[Editors] MIT compares effects of emissions bills

[Elizabeth Thomson]

MIT News Office
Massachusetts Institute of Technology
Room 11-400
77 Massachusetts Avenue
Cambridge, MA  02139-4307
Phone: 617-253-2700
http://web.mit.edu/newsoffice/www

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MIT model compares environmental, economic effects of emissions bills
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For Immediate Release
THURSDAY, JUNE 14, 2007
Contact: Elizabeth A. Thomson, MIT News Office
Phone: 617-258-5402
Email: thomson at mit.edu

PHOTO AVAILABLE

CAMBRIDGE, Mass.--While Congress considers seven bills that aim to 
limit America's greenhouse gas (GHG) emissions, MIT researchers have 
offered an analysis of the legislation based on a powerful model they 
created.

The MIT Joint Program on the Science and Policy of Global Change 
applied its model to the seven bills to determine how costs 
associated with each might affect the domestic economy. While the 
program does not endorse any individual bill, the analysis could lend 
insight into potential climate consequences and the rough effects on 
prices and consumers, said Henry Jacoby, co-director of the joint 
program and a professor of management.

"The objective of the assessment is to help policy-makers move toward 
a consensus," he said.

The current proposals span a wide range of future emissions targets 
for the country. The Bingaman-Specter and Udall-Petri bills, for 
instance, would keep U.S. emissions near current levels, while others 
sponsored by McCain-Lieberman, Kerry-Snowe, Waxman and Sanders-Boxer 
call for emissions reductions of 50 to 80 percent below the 1990 
level by 2050.

"All of these bills would substantially reduce United States GHG 
emissions from what they would be if nothing were done and would, if 
other countries follow suit, substantially reduce the risk of very 
serious climate change," said John M. Reilly, associate director for 
research for the joint program.

The MIT model predicts that if no action is taken, U.S. greenhouse 
gas emissions will double by 2050, with global levels growing even 
faster and continuing to rise for the rest of the century. Global 
temperatures would rise by 3.5 degrees to 4.5 degrees above current 
levels by 2100. "The more ambitious of the Congressional proposals 
could limit this increase to around 2 degrees Centigrade, but only if 
other nations, including developing nations, also strongly control 
greenhouse gas emissions," Jacoby said.

Capping pollution

The MIT Joint Program on the Science and Policy of Global Change 
conducts interdisciplinary research and independent policy analysis 
of global environmental issues.

One of its tools, the MIT Integrated Global System Model (IGSM), 
simulates global environmental changes linked to human activities, 
the uncertainties associated with these projected changes and the 
effect of proposed policies on such changes. IGSM and its main 
economic component, the MIT Emissions Prediction and Policy Analysis 
model, were applied to the seven proposals.

The various proposals include a variety of measures that would limit 
greenhouse gases. Many feature a mandatory cap-and-trade system that 
would cover all or most sectors of the economy.

In such a system, the government sets a mandatory cap on total 
emissions from polluters such as power plants and industrial and 
commercial firms. The emissions are then divided up into individual 
credits-usually for one ton of pollution-that represent the right to 
emit that amount.

The total amount of credits cannot exceed the cap, limiting total 
emissions to that level. Companies that pollute beyond their 
allowances must buy credits from those who pollute less than their 
allowances or face heavy penalties. The government might distribute 
credits to companies for free or auction them, but in either case 
companies are allowed to buy or sell credits among themselves.

Challenges ahead

The cost of meeting the proposed targets for the most stringent of 
the proposals would be equivalent to losing somewhat less than a year 
of economic growth through mid-century, Jacoby said. The proposals 
would increase the price of carbon dioxide to $30 to $50 per ton in 
2015, rising to $120 to $210 by 2050.

"These CO2 prices would be reflected as higher prices for fossil 
fuels, providing an incentive for alternative fuels and improved 
efficiency," Reilly said. "The value of the emissions permits-the 
resulting government revenue if the credits were auctioned rather 
than distributed for free-would range between $100 billion and $500 
billion a year."

Given the need to cap carbon dioxide emissions, the scale of required 
changes in the energy system could be dramatic. Even with strong 
growth in renewable electricity, by 2050, projections reveal a need 
for as many as 500 new nuclear power plants or new coal-fired 
generators that capture and store the carbon dioxide to meet growing 
electricity demand and to replace existing fossil fuel consumption.

"Squeezing the emissions out of our cars over the next few decades is 
projected to come through a huge expansion in biofuels production 
with likely effects on the cost of food," Reilly said.

"These results represent one plausible scenario of the potential 
outcomes, valuable not for the precise numerical estimates but for 
insights about the general direction of changes in the economy, the 
potential climate consequences of different emission paths and the 
rough magnitude of the effects to be expected on prices and the 
well-being of consumers," Jacoby said.

The joint program study can be found at 
http://web.mit.edu/globalchange/www/MITJPSPGC_Rpt146.pdf.

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Written by Deborah Halber, MIT News Office Correspondent