Background Paper: How CBO Estimates the Costs of Reducing Greenhouse-Gas Emissions
"In accordance with the Congressional Budget and Impoundment Control Act of
1974, the Congressional Budget Office (CBO) assists the Congress by providing
estimates of the costs the government could expect to incur as a result of enacting various legislative proposals. As the Congress has taken up the issue of addressing the risks associated with climate change, CBO has produced several estimates of the budgetary impact of policies designed to mitigate emissions of greenhouse gases (GHGs). A notable recent example of such legislation was a bill introduced in the Senate, S. 2191, the America’s Climate Security Act of 2007—also known as the Lieberman-Warner bill—which would have established a regulatory program aimed at reducing the emission of GHGs in the United States over the 2010–2050 period.
To estimate the impact of such proposals on the federal budget, CBO must estimate the marginal, or incremental, cost of reducing emissions of a number of different greenhouse gases at various levels of mitigation and at different points in the future. This background paper describes CBO’s methodological approach to estimating such costs, the sources of data and analysis used to develop that approach, and the rationale for using it."