January 14, 2008

RALEIGH – An outside consultant’s report on proposed global warming policies is plagued by problems that render it “useless” to North Carolina policy makers. That’s the assessment of a new peer review (pdf version) from a Boston-based economic research group.

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

The peer review of the North Carolina Climate Action Plan Advisory Group (NC-CAPAG) report arrives as the legislative climate change commission prepares to meet again 10 a.m. Wednesday in Raleigh. The commission will decide how to address 56 recommended policy options for North Carolina to reduce greenhouse gas emissions. Advocates believe reducing those emissions will address global warming.

“This peer review raises serious questions about the process North Carolina has used to come up with these proposed climate change policies,” said Dr. Roy Cordato, John Locke Foundation Vice President for Research and Resident Scholar. “The legislative commission should think twice before using this discredited NC-CAPAG report to make any changes that could have dramatic negative consequences for North Carolina consumers and taxpayers.”

This is the second peer review in the past week from the Beacon Hill Institute at Boston’s Suffolk University. A peer review issued Jan. 9 found “serious” flaws in the work of the Appalachian State University Energy Center. The Energy Center used a faulty model and questionable data from the NC-CAPAG report to project economic benefits for North Carolina.

“This new peer review marks the latest blow against the bad economics tied to these global warming policy recommendations,” Cordato said. “First, we learned that Appalachian State University researchers used a bad model to project hundreds of thousands of new jobs and economic benefits for North Carolina. With this second peer review, we learn that more than just the model was bad. The data used as the primary input for the model are bad as well. So we have bad data, a bad model, and results that are worth less than the paper used to print them.”

The Beacon Hill Institute has served since 1991 as research arm of Suffolk University’s Department of Economics. Peer review report author Ben Powell is an assistant economics professor at Suffolk with an economics Ph.D. from George Mason University.

Powell focused on the cost-benefit methods used for the NC-CAPAG report by the Center for Climate Strategies, a Harrisburg, Pennsylvania-based consultant. CCS helped formulate North Carolina global warming policy recommendations and estimated their costs and benefits. Powell had found “serious flaws” in CCS methods in an earlier peer review issued in October 2007.

“Unfortunately for North Carolina policy makers, these same … problems plague the NC-CAPAG study, rendering it useless for making any informed policy choices,” Powell wrote in the new peer review. “We have briefly examined the cost-benefit assumptions for the five most important proposals in the NC-CAPAG report. In each case we have found the analysis to be seriously flawed.”

The 56 global warming policy proposals now under consideration for North Carolina include ideas that would increase taxes, restrict land use, ration energy use, and raise energy costs.

“Surprisingly, the NC-CAPAG report claims that the implementation of these measures would bring ‘significant cost savings for the State’s economy,’” Powell wrote. “The NC-CAPAG report gives the impression that the state policy makers can have their cake and eat it, too, and that North Carolina can both reduce greenhouse gas emissions and at the same time actually save the economy money. Unfortunately, the seriously flawed nature of the report undermines these conclusions.”

The Beacon Hill Institute peer review labels as “serious” flaws: the NC-CAPAG report’s failure to estimate any dollar value for the benefit of reducing greenhouse gas emissions; the report’s routine mistake of treating costs as benefits, especially when discussing new jobs; and the report’s underestimation of costs tied to proposed global warming policies.

Those flaws raise serious questions about any conclusions listed in the NC-CAPAG report, according to the peer review. “This finding — that mitigating [greenhouse gas] emissions amounts to a free lunch — does not hold up under scrutiny, and is an artifact of NC-CAPAG report’s unrealistic assumptions and incomplete listing of costs.”

After picking apart faulty analysis within five proposed global warming policies, Powell concludes that the NC-CAPAG report offers “zero guidance” to policy makers. There’s “no sound scientific basis” for claims that the proposed policies would save North Carolina billions of dollars, according to the peer review.

“NC-CAPAG’s cost savings estimates are not just wildly optimistic; they are the product of a purely fictitious analysis,” Powell wrote. “Its cost savings estimates cannot be believed, and it fails to quantify the monetary benefits of reduced carbon emissions. Thus policy makers are left with no basis on which to judge the merits of the NC-CAPAG report’s recommendations for action on the mitigation of emissions of greenhouse gases.”

For more information, please contact Dr. Roy Cordato at (919) 828-3876 or [email protected]. To reach Ben Powell at the Beacon Hill Institute, call (617) 573-8750 or write to [email protected] To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].