Halloween Economists On National Tour to Spook Climate Action

Once in a while, the study of economics creates a new branch of inquiry that leads to startling new insights -- for example, behavioral economics. It combines psychology and economics to investigate what happens in markets when some of the actors display human complications -- like making irrational choices.

There's another new branch of the dismal science now gaining popularity, but its future seems far less promising. It's called Halloween Economics and the point of it is to scare people into doing nothing about global climate change. (Talk about an irrational choice!)

The current prime example of this phenomenon is exemplified by a report called Analysis of The Lieberman-Warner Climate Security Act (S. 2191) released by the American Council on Capital Formation (ACCF) and the National Association of Manufacturers (NAM). It delivers a big loud BOO! by predicting that the Climate Security Act -- now pending before Congress -- would lead to economic nightmare.

Examine the evidence supporting the report's conclusions, however, and the masquerade is exposed, leaving behind just a nasty trick played woefully out of season. Unfortunately, -- unlike children -- Halloween Economists do not limit themselves to a single night of ghoulish, make-believe indulgence. They have just kicked off a national tour.

Is it any surprise that Exxon is a proud parent of this nuisance coming to a neighborhood near you? Or that Senator James Inhofe has said he would use their findings in preparation for a June floor debate on the Lieberman-Warner bill?

Last week in Manchester, New Hampshire, ACCF/NAM launched their report in person at a forum hosted by the US Chamber of Commerce. If you want to read an amusing, first-hand account of the event, Hill Heat has posted an exclusive.

Here's a highlight -- a real-life economist asks Margo Thorning of ACCF whether she will allow a look under the hood of her report:

Tufts economist Dr Julie Nelson asked Dr. Thorning whether the new ACCF-sponsored analysis would be any better than the CRA version, allowing peer review, disclosing assumptions, etc, like all the competing 25 climate-economy models which project only very modest impacts. Answer: an embarrassed no.

Probably because, once the truth came out, the report wouldn't be scary anymore. There's more evidence that ACCF/NAM is playing fast and loose with its numbers -- this gem supplied by A Siegel who read some revealing footnotes. While ACCF/NAM claim that the study was "independent" -- conducted by Science Applications International Corporation (SAIC) -- here's what SAIC felt compelled to include in the report:

The input assumptions, opinion and recommendations are those of ACCF and NAM, and do not necessarily represent the views of SAIC.

So let's review the box score so far: 1) Exxon money 2) no peer review allowed 3) the results disavowed by the very researchers hired to produce the report. Now let's turn to numerical forensics.

In the labs over at the Center for American Progress, here's a highlight from Dan Weiss' A Broken Crystal Ball: Global Warming Solution Studies Will Overestimate Costs, Underestimate Benefits:

This isn’t the first time that pollution control studies have produced inaccurate predictions about the future. Remember what analysts predicted about acid rain controls from 1989 to 1990?.....During the congressional debate over acid rain controls in 1990, the EPA estimated that each allowance to emit a ton of sulfur would cost $750 during the first phase of the program. The actual prices began at $250-$300 in 1992, and eventually fell to $70 in 1996—one tenth of the predicted cost.

But what does industry have to say, you might ask. They've weighed in, too, with similar sentiments. This story from the Miami Herald: Utility Execs: Global Warming Fix Not That Pricey.

In a simmering feud between major players in the power industry, eight utility executives, including Lew Hay of FPL Group, have politely but firmly told their own national trade association to fix exaggerations in a study intended to warn Congress about the expenses of global warming.

''In the revised analysis, we believe that it will be important to accurately estimate the costs associated with the Lieberman-Warner Climate Security Act,'' the executives wrote in a Tuesday letter to Thomas R. Kuhn, president of the Edison Electric Institute, which represents he nation's utilities in Washington.

These utility executives were lodging a complaint against the report that provided the basis of the ACCF/NAM report -- a now infamous study by Charles River Associates.

The institute's report, prepared by the consulting firm Charles River Associates, predicts huge expenses and dire consequences that will come with attempts to fix global warming through the Lieberman-Warner proposal, which is believed by many the most practical proposal before Congress....Eventually, the CRA study predicted, proposed legislation before Congress could lead to 80-percent increases in the price of residential electricity.

The flawed reports failed to include factors crucial to an honest analysis such as the impact of innovation, profitable CO2 reductions from efficiency improvements, the positive economic impact of green collar jobs and improved health of the population, and the benefits of protecting agricultural productivity, coastlines and weather-dependent industries.

The reports of the Halloween Economists also ignored the high costs of inaction. That's why ACCF/NAM projects these really scary results:

The NAM-ACCF findings say that .... the bill would shave between 0.8 percent and 1.1 percent off the gross domestic product in 2020 ($151 billion to $210 billion) and between 2.6 percent and 2.7 percent by 2030 ($630 billion to $669 billion).

Industry estimates also show between 1.2 million to 1.8 million job losses in 2020 and 3 million to 4 million job losses by 2030. The report also predicts carbon dioxide prices in a new U.S. cap-and-trade market would range between $54 to $64 per ton in 2020 and between $227 and $271 in 2030.

Even the EPA, under the direct control of the White House, didn't get that ridiculous. It issued its own analysis of the Lieberman-Warner bill quietly last Friday. One headline captured the thrust of the EPA report this way: Shhh! Bush administration quietly acknowledges climate plan is doable. So do Senators Lieberman and Warner, in their press release about the EPA analysis:

Under the Climate Security Act, US gross domestic product grows by 80% from 2010 to 2030. That is just one percentage point less than the growth in the absence of the bill.

Under the Climate Security Act, the price of an emission allowance is $22 in 2015 and $46 in 2030.

Under the Climate Security Act, increases in average US electricity prices materialize slowly and gradually. Even forty years after enactment, those prices reach a level only 18% higher than the 2005 level.

There's plenty more of the same in the full report. Kinda takes the fear out of climate action, doesn't it?

Nevertheless, look for the Halloween Economists of ACCF/NAM as they go on tour -- March 18 in Fargo, N.D.; March 19 in Billings, Mont.; and April 21 in Columbus, Ohio. You can see their masquerade for only $35 at the door.

Take some treats to give them, and be sure to play along when they say BOO!

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