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Carbon Cap Analysis Misses Big Picture

Carbon Cap Analysis Misses Big Picture

The Washington State House of Representatives has been debating Governor Jay Inslee’s proposed climate pollution act since it was introduced in January.  In support of a hearing in the Appropriations Committee, the Office of Financial Management (OFM) issued a report on “Economic Modeling of Greenhouse Gas Emission Reductions.”

The findings from the modeling process are pretty bland, suggesting “negligible impacts.”  What is more interesting is what the Office of Financial Management left out.

I have had beef with Washington State’s economic modeling for a long time.  The input-output models that “predict” income and job distribution have always seemed like a pseudo-science, with no one checking to see if the model was correct. Still my argument here is not how the modeling works, but what we choose to model and how we use that information.

Here are the factors against which OFM evaluated the proposed carbon pollution cap and fee, and re-investments in transportation, education, and low-income families:

  1. Gas prices
  2. Disposable personal income (aggregated)
  3. Employment
  4. Real Gross State Product (GSP – the state level cousin of GDP)

The model did not attempt to capture future benefits or indirect benefits, and more significantly “the economic models did not allow for consideration of the costs related to impacts of climate change (e.g., water supply, forest fires, shoreline and flooding damage and public health) that could be avoided over the long term.” So, in essence, the purpose of the report was to measure only the immediate, direct impacts on macro-economy of the state as determined by the above factors.

To which I ask, is this in any way a sensible undertaking?  Can we compare – or in this case fail to compare – something as abstract as Gross State Product to the existential threat of climate change?  Can we make sense of aggregate personal income (not income distribution which is critically important – but just the sum over everyone’s income) against the devastating impacts to our food system of a 2 to 6 C global temperature increase?

I believe the intention was good and probably lacked flexibility, but the results come out somewhat absurd. We count the short-term blips of energy prices, but not the avoided cost of moving to a whole new type of economy. Metrics can provide a valuable tool for effective policy-making, but only if the right information and fair comparison is considered.   It short, it’s time for new measures of prosperity!

Photo Credit:  GovInslee, Creative Commons

 

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