House Committee Hears Pessimistic View of Climate Economics

Paul  Baer is writing in response to the recent hearing by the House Committee on Science, Space, and Technology on climate science and policy. The hearing featured the testimony of only one economist, David Montgomery, who has long expressed pessimisim about the economic impacts of climate policy in previous testimony and publications. This is Baer’s reaction to Montgomery’s testimony.

Why is  the Conventional Wisdom of Climate Economics So Pessimistic?

The House Committee on Science, Space, and Technology held a hearing yesterday on climate change science, economics and policy. It was fascinating to listen to, and will no doubt provide much rich food for thought and discussion (for starters see Andy Revkin, or Chris Mooney, or Steve McIntyre for a skeptic’s view). The witnesses included two climate scientists (Kerry Emmanuel and John Christy), a physicist turned climate researcher (Richard Muller), a corporate lawyer (Peter Glaser), a business school expert on forecasting (J. Scott Armstrong), and a respected economist (David Montgomery). Several of the witnesses are quite well known, and each is worth a story, or several. However, I will focus here only on Montgomery and his testimony.

Montgomery, now an independent consultant, was one of the principals for many years of Charles River Associates, an economics consultancy that is generally business friendly; he is frequently published in the peer reviewed literature, and has taught at prestigious universities. He and some of his former colleagues at CRA specialize in climate-economy models, and have consistently produced policy analyses that are relatively pessimistic about the economic costs and benefits of GHG mitigation. His testimony yesterday did not focus on his own modeling results but essentially suggested – by criticizing more optimistic studies in various ways – that any direct regulation of CO2 emissions by the EPA could only be economically harmful. He in fact relied more on economic theory and historical example than on specific modeling results in making his arguments. As a consequence a rebuttal is necessarily an exercise in describing and criticizing the theoretical and empirical assumptions he makes. Continue reading…