Even if You Buy the Science, the Policy Still Fails

In a recent speech to the Washington-based think tank Resources for the Future, EPA Administrator Gina McCarthy promoted the White House’s new Clean Power Plan by: (a) appealing to science and disallowing any debate about it; (b) making statements unsupported by the science; (c) praising the economic analysis behind the plan; and (d) announcing rules that economic analysis says won’t work and will cost too much.

In other words, it was business as usual in the world of climate policy.

She started her speech by saying that scientists are as sure that humans cause climate change as they are that smoking causes cancer, and “we are way past any further discussion or debate….don’t debate about climate change any longer because it is our moral responsibility to act.”

From there she focused on the harms from extreme weather events, attributing the California drought to carbon dioxide emissions, as well as increased storms, wildfires and floods. She said anthropogenic climate change (i.e. global warming) leads to more extreme heat and, amazingly enough, more extreme cold. And she linked weather-related economic threats facing families and small businesses to anthropogenic climate change.

Now whatever you do, don’t question the science. For many years we have been told to rely exclusively on the UN Intergovernmental Panel on Climate Change (IPCC) for official truth on all climate topics. There are, of course, lots of reasons to mistrust the IPCC, including its past blunders, the conduct of its disgraced and discredited chair Rajendra Pachauri, and its clique-like report-writing process. But for now, let’s play the game and turn to the IPCC.

A growing body of economic analysis over the years has indicated that the models overstate the potential savings from energy efficiency programs.

In 2012 the IPCC published a Special Report on Extreme Weather (SREX), gathering up the available knowledge on storms, droughts, etc, and their possible connection to climate change generally and carbon dioxide emissions specifically.

Contrary to McCarthy’s claim, the SREX singled out the U.S. as a region where “droughts have become less frequent, less intense or shorter.” Worldwide there is only “limited to medium” regional evidence regarding changes in floods because the records are sparse and the effects are confounded with changes in land use and engineering. “Furthermore,” they said, “there is low agreement in this evidence, and thus overall low confidence at the global scale regarding even the sign of these changes.”

Does this sound like the level of confidence associated with the link between smoking and cancer?

Overall the IPCC’s attribution of a causal link between extreme weather and carbon dioxide emissions was the limpest possible: “There is evidence that some extremes have changed as a result of anthropogenic influences, including increases in atmospheric concentrations of greenhouse gases.” But, they went on, there is only low confidence in attribution of tropical cyclone activity to anthropogenic influences, and “Attribution of single extreme events to anthropogenic climate change is challenging” — UN speak for “we’d go further if we could but even we can’t torque the evidence that far.”

They also made it clear that economic vulnerability to weather is a function of a nation’s wealth, adding “Increasing exposure of people and economic assets has been the major cause of long-term increases in economic losses from weather- and climate-related disasters (high confidence). Long-term trends in economic disaster losses adjusted for wealth and population increases have not been attributed to climate change, but a role for climate change has not been excluded.”

Do doctors say “trends in lung cancer have not been attributed to cigarette smoking, but a role for tobacco has not been excluded”? Of course not. McCarthy’s invocation of scientific certainty and prohibition on further debate was mere demagoguery.

After boasting about the extensive research and consultation that went into the rule, McCarthy then said that it will reduce household utility costs, a prediction based on engineering studies behind the energy efficiency rules in the Clean Power Plan. But do these programs really save households money?

A growing body of economic analysis over the years has indicated that the models overstate the potential savings from energy efficiency programs. New evidence from a large-scale randomized field experiment has confirmed this. Conducted by a team of economists from Berkeley and MIT, the study tracked more than 30,000 households in the federal Weatherization Assistance Program. Participants in the program went through household energy audits using a government-approved engineering model to estimate the savings from undertaking a fully subsidized efficiency upgrade.

By comparing before- and after-data, and comparing against households that did not undergo weatherization, the authors showed that the engineering models were way off, exaggerating the energy savings 2.5-fold, with the result that the renovations cost twice the value of the subsequent energy savings. Even taking account of social and environmental benefits the rate of return on the program was about -9.5 percent annually, in other words the costs greatly exceeded the benefits.

The authors also found that the implicit cost of carbon dioxide emission reductions in the program were about $330 per tonne, roughly ten times the administration’s own estimate of the Social Cost of Carbon. In other words, taking the administration’s science and economics at face value, a major component of their climate plan costs $330 per tonne for emission cuts they themselves value at $38 per tonne.

McCarthy told her audience not to question her science and to respect the research behind their climate policy. If you doubt her analysis, you will definitely find the policy plan misguided. The problem is that, even if you accept her science and economics, it’s still misguided.

Ross McKitrick is professor of Economics at the University of Guelph and an adjunct scholar at the Cato Institute.