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Economics of climate change move to the fore

Sen. John F. Kerry (D-Mass.) focused on the economic opportunities under a cap-and-trade system.
Sen. John F. Kerry (D-Mass.) focused on the economic opportunities under a cap-and-trade system. (Susan Walsh/associated Press)

The panel's top Republican, Sen. James M. Inhofe (Okla.), voiced widely held worries about adding to the economic problems of many workers. The fact that the measure includes provisions to soften the transition to a low-carbon economy, he said, "is an implicit acknowledgment that the bill will destroy jobs. . . . I'm sure the worker at a cement plant, when he loses his job, won't find much consolation in green welfare programs."

Some Republicans highlighted CBO Director Douglas W. Elmendorf's Oct. 14 testimony that the bill by Democratic Reps. Henry A. Waxman (Calif.) and Edward J. Markey (Mass.), which the House passed over the summer, would cause "significant" job losses in fossil-fuel industries and would slow U.S. economic growth for several decades, including between 0.25 and 0.75 percent by 2020. Sen. John Barrasso (R-Wyo.) said the policy reflected the administration's tendency "to promise jobs for all, create some for a few and let the rest of us fend for ourselves." But Markey countered in an interview that the CBO factored in neither the cost of inaction nor the potential benefits of technological innovations that could rise once the government treated carbon as a pollutant and put a price on it.

"The CBO view of the world is a green eyeshade, rear-view mirror that cannot factor in the technological revolution or our national security," Markey said, adding that a cap-and-trade system would spawn "the energy Amazons, eBays, Googles and YouTubes" of the future.

Environmental groups have issued several reports in recent weeks buttressing Markey's point. The Pew Environment Group surveyed every state and found that from 1998 to 2007 "clean energy" jobs grew at a national rate of 9.1 percent, compared with a traditional job growth rate of 3.7 percent. In June, the Center for American Progress and the University of Massachusetts at Amherst's Political Economy Research Institute predicted that a $150 billion annual public and private investment in clean energy would produce a net increase every year of 1.7 million jobs.

Margo Thorning, chief economist at the conservative American Council for Capital Formation, criticized the June prediction for using a static economic model rather than a macroeconomic one, which would show how higher energy prices reverberate throughout the economy. She added that the assumption embedded in the EPA analysis that Boxer cited -- a 150 percent increase in the number of nuclear plants by 2050 -- was unrealistic.

But studies projecting large job losses are similarly based on data that have not been established. One by the American Council for Capital Formation and the National Association of Manufacturers found that up to 2.4 million jobs could be lost by 2030 in part because it assumed that only half as many carbon offsets would be available to keep energy prices lower. Another, by the Charles River Associates for the National Black Chamber of Commerce predicted a 2.2 million job loss by 2030 because of plugging in higher cost estimates for nuclear and geothermal energy projects. "There's never a single, precise answer," said Ken Ostrowski, a director at McKinsey and Co. who helped write the firm's reports on the cost of cutting U.S. greenhouse gas emissions and improving energy efficiency.

"You have to deal with uncertainties like the speed at which the technology could be implemented."

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