too narrowly focused. As this analysis indicates, a much more broadly based energy R&D program is called for.