November 12, 2012

Addressing Climate Change: Cost Benefit Analysis

Recent reports suggest that the economic cost of Hurricane Sandy could reach $50 billion and that in the current quarter, the hurricane could remove as much as half a percentage point from the nation's economic growth. 

Economists of diverse viewpoints agree that the economic benefits of reducing greenhouse gas emissions would greatly outweigh the costs. 

A good model is provided by rules from the Department of Transportation and the Environmental Protection Agency, widely supported by the automobile industry, which will increase the fuel economy of cars to more than 54 miles per gallon by 2025.
The fuel economy rules will eventually save consumers more than $1.7 trillion, cut United States oil consumption by 12 billion barrels and reduce greenhouse gas emissions by six billion metric tons — more than the total amount of carbon dioxide emitted by the United States in 2010. The monetary benefits of these rules exceed the monetary costs by billions of dollars annually.
In a similar vein, recent rules from the Department of Energy are requiring greater energy efficiency from appliances like refrigerators, washing machines and small motors. For these rules as well, the monetary benefits dwarf the costs, and they include large savings to consumers as well as pollution reductions.

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