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Krugman: Climate Action Is 'Remarkably Cheap,' New EPA Rules Would Give 'U.S. Economy A Boost'

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Nobel prize-winning economist Paul Krugman explains for the umpteenth time that climate action is super cheap — and that even the pro-pollution U.S. Chamber of Commerce agrees.

What would be the cost to the U.S. of moderate carbon pollution reductions, such as the emissions standards for existing power plants that the EPA will be announcing shortly? It’s a question that we always had to answer since, as everyone knows, EPA is legally obligated to issue rules regulating CO2 from existing power plants.

In April the world’s leading scientists, economists, and governments reviewed the literature and came to the broad consensus that even aggressive climate action would reduce the median annual growth of consumption over this century by a mere 0.06%. And that’s for a scenario in which the rich countries embrace rapid and sharp reductions in CO2, as opposed to the slow and modest reductions the EPA is seeking. Nor does that analysis factor in the hundreds of trillions of dollars of economic benefit from avoiding climate catastrophe — or the co-benefits of mitigation (such as reduced air pollution).

In May, the world’s leading energy experts said we are headed towards catastrophic 11°F warming but that if we wanted to keep warming to a far safer level, under 4°F warming, it would require investment in clean energy of only about 1 percent of global GDP per year through 2050. And that investment would be astoundingly cost-effective: “The $44 trillion additional investment needed to decarbonise the energy system … is more than offset by over $115 trillion in fuel savings — resulting in net savings of $71 trillion.”

Krugman explains that even the latest report by the U.S. Chamber of Commerce — “clearly meant to convey the impression that the E.P.A.’s new rules would wreak havoc” — actually shows the exact opposite.

Specifically, the report considers a carbon-reduction program that’s probably considerably more ambitious than we’re actually going to see, and it concludes that between now and 2030 the program would cost $50.2 billion in constant dollars per year. That’s supposed to sound like a big deal. Instead, if you know anything about the U.S. economy, it sounds like Dr. Evil intoning “one million dollars.” These days, it’s just not a lot of money.

As Krugman notes, our economy is at $17 trillion and growing. So “what the Chamber of Commerce is actually saying is that we can take dramatic steps on climate — steps that would transform international negotiations, setting the stage for global action — while reducing our incomes by only one-fifth of 1 percent. That’s cheap!”

Again, we’re talking about an analysis by the polluting industries showing a loss of 0.2 percent of income a year — without counting any benefit from slowing global warming or reducing air pollution or becoming a leader in what will be the biggest job creating industry of the century, technologies and strategies to cut carbon pollution. Doesn’t seem like a tough choice, does it?

What about the impact on jobs? You may recall that five years ago, Krugman explained how the climate bill being considered in 2009, much more stringent than EPA’s proposed rules, would boost economic growth because it would “create major incentives for new investment — investment in low-emission power plants, in energy-efficient factories and more” during an unprecedented economic slowdown.

In his new column, Krugman repeats that point. “The U.S. economy is still depressed — and in a depressed economy many of the supposed costs of compliance with energy regulations aren’t costs at all,” he writes. “In particular, building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost.”

The Natural Resources Defense Council does the math in its recent economic analysis of the carbon rules, assuming they are written flexibly to encourage things like energy efficiency. NRDC finds that a well-designed rule “can save American households and business customers $37.4 billion on their electric bills in 2020 while creating more than 274,000 jobs.” This is a far more credible analysis then the one by the Chamber, not just because NRDC’s is actually consistent with the economic literature, but also because EPA appears to have been influenced by NRDC’s original proposals for how to do the rule flexibly.

The post Krugman: Climate Action Is ‘Remarkably Cheap,’ New EPA Rules Would Give ‘U.S. Economy A Boost’ appeared first on ThinkProgress.

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Engineer- Poet's picture
Engineer- Poet on Jun 1, 2014

“In particular, building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost.”

The lowest of low-emission base load plants are nuclear, and if the Fed would lend money at the same rate it gives to banks, we’d eliminate a large chunk of unemployment right there.

Robert Bernal's picture
Robert Bernal on Jun 1, 2014

The NDRC, although good for protecting local environments from degradation, does NOT offer any credable solutions to the excess CO2 problem. For example, they do not promote the necessary hundreds of thausands of square kilometers of solar (in the absense of nuclear) and they do not promote nuclear, either (which is even more unlimited)! Modern society requires massive amounts of energy at the fundamental level to which NO amount of conservation and efficiency can append (as per the laws of physics).

It is far more prosperous to build many thousands of molten salt reactors (or even millions of square km of solar) and displace fossil fuels than to reap a few pennies by reducing energy consumption in a fossil fueled world.

Bob Meinetz's picture
Bob Meinetz on Jun 1, 2014

Six weeks ago, the same Nobel-prizewinning economist made this remarkably naive statement:

…the price of solar panels has fallen more than 75 percent just since 2008.

Thanks to this technological leap forward, the climate panel can talk about “decarbonizing” electricity generation as a realistic goal…drastic cuts in greenhouse gas emissions are now within fairly easy reach.

Hmm. Why are we still listening to Paul Krugman on Energy?

John Miller's picture
John Miller on Jun 1, 2014

Before the US Senate failed to pass the ACESA 2009, many Representatives and the Administration advocated this action would be ‘affordable and sustainable’.  Besides bypassing Congress with this EPA Administrative action, what has changed?  If the new EPA rule could truly ‘boost the U.S. economy’, why did the Democratically controlled Congress not pass some form of ACESA 2009 or the current bipartisan Congress pass a similar bill to support the existing relatively weak economy?  Could it be that U.S. power costs might substantially increased to levels being experienced in the EU (up to double current US average price levels) and a significant increase in power costs might not be very beneficial to the current weak economic recovery? 

Joris van Dorp's picture
Joris van Dorp on Jun 2, 2014

Mr. Romm seems to like having his cake and eating it too.

The report by the Chamber of Commerce includes in its policy scenario a significant – though very modest – expansion of nuclear power in the USA by 22 GW between now and 2030 (page 25).

However, Mr. Romm has always been an outspoken critic of new nuclear power, calling it too expensive to matter, for example:


So the big question is, how does Mr. Romm reconcile his gross anti-nuclear rhetoric with the fact that the Chamber of Commerce assumes a sizable expansion of nuclear power in order to reach it’s least-cost case for rapid decarbonisation?

Presumably, Mr. Romm believes that the bulk of his audience will not read the full report and therefore be tricked into believing that Mr. Romm’s anti-nuclear prescription for the planet is fairly cost-effective. Obviously it is not and the Chamber of Commerce is not saying it is. Mr. Romm is trying to have his cake and eat it too.

John Miller's picture
John Miller on Jun 2, 2014

Joris, very good point.  For a variety of reasons many individuals tend to selectively use data that supports their argument in support or opposition of a given position, and overlook details that do not support their position.  When it comes to aggressively shutting down most U.S. Coal Power generation they tend to overlook the full costs and risks to power grids performance.  Refer to an analysis I published on the TEC last year (Impacts of Shutting Down Most U.S. Coal Power – Part 1, Part 2, and Part 3).  The most common factors overlooked when it comes to substantially reducing Coal Power capacity is possibly reducing baseload capacities to unstable levels, displacing coal by fuels-switching to natural gas (NG levels that will exceed available domestic supplies; leading to future U.S. NG imports!), and as you state, Nuclear Power will be required to stabilize and maintain future power grid supply-reliabilities.

The recent NRDC analysis the EPA may have used in developing their new-proposed carbon regulations, tends to make assumptions that can present significant risks to power grids and significantly under estimate costs/Consumer impacts.  This analysis’s assumptions include substantially lowering reserve/backup intermediate-peaking power generation capacity needed to properly manage large increases in variable/intermittent Wind & Solar Power penetration levels, huge increases in demand response and efficiency upgrades (fully controllable-reduced demand) and inadequate baseload power capacity (such as Nuclear).  When power demand exceeds supply, even the smartest grids face brown- and black-outs.

Your referenced U.S. Chamber of Commerce analysis does a good job of identifying these and other critical issues that must be fully and critically addressed during the new proposed EPA carbon regulation development process over the next 6-12 months.

Geoff Thomas's picture
Geoff Thomas on Jun 3, 2014

Bob Meinetz, I have been selling Solar panels for nearly 30 years, in 2008 the going price was $10; (Australian) per watt, – I was selling hem for $8;/watt, – low margins, – now I am selling them for $1.50 per watt and some competitors for $1;/watt, – whether you divide $8; by $1.50 or $1.00; Mr Krugman is absolutely correct, – why should we listen to your anti Krugman comments?

Robert Bernal's picture
Robert Bernal on Jun 3, 2014

Both solar AND nuclear will have to be used… at the very large scale, if we are to win the war on excess CO2. If someone says “solar is trivial” they are right, but it does not have to remain that way because solar can get cheaper (along with required storage). If someone says “nuclear won’t work”, they are simply cherry pick’n for their own agenda (or are not up to understanding the basics of all the various different reactor technologies that were foolishly terminated after positive proof of concept, such as the MSR and the IFR, so that no commercial development could result.

These machines are powerful enough to pump gigatons of ocean water for desalination, for even drought mitigation, let alone solve an excess CO2 problem! Sequestration proposals abound, but none will work without very large amounts of power (or simply the requirement to cool very large amounts of high temp power plant steam).

The closed cycle would make fossil fuels look like a blip in an elongated time interval. Such awesome power (also attainable by covering about 2% of the Earth’s landspace with solar) would prevent us and the biosphere from also going down in that blip!

Bas Gresnigt's picture
Bas Gresnigt on Jun 3, 2014

Except that baseload plants are not competitive, if >15% of the electricity is generated by wind+solar.
Only plants that can regulate their production fast up and especially deep down, are.
Shown by a.o. German experience.

It is one of the most important reasons German utilities build those low temperature burning circulating fluidized bed power plants, closing their still operating fine baseload plants.

Bas Gresnigt's picture
Bas Gresnigt on Jun 3, 2014

Because his/these statements are factual and correct.
As the Austin utility deal (utility buys ~100MW during ~30years for <$50/MWh from PV-panel installation) also shows.
And the costs of PV-solar continue to go down with ~8%/a.

Electricity from new nuclear cost at least three times more as shown with EPR and also AP1000 (if one can disentangle all subsidies e.g. Vogtle get).
And the costs of new nuclear tend to go up, as even EPR and AP1000 are not gen.4 and still are vulnerable.So improvements needed after another disaster.

Attacks such as by a 200ton airliner or a well armed terror group, may change an AP1000 plant into a Fukushima. If the major winds then do not go to the ocean but to a major city, the resulting damage can be several trillion of $. One of the major costs components will be that all infra and buildings of the city become worthless as the city will be evacuated for many decades.

Bas Gresnigt's picture
Bas Gresnigt on Jun 3, 2014

Electricity output from China’s wind farms exceeded that from its nuclear plants for the first time in 2012, by a narrow margin. Then in 2013, wind pulled away; outdoing nuclear by 22 percent!

In next years solar electricity will also surpass nuclear production.

In the last years Chinese government has reduced its nuclear targets greatly…
And increased solar targets greatly.

Bas Gresnigt's picture
Bas Gresnigt on Jun 4, 2014

Solar + Wind + Hydro + Geo-thermal + (biomass & waste burning) + (pumped) storage will do the job. In the transition phase filled up with gas.

Among others this study shows that investing in nuclear is a waste of money as renewable are already ~50% cheaper.
And those renewable will on average be another 30% cheaper in 2024, the moment a new NPP would start if all goes off well.

Desalination of water was once very energy intensive (vacuum distillation).
But nowadays membranes do the job. A technology that requires much less energy, and will require even less in the future as reversed osmosis membranes technology improves.

Supplying all US domestic water by sea water desalination would increase US Domestic energy consumption by around 10% now, about the amount of energy used by domestic refrigerators[

Bob Meinetz's picture
Bob Meinetz on Jun 4, 2014

Geoff, Krugman concludes from the low price of solar panels that “drastic reductions” in carbon are within “fairly easy reach”.

This goes beyond laughably naive; it’s directly opposite the effect solar is having on carbon emissions. The sooner we ditch the “solar delusion” the sooner we can start making real progress on confronting the threat of climate change.

Nathan Wilson's picture
Nathan Wilson on Jun 4, 2014

According to the US government EIA, nuclear power from new plants cost about the same as other new-build energy sources (only geothermal and central plains wind are notably cheaper, and these are not available in most locations).  Even so, total the cost for PV will be much higher still if less than 80% of the energy on the grid comes from flexible generation, as energy storage would then become important (ie. for “drastic cuts in … emissions”). 

The claim that an aircraft can cause a major radioactivity release at a nuclear plant has been studied in detail, and is considered unlikely by experts.  Furthermore, since 2009, the NRC has had rules which require that new plants licensed in the US must “avoid or mitigate the effects of a large commercial aircraft impact.”

Geoff Thomas's picture
Geoff Thomas on Jun 4, 2014

Bob, you suggest some politician in Germany knows more than any other politician, – from constant reading of articles on Germany’s ‘Energiewende’ I get a general impression that the mix of several different technologies there is having the desired effect, – several discussions on this subject have occurred on the energycollective, and despite the ranting of the occasional Nuclear is the only Way folk, real progress is being made and even Solar in such a less sunlight area, makes a strong contribution at times when it is most needed. However I agree that the delusion that Solar is the only Way, should be ditched, just as firmly, as Nuclear is the only Way.

All over the world, Solar, Wind, Biomass, Geothermal, wave and tidal, etc. coupled with superior grid management and even storage, are developing technologies to solve any problems and it may just be that we will need very little Nuclear, which having a definite dark side, of which most admit, would be best minimalised.

Even in my State, Queensland Australia, with very little grid management change, Solar now provides. I have been told, one quarter of the energy.

Of course Queensland is a very warm and Sunny place and highly addicted to air conditioning and it is just so fortuitous that at the time the state grid is struggling to supply the load from all those air conditioners with overworked Coal fired power stations, the sun is shining, Hallelulliah. 

Nathan Wilson's picture
Nathan Wilson on Jun 4, 2014

Geoff, using the latest data from the US solar industry (see SEIA), utility scale solar is down to $1.85/Watt-peak; assuming a 20% capacity factor, this would be $9.25 per average Watt.  This is low enough to beat nuclear for peaking, but not for baseload.  

Consider that batteries still cost $0.213/Watt-hour (and prices are not falling).  This means that if they survive 2000 cycles to 50% depth of discharge, they would add 21¢/kWh to the cost of solar electricity at night.  And this price is for mature lead-acid technology; new technology like lithium-ion, flow batteries, or liquid-metal batteries costs much more.

The best role for solar is to supplement nuclear baseload, especially in warm climates.  In this role, only limited storage is needed, and the resulting cost for very low carbon electricity is lower than could be provided by either the all-nuclear or all-renewable options.  (In northern climates, trying to displace nuclear with solar just makes the fossil fuel use go up, due to the inferior seasonal demand match).

Robert Bernal's picture
Robert Bernal on Jun 4, 2014

The dark side of nuclear can be minimized substantually if we would mass produce smaller closed cycle reactors such as the MSR in a factory setting, like jet airplanes and gas turbines.

Is it possible that solar and wind (and storage and a global like grid) will displace 95% of the fossil fuels in time to save the biosphere? We need to work on that, too.

Here’s something very dark… Every year, we emit about 15% of the excess CO2 as the total global accumulation from the beginning. This ratio will continue as accelerated combustion continues until fossil fuels decline, however, there are many times the hydrocarbon material that we already used (still) just waiting for advanced extraction.

The size of the wastes emitted from powering a city for decades by the closed cycle would fit in a house sized basement (assuming vitrified in glass also). There might even be a few mishaps where some radioactive leaks cause people to wonder “how serious is this?”. Still, I would take that chance.

The wastes required to power a city by 80% fossil fuels for decades will literally dwarf that city. In a few hundred years, that nuclear waste (fission products) will have become basically non radioactive but the excess CO2 will have had to have been sucked out of the ocean or air and sequestered in very large volumes or the biosphere would have already suffered irreversable consequences such that most life does not even exist anymore… 300 years from now.

This, the total destruction of the Holocene is what I don’t want to take a chance on. Nevermind mere sea level rise!


Robert Bernal's picture
Robert Bernal on Jun 4, 2014

It should be more difficult to destroy a small and hardened closed cycle reactor than anything else because they should be buried and hardened (they are small in comparison to the conventional water reactor). The inventor of the water reactor was fired after insisting that the world should be powered by his even better invention, the molten salt reactor.

Here’s a dark perspective (I posted above) concerning what the wastes from the sources which are scalable to planetary proportions can actually do…

Bas Gresnigt's picture
Bas Gresnigt on Jun 4, 2014

“…major radioactivity release at a nuclear plant has been studied in detail, and is considered unlikely by experts…”

Unlikely? Yes.
The chance of a sea dike break in NL (flooding the land) is qualified as extremely unlikely.
That chance is calculated by our state agency as once in 5000 years.

So assume that chance with a 1GW reactor, than the damage may become 2trillion$ with a big city or dense populated area to which major winds bring the radio-activity (and not to the ocean as in Japan).

Then you can easily calculate that the insurance premium costprice is 5cnt for each KWh the reactor produces (if you have a problem with it, I can show).
That 5cent/KWh insurance premium makes the nuclear reactor totally uneconomic.

So now citizens & tax-payers pay; invisible until disaster strikes.
Making nuclear the most heavily subsidized method of electricity generation.

Bas Gresnigt's picture
Bas Gresnigt on Jun 4, 2014


Your Question: “Is it possible that solar and wind (and storage and a global like grid) will displace 95% of the fossil fuels in time to save the biosphere?”
is already answered.

Denmark will reach that situation before 2040. The now have ~35% of their electricity generated by wind. In 2020 it will be 50%, etc.
The nordic lattitude of Denmark (~Alaska) cuases that they have only few solar panels (yet; until those become cheaper).

Germany follows Denmark with a ~20year lag.
Most experts estimate Germany will reach 95% renewable in 2060.

Robert Bernal's picture
Robert Bernal on Jun 4, 2014

No it is not. You do not understand that the world is emitting CO2 on an accelerating basis? The countries you list have or utilize large hydro also but are only a small dent compared to global. Furthermore, they have only reduced their CO2 footprint by 5%.

We will need about 2,000 quads worth of energy every year to power a planetary civilization. Even FF’s can’t do that!  (for very long)! We need closed cycle meltdown proof nuclear such as the MSR to be re-developed, to the commercial level, so that we can grow civilization, stop the excess CO2 and build the hundreds of thousands of sq km of solar and wind and storage necessary to replace nuclear.

Robert Bernal's picture
Robert Bernal on Jun 4, 2014

Do you really think that we can power “everything” (and so much more) with diffuse and intermittent sources on the global basis? In the overall picture, wastes burning is not a generator, but merely a capture, kinda like putting a wind mill on a car. You still need the energy to make the things being burned. Biofuels requires more more land than even solar and wind (and most of the wastes should be left for the soils).

I like you idea of pumped storage, though. It can be used for solar, wind and nuclear!

Bas Gresnigt's picture
Bas Gresnigt on Jun 4, 2014

Compared with a decade ago, there is a revolution going on in the battery world.
Better and cheaper technologies. Especially for grid-scale batteries. E.g. Liquid metal batteries, etc.

But prices for the residential market will also come down, as Germany started a successfull subsidy program (subsidizing 30% of the investment) for small rooftop PV-solar owners.
Batteries mitigate the need for capacity payments as a bigger part of the spare capacity can wait off-line.

Nathan Wilson's picture
Nathan Wilson on Jun 5, 2014

Your  2trillion$ number for a nuclear accident near a large city is completely arbitrary.  As the Fukushima reaction is showing, the cleanup effort is designed to appeas nuclear phobia, not serve a scientifically derived cost-benefit target.  Effectively, the spending will always be “all available funds”; so this means that the current US nuclear insurance pool (many billions$) is by definition adequate.  There is no reason for the government to spend additional money on cleanup, it’s mostly for show anyway (ie. no subsidy in reality).

Also, you neglected to account for the predicted two orders of magnitude reduction in core damage freqency that is expected going from existing Gen II nuclear to modern Gen III plants.  It makes absolutely no sense to pretent that we have learned nothing from five decades of operation civilian nuclear plants.

The real subsidy in developed countries is the external cost of using fossil fuels, which makes renewables with lignite-coal backup (ie. Germany) totally uneconomical.

Bas Gresnigt's picture
Bas Gresnigt on Jun 5, 2014

Yes, but it seems China’s CP understood some of the message of its population.
Taking into account its low latitude and no import taxes (~40%) on solar panels. I expect that solar will soon become substantially bigger than wind. E.g. Solar 8%, Wind 6%

Nathan Wilson's picture
Nathan Wilson on Jun 6, 2014

Setting a goal of low prices for batteries is not the same as achieving low prices.  Please provide reference that show low prices being achieved.  According to Solar Buzz, lead-acid is still the only game in town for residential (flow batteries and liquid have hazards that make it questionable whether they will ever be suitable for home use).

Even the iron-chromium battery mentioned below is not in high volume production, and has not yet taken any market share from lead-acid, hence the claims of low cost are not yet credible.

Nathan Wilson's picture
Nathan Wilson on Jun 6, 2014

China has not started building energy storage (it is not economical, hence they might never).  This means that each GWatt of wind or solar that they install will lock-in a GWatt of coal (at much higher capacity factor).

It is true that the Chinese nuclear program had a slow-down following the Fukushima accident, for new plant starts, and a permenent halt to construction of any new Gen II plants (those similar to the type used at Fukushima).

However, China has resumed new nuclear plant construction, and are raising the buid rate, based on the advanced AP1000 (a very safe and affordable Gen III reactor imported from Westinghouse, the same as the US is building at Vogtle).  This reactor is about half the cost of wind and solar in China, on an average-Watt delivered basis ($2.5 per Watt-avg versus $5 per Watt-avg for solar and $4/Watt-avg for wind).  

The current Chinese nuclear build rate is around 7 GWatts per year (a little higher than the current wind build rate, on an average-Watt basis); which is about a quarter of the coal plant build rate.  In the next year or two, as the effects of the post-Fukushima slow-down propagates through the system, China will start building the all-domestic CAP1400, and will resume the build rate, eventually increasing it further.  The CAP1400 (which is a Gen III reactor derived from the AP1000), will be so cost effective that China may use it as an alternative to all new coal plants (unless they are forced to resume building coal plants to support wind and solar).


Similarly, in India, domestically designed and built nuclear plants cost about $2 per average Watt, compared to $5 per average Watt for solar.  There is no talk of new pumped hydro energy storage.

Bas Gresnigt's picture
Bas Gresnigt on Jun 6, 2014

Be a little more patient. Such developments takes time.
I have good trust that we will see real improvements before 2022. The year when Germany closes its last NPP. Unless the utilities closed them earlier as those baseload plants cannot be operated economically in an environment with substantial wind+solar.

Bas Gresnigt's picture
Bas Gresnigt on Jun 6, 2014

“China has not started building energy storage…”

Because they don’t need so until wind+solar reach >20%. They can regulate by up and down regulating their huge hydryo capacity, which is easy.

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