Global Climate Coalition
1331 Pennsylvania Ave. NW
Suite 1500 - North Tower
Washington, DC 20004-1703
Tel: 202.637.3158
Fax: 202.638.1043
Alt. Fax: 202.638.1032

ECONOMIC AND LIFESTYLE IMPACTS
FROM PROPOSED GREENHOUSE GAS EMISSION RESTRICTIONS
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The Views of the Global Climate Coalition

US.living standards and lifestyles would be seriously damaged by many of the
greenhouse gas abatement proposals currently under consideration, especially those that
would stabilize or reduce carbon emissions by taxingfossil fuels.
Studies have been conducted on the effects of carbon taxation by a number of experts in
the field, including Dr. Lawrence Honvitz of DRIMcGraw-Hill, Dr. Alan Manne of Stanford
University, and by the Energy Modeling Forum. All agree that energy taxation would
appreciably shrink our economy. While carbon taxes might not be the policy chosen to reduce
energy use, economists generally view carbon taxes as a "least-cost" estimate of the impact of
other policies that might be used to reduce energy use.
Dr. Horwitz's study determined that about 40 percent of the cost increases brought by a
carbon tax imposed to reduce carbon emissions to 1990 levels by 20 10 would fall directly on
households. This action would increase expenditures on energy use -- electricity for heating,
cooling, lighting and running appliances. Carbon taxes would also drive up individual
transportation costs.
This might seem like a fair price if it would stop a dangerous "global warming" as some
special interests have claimed. But when the Intergovernmental Panel on Climate Change
(IPCC), an international panel of climate experts assembled by the United Nations, issued a
recent peer-reviewed report on what they actually know about future climate change, the results
were enlightening.
"Future population and economic growth are uncertain, future
greenhouse gas emissions given population and economic activity are
uncertain, future greenhouse gas concentrations given emissions are
uncertain, future climate given atmospheric concentrations of greenhouse
gases are uncertain, future physical impacts of climate change are
uncertain, and the future valuation of the physical impacts attributable to

 Economic and Lifestyle Impacts

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GCC Briefing Paper

climate change are uncertain." (WGIII, FSM, chapter 10, section
"Elements of an Integrated Assessment Model")

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industry in the form of higher prices for goods and services, which would then be passed along to
the general consumer. Real consumer spending would fall about 2 percent, or $452 per adult.
Dr. Horwitz predicts that 89 percent of consumption categories would be negatively affected by
the carbon tax.
In response to higher consumer prices and lower demand brought by the tax regime, real
business fixed investment would plummet $56 billion annually by 2010, according to Honvitz.
With a general slowdown in business, the employment rate would fall precipitously. Between
1995 and 201 0, some 520,000 jobs would be lost annually.
Additionally, real disposable income levels would decline. By 2010 that decline would
be in the range of $75 billion in 1992 dollars, or almost $400 less income for every American
aged 16 to 65. The residual effects of carbon-based taxation would be significant, including a
general trend toward smaller homes and a sharp decline in home buyers as the cost of owning
and operating a home rises while real disposable income falls.
The damage done to the nation's Gross Domestic Product would be significant. The
Energy Modeling Forum found a decline of about 2 percent in GDP assuming a 20 percent
emissions reduction by 2010. The results of Horwitz's study were even more alarming,
projecting a reduction of 2.3 percent or $203 billion dollars by 2010. This is about $862 for
every adult in the U.S.
The IPCC, quoted above, offers additional insight into claims that U.S. taxpayers must be
immediately forced into a new regime of energy taxation.

"AS a policy question, global climate is sometimes posed as a choice
between doing nothing at all, and committing to an all out effort. Given
the large current uncertainties about costs and benefits of greenhouse
mitigation, this is the wrong way to frame the issue. A more useful
forniulation is: 'Given current knowledge and concerns, what actions
should we take over the next one or two decades to position ourselves to
act on new information that will become available.' " (WGIII, FSM,
section 1.3.2)

 Economic and Lifestyle Impacts
GCC Briefing Paper

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Studies of the costs and benefits of emissions reduction policies demonstrate that a
more gradual, long-term approach is advisable. In the place of carbon taxation,for example,
energy saving is still possible within our economy. This and other alternatives should be
-exp&amwgMyA@rmM+oauM&ing-i6dmy
unwarranted change to our living standards and lvestyles.
'

The Global Climate Coalition is an organization of business trade associations and private companies established in
1989 to coordinate business participation in the scientific and policy debate on global climate change.

WGI, WGII, WGIII = IPCC Working Groups One, Two and Three.
FSM = Full Supporting Material, the peer reviewed portion of IPCC's work.
124820: 12/09/96]

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