A U.S. Perspective on the Economic Impact of Climate Change Policy

The Kyoto Protocol to the United Nations Framework Convention on Climate Change, which the United States negotiated in December, 1997, calls for industrial economies such as the United States, Canada, Europe, and Japan (termed Annex B countries) to reduce their collective emissions of six greenhouse gases by an average of 5.2 percent from 1990 levels by 2008–2012. The U.S. target is a 7 percent reduction from 1990 levels (or 1,251 million metric tons); this amounts to a projected 536 million metric ton cutback in carbon emissions relative to the projected amount in 2010, growing to a 728 million metric ton cutback by 2020 (see Figure 1). In 1999, U.S. emissions were 1,527 million metric tons, or 22 percent above the Kyoto target. By 2010, the U.S. Department of Energy’s Energy Information Administration (EIA) projects emissions will be 43 percent above the target, and gap grows to 58 percent by 2020. (In 2010, carbon emissions from the transportation and utility sectors alone are projected to be 1,300 million metric tons, see Figure 1). Additional substantial cuts in emissions, up to 70 percent or 10 times the Kyoto targets, are planned by Kyoto Protocol supporters.

The emissions cap will, in effect, ration the use of energy in the United States and will require very large taxes, either directly or indirectly through the purchase of “permits,” to restrain the demand for energy. Research conducted over the past decade for the ACCF Center for Policy Research by top climate policy scholars concludes that the cost of reducing carbon emissions in the near term would impose a heavy burden on U.S. households, industry, and agriculture by reducing economic growth.

This Special Report is based on ACCF’s testimony submitted to the Senate Committee on Energy and Natural Resources on March 30, 2000, as well as studies sponsored by the ACCF Center for Policy Research. Summaries of the studies are available at www.accf.org.

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