"No Cost" Efforts to Reduce Carbon Emissions in the U.S.: An Economic Perspective

Abstract

The 1999 Special Issue of The Energy Journal presents several articles that conclude the costs of the Kyoto Protocol would be very high for the U.S. if all the adjustments were domestic. However, a few studies conclude that the Kyoto target is achievable at a negligible cost and perhaps with a net benefit. This paper explains why a majority of studies conclude that the cost of reducing emissions is high while some studies conclude that the Kyoto target could be achieved at a low cost, if not for free. Most studies employ mainstream economic analysis to estimate the costs of achieving the Kyoto Protocol. In contrast, the "no cost" analyses use a unique methodology applied only to energy conservation and referred to here as the energy conservation paradigm. One conclusion is that the energy conservation paradigm is inconsistent with mainstream economics. The "no cost" conclusion used to support approval of the Kyoto Protocol is not supported by the basic principles of economics. The Climate Change Technology Initiative recommends tax credits to reduce carbon emissions. With the proposed tax credit of $1,100 per residential head pump, each tonne of carbon reduced from the more efficient heat pump would cost $510. With different input assumptions, higher and lower estimates are produced.