"U.S. Chamber of Commerce’s Energy Institute Misleads on Climate Action Costs"

It seems that many economists don't think the Paris climate agreement would cost that much but the President, 22 Senators and much of the Republican Party think that it will. The latter group are using a NERA study funded by the usual suspects to suggest that the costs are huge (2.7 million to 6 million in job losses have been quoted by various politicians). Here is the World Resources Institute on three things that are wrong with the NERA study:

A wide body of research shows that well-designed policies achieve reductions in greenhouse gas emissions at reasonable costs. A recent article from the U.S. Chamber of Commerce’s Institute for 21st Century Energy (“Chamber Energy Institute”) uses a NERA Economic Consulting study as evidence that meeting U.S. climate change commitments under the Paris Agreement will cause economic hardship, particularly in the manufacturing sector. High-profile opponents of climate action— such as U.S. Sen John Barrasso — are using the results of this study to attempt to make a case for withdrawing the United States from the global climate accord.

As part of our ongoing effort to promote credible and independent economic modeling, WRI reviewed the Chamber Energy Institute’s article and the associated NERA study. We found that the Chamber’s conclusions are based on a decarbonization pathway that is unrealistic and unnecessarily costly. Rather than providing support for the Chamber Energy Institute’s claim, the NERA study in fact provides further evidence that a market-driven approach can enable the United States to achieve its emissions-reduction targets at a relatively low cost.

Here are three things you need to know:

1. The Chamber Energy Institute’s claims are based on a highly unrealistic and unnecessarily expensive pathway to achieving the U.S. 2025 target. ...
2. The full NERA study shows that the United States can achieve its 2025 targets at a relatively low cost. ...
3. The NERA study assumes that innovation in clean energy slows considerably, which makes climate action appear artificially costly, particularly for 2040 results. ...

Number 1 says that the NERA cost estimates are based on a policy where all of the regulations are in the industrial sector, instead of the lower cost electricity and transportation sectors. Number 2 says that the politicians are cherry picking the worst case scenarios. NERA finds that a carbon tax would trim economic growth from 2.5% to 2.44% (similar to an RFF study). NERA uses the most pessimistic Department of Energy assumption about technological progress in clean energy.