Chamber Inflates Costs, Ignores Benefits of Climate Action

Credit: U.S. Department of Energy, Better Plants Progress Update, Fall 2016

The Paris Climate Agreement, which entered into force in November, represents a historic step toward preventing catastrophic climate change, with 195 countries signing on and pledging to reduce their greenhouse gas emissions. Now, some of our country’s biggest polluters are out with a new report with inflated and misleading claims about the costs of achieving the United States targets.

As part of the Paris Agreement, the U.S. committed to achieve a 26 to 28% reduction in greenhouse gas (GHG) emissions below 2005 levels by 2025, and to reach at least an 80% reduction in total U.S. GHG emissions by 2050.

These goals are ambitious but achievable. Moreover, study after study has shown that the economic damages of climate change will be severe, and that the costs of inaction far outweigh the costs of curbing the carbon pollution that’s driving those damages.

Since the election, more than 1000 U.S.-based businesses and investors, accounting for $1.2 trillion in annual revenue, have signed a statement to President-elect Trump expressing their support for the Paris Agreement. They have stated that “failure to build a low-carbon economy puts American prosperity at risk.”  

Nevertheless, the U.S. Chamber of Commerce and the American Council for Capital Formation (ACCF), unabashed apologists for America’s biggest climate polluters, are out with a new report attacking the Paris Agreement, with exaggerated and deceptive claims about the costs and benefits of achieving our climate goals. Let’s take a look at some of the ways they cooked the books:

The study inflates costs by creating an unrealistic strawman

The headline numbers from the Chamber’s study are derived from a fictional scenario that does not reflect any current proposals or realistic plans to achieve our climate goals.

By design, the Chamber study intentionally imposes the most stringent greenhouse gas regulations on the sectors that would face the highest costs per ton of GHG reduction.

This scenario greatly exaggerates the likely costs of any future program to achieve the economy-wide reductions set forth in the Paris Agreement, because any real program to meet those goals would be designed with cost-saving flexibility the Chamber deliberately left out.

The public-facing summary also neglects to mention that the report actually analyzed a wide range of scenarios, including one that allowed for a market-based, economy-wide approach. In that scenario, the report finds that the Paris goals can actually be achieved at much lower costs than the headline numbers suggest.

Although even that scenario still inflates costs (as we’ll discuss below), the study did find that a more flexible approach results in 70% lower cumulative costs than in the core scenario presented.  In fact, the report itself concludes that “in every case, scenarios that allow more flexibility achieve the same or greater reductions at lower cost.”

One might recall that back in 2009, when Congress was considering a proposal with the type of flexibility they now admire, the Chamber and ACCF vehemently opposed the economy-wide program and launched grossly misleading attacks. Funded by some of the country’s biggest polluters, it seems what they’re really opposed to is any effort at all to reduce pollution. 

Although the study contained scenarios with some flexibility, it conveniently neglected to analyze the most flexible and efficient way of achieving the reductions, which would be an economy-wide limit on carbon pollution with full allowance trading (or an equivalent carbon price). Such a program could be coupled with sector-specific policies aimed at overcoming market barriers while providing flexibility to achieve emissions reductions at the lowest overall cost to the economy. Even the report’s flexible scenario imposes unnecessary (and nontransparent) constraints, which hampers the ability of the U.S. economy to take full advantage of the most cost-effective decarbonization strategies—such as by electrifying vehicles.  

The analysis ignores the enormous potential of energy efficiency, both in the industrial sector and across the economy

The Chamber study overlooks the potential to make much deeper and cheaper emission reductions through energy efficiency.

Under the Department of Energy’s Better Buildings, Better Plants Program, participants have achieved between 2 and 4 percent annual energy intensity gains over four years, leading to overall cost savings and cutting emissions.

The Better Plants participants, depicted in the figure below, consist of 179 companies, with a combined 2,500 facilities across all 50 states, and represents about 11 percent of the total energy footprint from U.S. manufacturing. Between 2009 and 2015, the program has helped stakeholders achieve energy cost savings of over $3 billion, with the average participant cutting their energy intensity by 3% a year.

In a more aggressive program, called the Superior Energy Performance program, industry participants have improved their energy performance by up to 30 percent over a three year period, with a payback period of less than 1.5 years.  

These highly successful programs can and should be expanded to include more participants, leading to even greater energy savings and emissions reductions at little to no cost.

And making industry more efficient can help keep manufacturing jobs in the U.S. and keep American industry competitive in the global market. The Chamber/ACCF report ignores the significant potential for cost-effective energy efficiency throughout the industrial sector, and by doing so greatly exaggerates the costs of achieving emissions reductions for both the industrial sector and the entire U.S. economy.

In the power sector, energy efficiency remains the lowest cost resource—it is cheaper to save electricity than it is to produce it. States and power companies should double down on their energy efficiency programs, which can save customers money, create jobs and stimulate economic growth, and accelerate our transition to a low carbon economy.

Smart investments in modernizing our electricity infrastructure and improving the overall efficiency of our transmission and distribution system would enhance our ability to shift to renewable, zero-carbon technologies and would also likely drive additional job creation.

Development of clean energy technologies will continue to accelerate

The costs of generating electricity from wind and solar has fallen by 66 percent and 85 percent since 2009, respectively, and costs continue to fall so rapidly that it is hard for analysts to keep up.

The Chamber report relies on EIA’s Annual Energy Outlook (AEO 2016) for its baseline. Between the release of the AEO 2016 and AEO 2017, EIA revised solar costs downwards by 8 percent.  Even with that improvement, EIA’s cost projections far exceed the costs actually seen on the ground today.

The costs of batteries for electric vehicles are undergoing a similar transformation. Bloomberg New Energy Finance projects that by 2018, battery pack prices will have fallen by a remarkable 77 percent from 2010 levels.

EIA updated its battery cost forecast in its 2017 outlook, and as a result its forecast for the electric vehicles nearly doubled compared to its forecast just a year prior, and is more than 10 times greater than its forecast in 2014.

The clean energy industry has proven its ability to rapidly innovate, driving down costs and increasing deployment at a scale no one thought possible even a decade ago. The Chamber report uses outdated cost estimates, imposes false constraints on clean energy and electric vehicle development, and fails to consider a scenario in which American clean energy businesses expand on their track record of innovation, cost reductions, job creation, and economic growth.

Achieving the Paris Goals Will Drive Significant Climate and Public Health Benefits

Climate change is already causing significant economic damage, and we cannot afford to delay action any longer.

The benefits, in terms of avoided climate damages, of U.S. action to achieve the goals of the Paris agreement will total around $40 billion in 2025. Additionally, cutting greenhouse gas emissions will lead to substantial public health benefits, both from reduced impacts from climate change and due to reductions in the pollutants that directly harm human health.

The Chamber report fails to mention any of these benefits. It goes so far as to claim that U.S. emissions cuts would be offset by emissions increases elsewhere in the world. This is a fallback to a long-held but false industry talking point. In reality, when the U.S. leads, other countries have joined us. 

And the whole premise of the Paris Agreement is that all countries commit to act together. All of our major trading partners have made commitments to reducing emissions, as shown below, and the Paris Agreement represents a major step forward in the global effort to combat climate change.  

Credit: The White House, United States Mid-Century Strategy for Deep Decarbonization (November 2016)

Addressing the Challenges of Climate Change Will Require Transformative Change

To be clear, cutting climate-changing emissions at the scale necessary to meet our long-term climate commitments will require transformative changes to our economy. It will not be easy, and as we make the transformation from a carbon-intensive economy to a low-carbon future, we can and must take steps to ensure that the clean energy economy works for everyone.

But contrary to what the Chamber and ACCF would have you believe, we already have all of the tools and technologies needed to accomplish our goals, and achieving deep emissions reductions is in no way incompatible with economic growth.

Last week’s report represents just another effort in the denial-and-delay playbook that we have seen for decades, and we cannot afford to be stalled by big polluters and their allies any longer. We need to take bold, ambitious actions immediately in order to avoid the worst impacts of climate change.