Originally created 08/01/98

White House offers optimistic view on costs of global warming



WASHINGTON -- The White House released an optimistic economic analysis Friday on the cost of addressing global warming that assumes U.S. companies will rely heavily on buying pollution credits abroad and make relatively small reductions themselves.

The analysis, produced by the President's Council of Economic Advisers, said meeting the goals of the climate agreement reached in Kyoto, Japan would cost an average household $70 to $110 a year more for energy.

Similar estimates have been given previously by administration officials in testimony before Congress, although business groups have cited other studies that put the cost much higher.

The White House analysis, however, relies on an economic model that assumes 75 percent of U.S. reductions in heat-trapping greenhouse gases would come from buying pollution credits from abroad. About one-fourth would be actual U.S. reductions, mostly cuts in carbon dioxide from burning fossil fuels.

The heavy reliance on so-called emissions trading brought instant criticism from environmental groups.

"We're disappointed that the economic analysis fails to envision real emission cuts at home and relies on buying the right to pollute from other countries," said Jennifer Morgan of the World Wildlife Fund.

Alden Meyer of the Union of Concerned Scientists accused the administration of "dropping the ball on emission cuts in the United States" if it follows through on relying so heavily on credits purchased from abroad.

Yellen cautioned that the economic analysis "is by no means an assessment of what we would do at home" in terms of greenhouse reductions. She said the analysis assumes only "a rock-bottom floor" of domestic activity to cut greenhouse gases and that, in fact, larger domestic emission cuts likely will be achieved at modest cost.

For example, said Yellen, increased competition in the electricity industry, expanded tree planting to absorb carbon dioxide, new energy technology advancements, and more voluntary actions by U.S. industries would increase the amount of domestic emission reductions.

But these activities were not factored into the analysis released by the White House even though the economic report, copies of which were sent to members of Congress, was supposed to provide the administration's best estimate on economic impact from meeting the Kyoto climate accord.

Todd Stern, White House coordinator on global warming issues, said that when some of those activities are added the domestic reductions in greenhouse gases could be as much as 40 to 45 percent of what will be needed under the Kyoto treaty.

The agreement reached in Kyoto in December calls on the United States to roll back greenhouse gas emissions -- primarily carbon dioxide -- to 7 percent below what they were in 1990 by 2008-12. That would mean emitting nearly 40 percent less than what would be expected under current growth predictions.

Critics of the treaty have cited various economic studies that show such cuts could cost as much as $2,700 a household and devastate energy-intensive sectors of the economy. These analysis, however, do not assume any purchase of pollution credits from abroad.

Emissions trading, as it is called, is part of the Kyoto agreement, but details have not been worked out. Europeans have criticized the United States for planning to meet too much of its obligation by buying pollution credits. These credits from countries like Russia reflect reductions already have been made because of economic decline and other reasons.