Yesterday I attended a hearing of the North Carolina Legislative Commission on
Global Climate Change where David Tuerck, Ph.D. economist and Executive
Director of the Beacon Hill Institute, presented a cost-benefit
analysis that Beacon Hill had done on the North Carolina Climate Action Plan Advisory Group’s
(CAPAG) recommendations.

Dr. Tuerck’s comments followed directly after a presentation by a
graduate student in public administration.  The student was
representing the ASU Energy Center that
performed its own analysis. Among the assumptions built into the Energy
Center’s model that he explicitly admitted to was an assumption of “no
supply-side restrictions.” Hence, the model assumes that there is an
infinite unused supply of labor and capital in North Carolina that is
waiting to be employed. (Of course, this is untrue. Any resources
shifted to one sector would necessarily be drawn from another, more
efficient sector of the economy.)

This assumption is vital to another
of the stated assumptions – that there would be a Keynesian multiplier
effect. Because these assumptions were made in the analysis, the Energy
Center was able to predict a boost in manufacturing due to climate
change policies and that overall employment in North Carolina would
increase as a result of these policies.
However, Beacon Hill’s analysis highlights these and other major
weaknesses of the Energy Center’s model and goes on to show that North
Carolina would lose 33,000 jobs and lose $4.5 billion in Gross State
Product by 2011.

What’s more is that Beacon Hill’s analysis examines
only the 9 most costly of the 56 policy options recently proposed by the CAPAG.
Despite the strength of Dr. Tuerck’s analysis and presentation, he
received several vexing questions from committee members who clearly
did not have a thorough understanding of the issues at hand.

One committee member asked where North Carolina’s “competitive
advantage” is, asserting that it was no longer in manufacturing. (Of
course, the answer is that it is determined by the market and that it
changes over time. Also, it is never an absolute advantage in
production that is important in trade theory, it is always the relative
or “comparative advantage.” Notably – he had described himself as a
fellow economist prior to his line of questioning).

After a roundabout
manner of questioning, the member then asserted that North Carolina’s
competitive advantage was in creative capital and that funneling
resources into research and development for new technologies would in
fact spur more jobs for North Carolina.
When told by Dr. Tuerck that this could be true, but that it would come
at the expense of new technologies in private markets, the committee
member responded that utilities operate in a regulated market and that
private competitors cannot compete to create new technologies in energy
markets.

I found this particularly amusing because the second presenter
on the day had been from a private company that developed new
technologies in energy production and then sold those technologies to
utilities. I guess he missed that one.
Another committee member noted that air quality, in the past, has
vastly improved due to environmental regulations. This may be true, yet
he failed to grasp that it is a trade-off between increased regulation
and economic prosperity (which is left as a policy decision)  Also, CO2
emissions have nothing to do with air quality – CO2 is required for
life on earth.

Finally, in my favorite comment, climate change was compared to Adolph
Hitler. Seriously. While we see it looming, if we refuse to do anything
about it before it is too late, we will meet our doom. Signs that the
earth may be warming are like the pro-war posters that were hung prior
to our entrance into World War II, serving to remind us of that
potentially fatal truth. This committee member saw it as our duty to do
what we can to address climate change now.

My only response is that there were options available at the time to
actually stop Hitler. Nothing that could reasonably be done now would
have any measurable effect on climate change. Big difference. (There
are also major questions as to whether a return to a warmer climate
would even be a bad thing – it could actually be quite beneficial for
humans.) What proposed climate change policies in North Carolina
clearly will do, however, is stifle the economy and particularly punish
the poorest citizens in this state. But then, they could apparently
also stave off the Holocaust.