The right says action on climate change will wreck the economy. The left says the clean-energy revolution will be an economic boon. Both sides are overplaying their hands. Most policies Washington considers to cut carbon emissions will have a relatively small impact on the broader economy, studies not pushed by one side or another have shown.
Why it matters: The economic arguments for and against action on climate change are what carry the most weight with Americans hyper-focused on their jobs. It's politically convenient to push misleading numbers that align with a desired policy outcome, but it's not accurate, and the narratives further polarize this divisive debate.
On the right, a recent example of using misleading numbers comes from President Trump himself. When he announced he was withdrawing from the Paris climate accord, Trump cited part of a study by NERA Economic Consulting that was backed by the U.S. Chamber of Commerce and conservative think tank American Council for Capital Formation. It concluded that then-President Obama's pledge to the climate deal would cost as many as 6.5 million industrial jobs and almost $3 trillion economic gains by 2040.
The part of the study the two interest groups and Trump highlighted forecast deep emissions reductions on the industrial sector, instead of first focusing on the electric power industry, which is the more likely source of initial emissions cuts. The study also avoids altogether projected benefits of cutting emissions and assumes little to no innovation in new technologies.
On the left, studies focus on the positives as much as possible, downplay the negatives and often assume an overly rapid buildout of technologies not yet feasible. We saw this most starkly in the recent debate over a 2015 study led by Stanford University professor Mark Jacobson where he laid out a path to run the entire U.S. economy on renewable energy by 2050, while creating a net two million jobs.
In a rebuttal paper issued in June, another team of academic researchers argued Jacobson's work "made implausible and inadequately supported assumptions."
Both the Stanford and NERA studies are technically right because economic models can show almost any outcome if you put the relevant assumptions into the equations. But they're contextually wrong, and yet are getting most of the media attention (ahem, like in this column), in part because they're driving ideological agendas.
In the murky middle, Resources for the Future has done studies analyzing the economic impacts of different climate policies, with results that are not quite as rosy as what some left-leaning experts have posited but also not so dire like what conservative interest groups and Trump have claimed.
"While there is a substantial shift in employment between industries, the net effect on unemployment is small, even in the short run," said one 2016 study analyzing the impacts of carbon taxes ranging from $20 to $40 a ton.
Another study the group did last November imposed a roughly $22 tax on carbon emissions. That would get the U.S. to its goal Obama laid out for the Paris climate deal: 26% to 28% reduction by 2025 based upon 2005 emissions levels. It would reduce the nation's GDP by 0.03% per year on average from 2017 to 2025, compared to a yearly GDP growth rate of 2%.
Over the longer term, the debate about costs and benefits diverges even more, fueled by deep uncertainty about technology, economic growth and whether other countries will similarly act to cut emissions.
Oren Cass, a senior fellow at the conservative think tank Manhattan Institute, agrees that policies on the table now, including Obama's, don't have a big impact on the economy. But Cass, former policy director for the GOP's 2012 presidential nominee Mitt Romney, argues those policies also don't have a sizable impact on reducing carbon emissions to the level scientists say we should over the next 50 to 100 years.
Most economists don't even project past 2040 because of the uncertainty about technology development and related issues that make up the core assumptions in any modeling.
Bottom line: If everyone sticks to these entrenched positions, it is certain that inaction will make both tackling and responding to climate change more expensive down the line.