Monday, November 2, 2009

Measuring the Costs and Benefits of Climate Legislation

For those who have not yet seen it, the Institute for Policy Integrity (IPI) at NYU Law School has published (here) a concise and easily understood benefit-cost analysis of proposed climate policy legislation in the US. Utilizing conservative estimates and parameter values (e.g., a 5% discount rate), the study finds that the global benefits of US climate legislation would exceed the domestic costs by a factor of at least 9-to-1. The fact that the costs are domestic while the benefits are global simply confirms Tom Schelling's observation that, for the United States, measures designed to avert global climate change are mostly in the nature of foreign aid because the risk to material welfare in the US from moderate climate change is relatively low. Still, it would be useful to have a direct comparison of domestic costs to domestic benefits. [For the sake of full disclosure, I serve on the Board of Advisors of the IPI.]

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