Find the best buys: Cost interventions Many different regulatory or spending initiatives might reduce GHG emissions. If one regulatory measure costs the country 10 times more per tonne than another regulatory measure, that suggests avoiding the first measure while scaling up the second. Doing the most good possible requires finding the best buys, as any careful shopper would recognise. Table 1: Cost of abatement by policy (USD) Policy Behavioral energy efficiency Corn starch ethanol (US) Renewable Portfolio Standards Reforestation Wind energy subsidies Clean Power Plan Gasoline tax Methane flaring regulation
Estimate ($2017/ ton CO2e) −190 −18 to +310 0–190 1–10 2–260 11 18–47 20
Reducing federal coal leasing
33–68
CAFE Standards
48–310
Agricultural emissions policies
50–65
National Clean Energy Standard
51–110
Soil management
57
Livestock management policies
71
Concentrating solar power expansion (China & India)
100
Renewable fuel subsidies
100
Low carbon fuel standard
100–2,900
Solar photovoltaics subsidies
140–2,100
Biodiesel
150–250
Energy efficiency programs (China)
250–300
Cash for Clunkers
250–300
Weatherization assistance program Dedicated battery electric vehicle subsidy
350 350–640
Source: Kenneth Gillingham and James H. Stock, “The Cost of Reducing Greenhouse Gas Emissions,” Journal of Economic Perspectives 32:4 (2018), 53–72. Note: Figures are rounded to two significant digits. We have converted all estimates to 2017 dollars for comparability. See Appendix Table A-1 for sources and methods. CO2e denotes conversion of tons of non-CO2 greenhouse gases to their CO2 equivalent based on their global warming potential.
34 ROADMAP FOR RECOVERY
Table 1 summarises various American interventions aimed at reducing emissions, costed in US dollars. Many of those initiatives are more expensive, or far more expensive, than the going price of ETS units. US electric vehicle subsidies, on this measure, cost between 15 and 27 times as much as the $35 early September ETS price of carbon here. For every tonne of emissions abated through electric vehicle subsidies, the Government could instead buy and retire 10 tonnes of New Zealand Units (NZU), reducing the overall cap, and still have the country come out ahead. But some policies may be better buys than spending the equivalent amount in buying back and retiring emissions credits, or slightly reducing the cap. Table 1 highlights static costs, but some policies have dynamic effects too. In principle, if a network of vehicle charging stations had not been established along major transport routes, government investment could encourage electric vehicle uptake. Investments of that sort could provide dynamic gains if their costing is based on the expected tonnes of emissions reductions. The Interim Climate Change Commission (ICCC) should produce cost-per-tonne evaluations of every policy it assesses or recommends. These costings should focus exclusively on the gross cost per tonne of resulting emissions reductions. Some measures may have benefits that go beyond emissions reductions. For example, shifting from diesel to electric vehicles would reduce PM2.5 emission levels, and those reductions have associated health benefits. It would be tempting to include those benefits to get a net cost per tonne measure rather than a gross cost per tonne. But that would spread the ICCC’s resources too thinly, and risk introducing additional distortions. For example, suppose a policy encouraging shifting from diesel to electric has a net cost per tonne lower than the current ETS price if the air quality benefits are deducted
