Warming of the world may have economic costs that exceed benefits, but cutting CO2 emissions will not necessarily improve matters. Warming alone may have net negative impacts. However, warming caused by human activity cannot be divorced from the benefits that human activity generates. Cutting CO2 emissions will have clear economic costs.
The question for policymakers is how the costs of cutting CO2 compare with the benefits. We find that the costs vastly exceed the benefits. In particular, we analyzed a regime to reduce CO2 emissions of the magnitude found in the Boxer–Sanders carbon-tax bill and the Lieberman–Warner and Waxman–Markey cap-and-trade bills. These reductions would have a decidedly negative economic impact on both the U.S. and the world as a whole, with net losses reaching hundreds of trillions of dollars by the century’s end. On the other hand, faster growth could insulate the economy from the impacts of global warming.