CBO Analysis: Clean Energy for Less

The non-partisan Congressional Budget Office released an analysis on Sept 17. that confirms a modest short-term cost for comprehensive clean energy legislation - around $160 per household per year - or roughly 43 cents per household per day by 2020. That's less than a postage stamp per day.

This new finding by CBO is consistent with previous analysis from the CBO, along with earlier EPA and EIA analyses. (In fact, CBO lowered its own cost estimate from $175/year to $160/year.)

The CBO report included another figure which some have focused on, which suggests that in the long-term - that is in 2050 - GDP would be 1 to 3.5% less with a comprehensive clean energy plan than without it. A few important points about this analysis:

1. The CBO report concludes that the economy will grow significantly between now and 2050. According to the report, "the real GDP in the United States will grow at an average annual rate of about 2.4 percent between now and 2050 and will be roughly two and a half times as large in 2050 as it is today." Given that, if we consider that a 1 - 3.5% difference in 2050 is the equivalent of a difference in the growth rate of only 0.025 - 0.09% per year, the impact would be almost imperceptible.
2. This estimate leaves out savings through innovations that are very likely over the next 40 years. In the last 40 years, we invented personal computers, the Internet, iPhones, hybrid cars, and many other innovations that are faster, cheaper and more efficient than what we had 40 years ago. Today's refrigerators are on average 3-5 times more efficient than 40 years ago and cost 60% less. We can't even know what new innovations we will come up with in the next 40 years that will help strengthen our economy. None of the economic models account for innovation, because it is unknown. But it's hard to believe it won't happen in markets as creative, entrepreneurial and innovative as ours.
3. While the CBO analysis looks at the impact of legislation, it doesn't look at the cost of doing nothing. For instance, what would be the impacts of more hurricanes, more droughts and global population movements? We all remember Hurricane Katrina and the tremendous cost of that disaster. A recent report from NYU found that the costs of climate change would far exceed the cost of reducing global warming pollution. And what about the national security impacts of doing nothing, such as having our troops overseas in places like the Middle East protecting our ongoing dependence on oil? That's why a bi-partisan group of 32 leaders in national security recently called for "a clear, comprehensive, realistic and broadly bipartisan plan" that will allow the U.S. to lead the development of a global strategy to combat climate change.

Of course, long-term economic modeling is somewhat guesswork (which explains why there's a range of 1 - 3.5%). As the Congressional Research Service says, long-term economic models are "at best speculative, and should be viewed with attentive skepticism."

Even with this uncertainty, the bottom-line is clear: For a modest and manageable cost, we can shift to a clean energy economy that makes our planet, our health and our national security stronger than it is today.