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Costs of Reducing Greenhouse-Gas Emissions 1 (November 2009)

handle is hein.congrec/cbo8926 and id is 1 raw text is: A series ofissue summaries from the Congressional Budget Office NOVEMBER 23, 2009 The Costs of Reducing Greenhouse-Gas Emissions Human activities around the world are producing increas- ingly large quantities of greenhouse gases, particularly carbon dioxide (CO2) resulting from the consumption of fossil fuels and deforestation. Most experts expect that the accumulation of such gases in the atmosphere will result in a variety of environmental changes over time, includ- ing a gradual warming of the global climate, extensive changes in regional weather patterns, and significant shifts in the chemistry of the oceans.1 Although the mag- nitude and consequences of such developments are highly uncertain, researchers generally conclude that a contin- ued increase in atmospheric concentrations of greenhouse gases would have serious and costly effects.2 A comprehensive response to that problem would include a collection of strategies: research to better understand the scientific processes at work and to develop technolo- gies to address them; measures to help the economy and society adapt to the projected warming and other expected changes; and efforts to reduce emissions, avert- ing at least some of the potential damage to the environ- ment and attendant economic losses. Those strategies would all present technological challenges and entail economic costs. Reducing emissions would impose a burden on the econ- omy because it would require lessening the use of fossil fuels and altering patterns of land use. This issue brief 1. For a discussion of expected effects, see Congressional Budget Office, Potential Impacts of Climate Change in the United States (May 2009), available at www.cbo.gov/ftpdocs/101xx/docl0107/ 05-04-ClimateChange-forWeb.pdf. 2. For a general discussion of the economics of climate change, see Congressional Budget Office, The Economics ofClimate Change: A Primer (April 2003), available at www.cbo.gov/ftpdocs/41xx/ doc4171/04-25-ClimateChange.pdf. For a general discussion of uncertainty and climate change, see Congressional Budget Office, Uncertainty in Analyzing Climate Change: Policy Implications (January 2005), available at www.cbo.gov/ftpdocs/60xx/doc discusses the economic costs of reducing greenhouse-gas emissions in the United States, describing the main deter- minants of costs, how analysts estimate those costs, and the magnitude of estimated costs. The brief also illus- trates the uncertainty surrounding such estimates using studies of a recent legislative proposal, H.R. 2454, the American Clean Energy and Security Act of 2009. What Determines the Costs of Reducing Emissions? The costs of reducing emissions would depend on several factors: the growth of emissions in the absence of policy changes; the types of policies used to restrict emissions; the magnitude of the reductions achieved by those poli- cies; the extent to which producers and consumers could moderate emission-intensive activities without reducing their material well-being; and the policies pursued by other countries. (For a discussion of different concepts of cost, see Box 1.) Emissions in the Absence of Policy Changes In 2006, the United States emitted roughly 7 billion metric tons (MT) of greenhouse gases, measured in CO2 equivalents (CO2e, or the amount of CO2 that would cause an equivalent amount of warming).3 Eighty percent of domestic emissions consisted of CO2 from the burning of fossil fuels in activities such as manufacturing, electricity generation, transportation, agriculture, and the heating and cooling of buildings. The remaining 20 per- cent-consisting of CO2 emitted from sources other than fossil fuels, methane (CH4), nitrous oxide (N20), and a variety of fluorinated gases-were produced by myriad processes and activities throughout the economy. Under current land-use patterns in the United States, forests and soils absorb nearly 900 million MT CO2 every year, 3. See Environmental Protection Agency, Inventory of U.S. Green- house Gas Emissions and Sinks: 1990-2006 (April 15, 2008).

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