Ten years ago this summer, President Clinton’s Council of Economic Advisers, of which I was a Member, responded to requests from the Congress, which was then under Republican control, to explain in analytical terms what would be the economic effects of the Kyoto Protocol on climate change that had just been negotiated among the members of the UN Framework Convention on Climate Change. Our response was a document called the Administration Economic Analysis. It relied on some of the leading Integrated Assessment Models, and showed that the costs of Kyoto could be relatively low provided international trading of emission permits were freely allowed, and provided developing countries participated in the system. Not zero costs, as wishful thinking by some techno-optimists would have it. Not prohibitive costs, as some skeptics would have it. But moderate costs — relatively low if measures could be implemented sensibly.
Integrated Assessment Models are designed to assess both the economic costs and the environmental benefits of action to reduce emissions of greenhouse gases. For 15 years, the Energy Modeling Forum (EMF), under the leadership of John Weyant at Stanford University, has periodically brought together the modelers to compare results and exchange ideas. It was gratifying when we discovered that the economic model we had used to estimate costs was near the middle of the pack of ten leading academic models according to the EMF, in terms of the estimated impact on energy costs for example, contrary to suspicions that we must have low-balled the estimates.
Exactly ten years ago, in August 1998, I attended the Energy Modeling Forum’s annual workshop in Snowmass, Colorado, Climate Change Impacts and Integrated Assessment. My assignment then was to explain the Administration Economic Analysis to this group. Unlike most American economists, I believe that something along the lines of the Clinton-Gore version of Kyoto offers the most promising path to address the problem of Global Climate Change.