Climate Change Stresses US-Economy until 2050
Congressional Budget Office | September 2009
On June 26th, the US House of Representatives passed the American Clean Energy and Security Act of 2009 (ACES Act). It provides for a 85% reduction in green house gas emissions by 2050. The costs entailed would lead to a greater decline in gross domestic product (GDP) than otherwise anticipated, up to 3.4% by that date. Accounting for inflation and disregarding the effects of the ACES Act, the Congressional Budget Office assumes that GDP (2008: 14.2 trillion) will more than double by 2050. Expenses for climate legislation in the range of 3.4 % of GDP would hence equal over a trillion dollars.
The climate legislation would affect employment as well. New environmental technologies would necessitate a retraining of personnel in order to meet the requirements of the labor market in a timely fashion. A lessening demand for carbon-based fuels and an increasing one for renewable energies would require employees to move across industries and to explore new career opportunities. The caps-and-trade provision of the ACES Act would lead to a gradual increase in energy prices, which would result in a loss of purchasing power for middle class households. Income from the caps-and-trade program should hence be used to offset these losses.
The US economy and American politicians face the challenge of safe-guarding economic growth and US competitiveness in world markets, without losing sight of the environment. The policies required to attain this necessitate inventions that take into account economic concerns. Market-based models, such as the caps-and-trade program, have to be complemented by traditional regulatory approaches. Environmental policies need to establish clear rules and elicit the long-term cooperation of all nations in the pursuit of international goals, such as the reduction of greenhouse gas emissions.
This summary was prepared by the Atlantic Community editorial team from "The Economic Effects of Legislation to Reduce Greenhouse-Gas Emissions" published here by Congressional Budget Office.
