By the Numbers: The economic benefits of a national climate action plan
President Obama’s newly announced National Climate Action Plan will make serious progress on reducing pollution and curbing climate change. But importantly, the United States can also save billions of dollars each year by fully implementing all aspects of the plan.
We’re Already Experiencing the Costs of Climate Inaction
Last year alone, federal spending related to the impacts of extreme weather events amounted to more than $1,100 per taxpayer. After decades of warming, extreme weather and climate events such as floods, droughts, and wildfires are increasing in frequency and intensity, resulting in major costs to families, communities, and businesses. Some of these costs include:
- At least $1 billion: The amount of damages caused by each of the 25 extreme weather events the United States experienced in 2011 and 2012. Their collective damages add up to about $188 billion
- $80 billion: Losses in New York and New Jersey caused by Hurricane Sandy, according to state officials
- $426 million: Value of damages to Oklahoma’s crops, livestock, municipalities, and property as a result of drought-induced wildfires. At the end of August 2012, nearly 63 percent of the contiguous United States was experiencing drought conditions
- According to the Federal Emergency Management Agency, every $1 invested in community resilience reduces extreme weather damage by $4.
While no single step can reverse climate change, the National Climate Action Plan will make a serious dent in the country’s greenhouse gas emissions—and the costs that come with them.
Economic Benefits of Reducing GHG Emissions Outweigh the Costs
The National Climate Action Plan recommits the United States to meet its target of reducing GHG emissions by 17 percent below 2005 levels by 2020. The President echoed WRI’s research on the top four areas to achieve significant emissions reductions: power plants, energy efficiency, hydrofluorocarbons (HFCs), and methane. Taking action in these areas will yield far greater economic benefits than costs. Take a look at some of the savings that can be achieved:
- $25 billion-$60 billion: Annual savings if existing power plants reduce their carbon dioxide emissions 26 percent below 2005 levels by 2020.
Last year, NRDC put forward a proposal for reducing existing power plants’ carbon dioxide emissions 26 percent by 2020. This approach would cost approximately $4 billion a year by 2020, but would provide $25-$60 billion per year from saving lives and reducing the risk of climate change. The president’s Climate Action Plan calls for emissions standards for both new and existing power plants.
- $26 billion: The amount of money consumers could save annually by 2025 through 34 new or updated energy efficiency standards.
Boosting the energy efficiency of appliances and buildings represents one of the most cost-effective ways to reduce emissions. A recent study by the American Council for an Energy Efficient Economy (ACEEE) and the Appliance Standards Awareness Project (ASAP) finds that there are a total of six energy efficiency standards awaiting approval. Each additional month of delay on these costs consumers $200 million in lost savings and pumps an additional 3 million metric tons of CO2 into the atmosphere. President Obama plans to take advantage of this opportunity and set several new standards that will not only reduce carbon dioxide pollution, but also cut energy bills for families and businesses.
Primarily used in refrigerators and air-conditioning units, hydrofluorocarbons (HFCs) are potent greenhouse gases and are becoming a significant component of total U.S. GHG emissions. Acting now to shift to less-damaging alternatives will prevent these gases from becoming a major part of the emission picture. The President plans to reduce these emissions here in the United States through the EPA’s Significant New Alternatives Policy Program, as well as internationally through the Montreal Protocol. Both chemical and consumer product manufacturers support a planned global phasedown of HFC production and consumption, and many companies have already started using alternatives with lower global warming potentials. For example, Coca-Cola expects that all of their new vending machines will be HFC-free by 2015.
- $2 billion: Amount that the U.S. energy industry would save annually if natural gas producers reduce methane leakage through the use of existing technologies. These technologies can pay for themselves in fewer than three years.
The president recognizes the importance of curbing emissions of methane, a potent greenhouse gas. His plan calls for development of an inter-agency methane strategy that improves data on methane emissions and identifies opportunities to reduce those emissions.
Opposition Often Exaggerates the Costs of EPA Regulation
Historically, opponents have expressed concern that EPA regulations on the four areas outlined above will result in extreme economic hardship. But that just isn’t true. There is extensive literature showing that the costs of environmental regulations are more than offset by a broad range of economic, public health, and jobs-related benefits. For example, since 1970, every $1 investment in compliance with Clean Air Act standards has produced $4-8 in economic benefits.
In fact, initial projections of costs from EPA regulations are often overstated. Economists and researchers who have compared actual costs with initial projections report that regulations generally end up costing far less than the grim predictions from opponents and even below the costs projected by EPA.
Clear Environmental Standards Can Help Spur Industry Investment
Environmental standards can actually boost industry investment and development. Clean Air Act regulations are developed in close consultation with industry, state regulators, and other affected stakeholders. In fact, the GHG emissions standards put forward by EPA for light-duty vehicles last year received broad support from auto manufacturers, labor unions, and environmental organizations. For example, during a public hearing in early 2012, Sue Cischke, a Vice President of Ford Motor Corporation, said that the current regulatory framework enables manufacturers to confidently plan and invest in the future, and that the proposed standards “are aggressive, but so are the demands from our consumers for greater fuel efficiency.” Additionally, in April 2013 some of the world’s largest businesses called on America’s political leaders to urgently accelerate efforts to build a greener economy, arguing that “tackling climate change is one of America’s greatest economic opportunities of the 21st century.”
We Cannot Afford to Wait in Taking Strong Action on Climate Change
As climate change’s impacts continue to be felt both globally and in the United States, so do the economic costs associated with them. Under President Obama’s leadership, the United States now has a comprehensive plan to start addressing climate change through mitigation, adaptation, and international efforts. This action will require work—and even money—but taking bold action now has far greater public health, environmental, and economic benefits than costs. Implementing the president’s plan can put the United States on a path towards a sustainable future for our families, communities, and businesses.
- LEARN MORE: Read our recent blog post, “First Take: Looking at President Obama’s Climate Action Plan”