Share this story
Close X
Switch to Desktop Site

What Global-Climate Pact Would Mean for Your Pocketbook

How much could Kyoto cost you?

Perhaps as much as 50 cents a gallon at the gas pump by 2010. Your utility bills may be 50 percent higher. If you are mining low-BTU coal in Powder River, Wy., it might mean your job.

About these ads

For the nation as a whole, it could mean a significant increase in inflation as price increases work their way through the economy - everything from the cost of a ton of steel to the price of carting cabbages from California to the local produce rack.

The annual inflation rate may zip to 4.6 percent compared with about 2.5 percent now. As Americans feel the squeeze on their pocketbooks, they will stop spending as much. This could extract a total of about 3 percent from the nation's gross domestic product, its total output of goods and services.

These are some of the early projections by the economic forecasting company Standard & Poors DRI, based in Lexington, Mass. The firm, which has done forecasts for the government as well as business, has been looking at the implications of a Kyoto agreement for the past year. It plays down some of the extreme forecasts, such as long gas lines or a collapsing economy. "We are talking about dampening the rate of increase of the GDP, but never a downturn," says Susan Haltmaier, an economist who has worked on the computer model.

It's not clear how accurate any economic forecasts will be since it's difficult to gauge human behavior. The US government tried to blend the economic models of DRI and two other forecasters. But it dropped the project. "The effort to develop a model or set of models that can give us a definite answer as to the economic impacts of a given climate-change policy is futile," Janet Yellen, chairman of the president's Council of Economic Advisors, told a House subcommittee.

To fashion any forecast, economists have to make certain assumptions. Ms. Haltmaier's chief one is that the final result of the Kyoto conference will be the stabilization of greenhouse gases at 1990 levels. To reach that goal will require removing 20 percent to 26 percent of the nation's carbon emissions.

The actual impact on consumers could be less, says Haltmaier, if the final agreement allows the trading of emissions permits. (At press time, this issue was still holding up an accord.) If the US, for example, is allowed to buy emissions permits from Russia, the cost to US consumers would be reduced. Haltmaier estimates gasoline prices would only increase by as much as 25 cents per gallon and the rise in utility bills and inflation would be less.

EITHER way, there is little question that there will be some cost to consumers. The American Petroleum Institute, for instance, estimates the average automobile consumes 550 gallons of gasoline per year. An increase of 25 cents per gallon will hike the expense of running the vehicle by $137 annually, assuming similar driving habits. A 50-cent per gallon rise would cost $275 a year.

About these ads

The API, in a more pessimistic assessment than DRI, estimates the global treaty will increase home heating-oil prices by 54.9 percent and gasoline by 35.6 percent by 2010. Natural gas will rise by 50 percent.

The average utility bill could also increase. According to the Edison Electric Institute (EEI), an industry trade group, the average residential utility bill is $66 per month. It would be higher in large industrial states such as New York, Michigan, New Jersey, and California. If the DRI study is correct and utility bills leap by 50 percent, the average bill would climb to about $99 per month. "There is no question the cost of living would go up," says Bill Fang, an EEI observer in Kyoto.

Some energy industries may also suffer. Haltmaier estimates US coal production will drop from 1.3 billion tons to 700 million tons by 2010. But, she argues, it's likely there would be fewer coal miners anyway, since the industry is in decline. Currently, there are 85,000 coal miners nationwide.

Environmentalists argue that industry estimates are overstated. They believe there could be a bigger economic cost in not acting. Global warming, for instance, could result in billions of dollars of coastal real estate being washed out to sea or heavy crop losses.

Calculating the effect of an accord on the overall economy is more difficult. Haltmaier says the US can expect higher unemployment and interest rates. But the actual loss in jobs may be small. If the US economy only loses 3 percent GDP by 2010, this would mean a loss of 35,000 jobs per year.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.