President Obama’s proposed rule for limiting CO2 emissions from the nation’s power plants is estimated to have a compliance cost of US$ 7.3 billion, while providing a climate benefit of US$ 30 billion in 2030.
However, the Brookings Institute has highlighted that a new working paper from Ted Gayer and Kip Viscusi suggests that the US Environmental Protection Agency’s (EPA’s) methodology for calculating the benefit represents a shift away from typical practice. Traditional cost-benefit analysis would estimate climate benefits of US$ 2 billion to US$ 7 billion, significantly less than the estimated compliance cost of the rule.
Gayer and Viscusi wrote that he assessments used to determine the benefits for Obama’s rule has shifted to a global benefits approach, rather than solely considering benefits to US citizens. Instead, the analysis considers the benefits for other countries while Americans bear the full cost.
“[I]f applied broadly to all policies, [this practice] would substantially shift the allocation of societal resources”, commented the authors. For example, a global perspective would likely shift immigration policy to one of entirely open borders, would shift away from transfers to low income US citizens and towards transfers to much lower income non-US citizens, and would substantially alter US defense policy.
Adapted from a press release by Emma McAleavey.