Evaluating Climate Policy Options, Costs and Benefits

EPA analyzes the anticipated economic effects of proposed standards and policies to reduce greenhouse gas emissions. These analyses have shown that there are a variety of cost-effective policies available to reduce greenhouse gas emissions.

Policy options range from comprehensive market-based legislation to targeted regulations to reduce emissions and improve the efficiency of vehicles, power plants and large industrial sources. Underlying these analyses are economic models and detailed studies of technologies to reduce emissions.

Common-sense Approaches Through the Clean Air Act

EPA is taking action under the Clean Air Act to reduce greenhouse gas emissions from the largest sources by increasing the efficiency of our power plants, cars, and trucks. Our analyses show that these regulations will save consumers money at the pump, improve the air we breathe, promote jobs in the green technology sector, and cut millions of tons of harmful greenhouse gas emissions.

• EPA's regulatory initiatives for greenhouse gases under the Clean Air Act
• Historical economic benefits from taking action under the Clean Air Act

Analysis of Proposed Climate Legislation

Congress periodically proposes legislation to lower greenhouse gas emissions, and EPA economists analyze these bills as part of the legislative process. EPA analyses have shown that comprehensive, market-based climate legislation can transform the U.S. energy system and reduce greenhouse gas emissions, all at relatively low cost.

• EPA Legislative Analyses
• Climate Economic Modeling

Understanding Benefits

Taking actions to reduce greenhouse gas emissions yields important economic benefits. These benefits are from the reduced risk to human health and welfare that results from lower emissions of greenhouse gases and less global warming and climate change. EPA and other federal agencies have developed Social Cost of Carbon (SCC) estimates to assess the economic benefits of rulemakings that reduce carbon dioxide (CO₂) emissions. When agencies prepare to issue regulations implementing the laws enacted by Congress, they must justify proposed regulations by assessing their cost and benefits to the economy and society. The SCC is used in the benefits part of the cost-benefit analysis. For a regulation that decreases emissions, the SCC represents the damage avoided--or the benefit of the regulation--on a dollar-per-ton-of-CO₂-avoided basis.

These benefit estimates, however, are not complete because current models do not yet capture all of the important physical, ecological, and economic impacts of rising levels of CO₂ in the atmosphere that are recognized in the literature. In addition, the SCC does not capture the added benefits from reductions in other pollutants, such as particulate matter, that are often achieved through regulations targeting greenhouse gas emissions.

Research Underlying EPA Economic Modeling of Climate Policies:

Climate Economic Modeling
EPA uses a variety of economic models and analytical tools when conducting climate economic analyses of climate legislation or policy. These models help researchers estimate the future effects of proposed policies on energy production, the economy, emissions of CO₂, and land use trends in agriculture and forestry.

Air Quality and Climate Modeling
EPA is creating decision support tools to evaluate policy options for both air quality and climate change

Transportation Sector Analyses
EPA conducts modeling and feasibility analyses to understand the potential of technologies and strategies to reduce greenhouse gas emissions from the transportation sector.

International Emissions Projections for Non CO₂ Gases
EPA conducts studies of projected global emissions of the methane, nitrous oxide, and fluorinated greenhouse gases which account for about 30 percent of human-caused warming. Projected emissions studies for the non-CO₂ gases provide a benchmark that can be used to measure the potential environmental and economic impact of proposed climate policies across all relevant gases.

International Mitigation Technologies to Reduce Emissions of Non CO₂ Gases
Numerous technologies are available to reduce emissions of methane, nitrous oxide, and fluorinated greenhouse gases. EPA develops reports that evaluate the costs of various technologies to reduce non-CO₂ greenhouse gas emissions. These reports also provide cumulative marginal abatement cost curves which are used by researchers to represent mitigation costs in their models.