Claims about climate change policy benefits are unreliable

April 28, 2008

Click here to view and here to listen to Dr. Roy Cordato discussing this press release.

RALEIGH – North Carolina legislators should question any claims of economic benefits from proposed climate change policies, now that the Appalachian State University Energy Center has admitted* inflating earlier estimates by more than 900 percent. A John Locke Foundation policy analyst delivered that warning today.

“Six months ago, the ASU Energy Center trumpeted its claims that policies to cut carbon dioxide emissions in North Carolina would add more than 325,000 jobs and $20 billion to the state’s economy by 2020,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “Now the same ASU team has snuck out a new report that drops that estimate to 32,000 jobs and $2.2 billion in gross state product.”

“That’s not just a rounding error,” Cordato added. “That’s a major mistake that should call into question the researchers’ competence. No serious scholar would put out research that makes a mistake that large.”

Accurate estimates are important to North Carolina, since the policies studied would lead to higher taxes and fees, new restrictions, and price hikes for consumers, Cordato said. “In fact, our own analysis from trained economists at the Beacon Hill Institute at Boston’s Suffolk University shows that the policies would hurt — not help — the North Carolina economy.”

The new ASU Energy Center report emerged at the April 22 meeting of the N.C. Legislative Commission on Global Climate Change. At the same meeting, a new analysis from trained Beacon Hill Institute economists warned that North Carolina would lose more than 33,000 jobs and face a $4.5 billion hit to its Gross State Product by 2011, if lawmakers adopt just a fraction of the policies under consideration now to address climate change.

The policies studied also would cost the state more than $502 million in investment, lower real disposable income by $2.2 billion, and reduce state and local revenue by more than $184 million, according to Beacon Hill Institute researchers.

“When we’re talking about potential harmful impacts of this magnitude, North Carolina cannot afford to rely on faulty estimates of economic benefits,” Cordato said. “That’s especially true if the proponents of climate change policies can’t distinguish between 32,000 jobs and 325,000 jobs or between a $2.2 billion impact and a $20 billion impact.”

The ASU Energy Center’s errors might be linked to the fact that its report did not rely on the expertise of the university’s economics department, Cordato said. “The ASU Energy Center calls its report an ‘economic impact analysis,’ but economists had nothing to do with it,” he said. “A student in a public administration master’s degree program and a colleague with an engineering degree assembled both the wildly inflated numbers in the original report and the revisions released last week.”

“ASU economics professor John Whitehead has distanced himself and his department from the report,” Cordato added. “Whitehead wrote on his Web site that he’s ‘very skeptical’ any positive benefits from climate change policies would cancel out the clear negative impacts.”

North Carolina shouldn’t bet its economic future on dubious claims from untrained non-experts, Cordato said. “The costs of making a mistake would be too high,” he said. “Given the mistakes the ASU Energy Center has already admitted, there’s no reason to believe these climate change policies would create 32,000 jobs or 320 jobs or 32 jobs.”

Legislators should also remember that North Carolina can take no step that would have any significant impact on the climate, Cordato said. “None of the policies under consideration would do anything to reduce global warming,” he said. “Plus trained economists see far more costs than benefits. They see large-scale job losses and a major hit to the Gross State Product. North Carolina policymakers should listen to their warnings.”

*Editor’s note: In a June 16, 2008, article in the Asheville Citizen-Times David Ponder of the Appalachian State University Energy Center explained that the discrepancy between the original and revised projections of job creation related to the fact that the latter figure projects annual job creation in 2020.

Ponder’s statement contradicts the plain language of text in the report’s executive summary, which does not use the word “annual” in reporting this statistic. In addition, there is no use of the word “annual” in the headings on graphs included in a Power Point presentation to the climate commission or in the headings of the same graphs in the text of the Energy Center report.

The Energy Center refers to the data as “annual” only in tables that present employment data for three of the seven years covered in its study. Despite the language used in the text of the report and language used to label graphs presented in the report, the Energy Center does not provide its cumulative net employment change estimates in its latest report.

The Energy Center does not provide sufficient data for calculating this information. The new figure’s relationship to the earlier figure cannot be determined from the estimates provided. Ponder’s statement to the Citizen-Times does not indicate how close the revised estimate is to the October estimate.

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].