Listening to the presentation to the Climate Council on the cost savings they are claiming will be associated with the Climate Action Plan, I was reminded of the classic scene from “Caddyshack” where Bill Murray’s character tells the story of his compensation for a round with Dalai Lama: “Oh, there won’t be any money,” says the Lama, “But when you die, on your deathbed you will receive total consciousness.”
The reason for my cinematic flashback is that the “savings” being promised by the Climate Council if we spend the multiple tens of billions of dollars necessary to implement its programs are largely based on something called “The Social Cost of Carbon.” What is this? Well, like Murray’s caddying fee, there won’t be money.
The Social Cost of Carbon is a made-up calculation that attempts to affix a price to the negative economic impacts of releasing a ton of carbon dioxide into the atmosphere by burning fossil fuels. It is highly subjective. Under the last three administrations, it has been officially pegged at $43 a ton (Obama) $3 to $5 a ton (Trump), and $51 a ton (Biden). There are as many calculations as there are organizations interested in such things.
According to an explanation provided by Stanford University, “When calculating the social cost of carbon, the main components are what happens to the climate and how these changes affect economic outcomes, including changes in agricultural productivity, damages caused by sea level rise, and decline in human health and labor productivity. … For example, many studies now show very clearly that our productivity at work declines quickly as the temperature gets hot.”
Perhaps you see the problem here: To realize the “savings” promised by the Climate Action Plan that come from the Social Cost of Carbon, the plan would actually have to stop temperatures from increasing, stop sea levels from rising, etc. And we know for a fact that the Vermont Climate Action Plan won’t do this. Ergo, the plan doesn’t actually realize any such savings.
Referring again to the Stanford example, if rising temperatures account for a loss in labor productivity and temperatures still go up despite our “investment,” which they will, we won’t see any savings on labor productivity. Such “savings” should not be counted in an honest cost/benefit analysis — but they are. And this is dishonest.
Now, the case can be made that some actions being pushed or mandated under the Climate Action Plan could result in some savings over time. Installing solar panels on your roof may, depending upon an individual’s situation, over the lifetime of the panels reduce one’s overall electric bill. (Whether or not it’s government’s role in a free country to mandate such decisions is another argument for another day). But even by the Climate Council’s own generous math, savings from these types of activities add up to less than the costs of the programs.
That’s where the Social Cost of Carbon comes in! Calculated by the Climate Council at $146 per ton (because why not?), it adds, like a giant dollop of whipped cream on top of the Brussels sprouts, over $6 billion in “savings” to the overall calculation. And the total savings being promised by the Climate Action Plan over a 30-year period: $6.4 billion. Nice coincidence!
The upfront costs of the Climate Action Plan are very real. Big subsidies for electric vehicles, charging stations, weatherizing homes, expanding wind and solar, and a big new state bureaucracy to manage it all that will have to be paid for with high taxes on things like home heating fuel, gasoline and diesel.
We can put numbers to this, and they are very big numbers that will have to be paid for now and in the very near future.
But even in a best-case scenario, any savings from this “investment,” real or imaginary, won’t show up until the back end of the plan near 2050, if they show up at all. Cost estimates for implementing new government programs such as those prescribed in the Climate Action Plan rarely come in under budget, and with labor, supply chain issues, and inflation in play, it is a safe bet that the cost estimates put forward in the Climate Action Plan are lowballs, perhaps very low.
So, when you hear advocates saying that the Climate Action Plan will “save Vermonters money,” this is what they’re basing their claims on — a made-up number attached to a fuzzy concept called the Social Cost of Carbon.
Bill Murray seemed happy with his ethereal return on investment. Personally, I’d rather see actual cash.
member of the Ethan Allen Institute board of directors