RFF Calculator Compares Carbon Pricing Bills

By Jerry Hinkle

Resources for the Future (RFF), a leading environmental economics think tank, just released a calculator that assesses the environmental and economic impacts of the carbon pricing legislation now before Congress, including the Energy Innovation Act. The calculator compares the carbon price, emission reductions, gross domestic product (GDP) and distribution of Impacts by income quintile of seven different bills, as well as a “business as usual” (BAU) scenario.
(Please Note: the distribution of impacts analysis will be changing in the near-term so should not be considered final.)

The calculator is based on a model built by Larry Goulder (Stanford) and Marc Hafstead (RFF). The GH-E3 model is a top-of-the-line peer-reviewed model, and its general methods and results are well described in “Confronting the Climate Challenge: U.S. Policy Options.” CCL is fortunate to feature one of the authors, Marc Hafstead, for a live CCU training on Oct. 17 at 5 p.m. PT / 8 p.m. ET (click here for more details). Marc will join me to discuss the model and its results, and take questions.

Two words of caution are in order when viewing such model estimates. First, these analyses require significant assumptions, and there is much uncertainty in the results. They should be “taken with a grain of salt.” Second, the model will show an economic cost for all the bills as GDP grows just slightly less with the policy than under the BAU scenario. But as described in this recent blog post, economists are clear these policies that charge for carbon pollution are good for the economy and society as the policy benefits far outweigh the costs.

Jerry Hinkle is a Research Coordinator with CCL and a member of CCL's Economics Policy Network Action Team, which offers many economic articles helpful for climate advocates.