Adopting carbon restrictions of the magnitude mandated by the Lieberman–Warner and Waxman–Markey cap-and-trade bills or the Boxer–Sanders carbon-tax bill would harm the U.S. and global economies. By 2100, the global economy would lose more than $100 trillion. Analysis suggests that countries with stronger economies can overcome the challenges posed by warming. Indeed, faster growth would insulate the economy from the negative impacts of global warming.
How would adopting a global-warming policy affect world income?
Adopting carbon restrictions of the magnitude found in the Lieberman–Warner cap-and-trade bill[1] would actually reduce worldwide income, even after accounting for the economic benefits of moderated warming. The costs would exceed the benefits by more than $100 trillion over the remainder of the 21st century. The perverse impact of climate policy would be even worse if the major developed countries join the U.S. in implementing an equivalent policy to restrict carbon emissions. Further, the net negative impact would grow exponentially, causing those working in the last two decades of this century to suffer annual income losses that would be hundreds of times greater than those suffered in the early years of the climate policy.
Warming and National Income
There is some debate about the magnitude of warming experienced worldwide over the past century. However, there is more debate about how much manmade carbon dioxide (CO2) emissions have contributed to this increase in temperature, and there is even greater uncertainty about how rapidly the Earth will warm over the next century and beyond.[2]
If there will be little warming, then there is little need to address carbon emissions. However, regardless of the amount of projected warming, policies should be evaluated by comparing their impact relative to their costs. We find that carbon policies flunk the cost-benefit test by wide margins.
When considering both costs and benefits, a carbon policy with restrictions similar in size and scope to those in the Waxman–Markey legislation (an 80 percent cut in CO2 emissions by 2050),[3] which the House of Representatives passed in 2009, would lead to:
An aggregate income loss to the U.S. of $207.8 trillion by 2100;
An aggregate income loss worldwide of $109.6 trillion by 2100;
A one-year worldwide loss of $3.5 trillion in 2100, equivalent to 4.75 percent of U.S. gross domestic product (GDP); and
Adverse impacts, on net, in every year of implementation.
These same results would hold for a carbon tax, and the results are even worse if more countries adopt the carbon-restricting policies.