How CBO Estimates the Costs of Reducing Greenhouse-Gas Emissions   [open pdf - 777KB]

"As part of its mandate to provide the Congress with the objective, timely, and nonpartisan analysis needed to make informed economic and budgetary decisions, the Congressional Budget Office (CBO) prepares cost estimates for legislation under consideration by the Congress. In recent years, a number of legislative proposals have involved efforts to restrict emissions of greenhouse gases in the United States. To estimate the budgetary impact of such proposals, CBO must first estimate the incremental costs to firms and households of mitigating greenhouse gases. This background paper briefly describes the methodology that CBO uses to estimate those incremental costs, the data sources and models used to develop that methodology, and the rationale for using it. In keeping with CBO's mandate to provide impartial analysis, the paper contains no policy recommendations. [...] CBO's methodology for estimating the costs of mitigating greenhouse-gas emissions draws on a wide range of public and private sources for data and analysis and involves a relatively simple framework that can be used to evaluate a wide variety of proposed policies. The framework can be adjusted to take into account changes in projections of emissions, other important economic assumptions, and science and policy parameters. In preparing its cost estimates, CBO uses estimates of mitigation costs that, by construction, are in the middle of the range of estimates produced by current state-of-the- art energy-economy models."

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