Contact: Dr. Roy Cordato
October 17, 2007
RALEIGH – An outside consultant likely used “seriously flawed” methods to help craft state global warming policy proposals for North Carolina. That’s according to a new assessment from a Boston-based economic research group.
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The John Locke Foundation is highlighting the Beacon Hill Institute’s peer review assessment as N.C. policy makers begin to review proposed global warming policy ideas. “Unless the methodology used to construct their North Carolina report is significantly different from the work they have done in the past, the … report will contain little information that could guide policy makers to make efficient decisions,” according to the Beacon Hill assessment.
Beacon Hill Institute researchers specifically focused on the work of a Harrisburg, Pennsylvania-based group called the Center for Climate Strategies. CCS served as the consultant to North Carolina’s Climate Action Plan Advisory Group.
CAPAG released a list Tuesday of more than 50 policy proposals for North Carolina. All are billed as strategies for addressing global warming. Among those proposals are policies that would increase taxes, restrict land use, ration energy use, and raise energy costs.
“This peer review from the Beacon Hill Institute arrives at a critical time in North Carolina’s debate about global warming,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “If we can’t trust the work of the consultant that guided the entire process of studying climate change in North Carolina, we should doubt the merits of any recommendations from that consultant.”
“Unfortunately for North Carolina and other states using CCS estimates, the cost-benefit methodology is seriously flawed,” concludes the Beacon Hill Institute, the 16-year-old research arm of the Department of Economics at Boston’s Suffolk University. “First, CCS fails to quantify benefits in a way that can be meaningfully compared to costs. Second, when estimating economic impacts, CCS often misinterprets costs to be benefits. Third, the estimates of costs leave out important factors, causing CCS to understate the true costs of its recommendations.”
The Beacon Hill Institute did not review CCS work in North Carolina. Researchers instead based their findings on nearly identical CCS policy proposals developed for other states. CCS has completed greenhouse gas reduction plans in 10 states and is working on plans in 15 other states, according to the Beacon Hill report.
Publicly available data suggest policy recommendations for North Carolina mirror those CCS has proposed for other states, the Beacon Hill Institute report said. CAPAG issued 56 policy recommendations this week for North Carolina. Each recommendation came from a master list of more than 300 proposals from CCS. “In plans that CCS is involved with the typical state plan contains between 50 and 75 specific policy actions,” according to the Beacon Hill Institute report.
CCS also appears to have used the same methodology in North Carolina to estimate costs and benefits of its recommendations, the report said. The similarities suggest the flaws in CCS cost-benefit analysis work in other states also apply to North Carolina. For instance, “they never estimate the dollar value of the supposed benefits of their recommendations.”
Without a dollar value linked to greenhouse gas reduction, there’s no way to tell whether any policy that has a cost is desirable, according to the report. “For example, if a policy could reduce [greenhouse gas] emissions by five tons, but it would require giving up two tons of steel in lost production, would it be desirable?” the report asks. “CCS gives us no guidance because we cannot directly compare tons of [greenhouse gas] reduction to tons of steel, so we are left essentially comparing apples and oranges.”
The Beacon Hill Institute finds similar problems with misinterpretation of costs and benefits, along with understatement of the true costs of CCS recommendations. The report labels at least one CCS proposal as “astonishing.”
“CCS is claiming that by forcing individuals to comply with their recommendations, the individuals themselves will receive direct cost savings that make them better off,” the report said. “There are good reasons to be skeptical about this claim of a free lunch. If there are direct benefits (negative costs) to individuals from reducing activities that emit greenhouse gases we should expect their own self-interest to guide them to reduce emissions. … Most people would simply do what CCS recommends on their own.”
The CCS cost-benefit analysis does not hold up to the scrutiny of peer review, according to the Beacon Hill Institute report. “The Center for Climate Strategies fails to do one of the most basic calculations included in any responsible cost-benefit study: it does not quantify both benefits and costs in dollar terms so that they can be compared.”
For more information, please contact Dr. Roy Cordato at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].