Asked to compare differing conclusions by the Energy Information Administration (EIA) and Council of Economic Advisers (CEA), GAO said the EIA study – which placed compliance costs at an estimated $US397 billion “used a type of model that typically focuses on a more immediate time period and highlights the near-term costs of economic adjustments (such as unemployment).

EIA’s model used a more comprehensive cost measure than CEA’s model and was thus able to capture certain costs that CEA’s model could not capture.

CEA’s study found that the costs of implementing the Protocol could be as little as $US7 billion to $US12 billion annually in economic output, depending on the extent of international emissions trading allowed and the participation of developing countries.

GAO noted the model used by CEA “assumes that the economy makes a smooth transition to a new path over the long term, losing some productive capacity as a result of higher energy prices. Thus, CEA’s cost estimate includes only the loss in potential GDP (Gross Domestic Product), or the loss in GDP if employment were full.

“In contrast, EIA’s model captures both types of costs. EIA’s approach to modeling energy markets explicitly incorporates, on an annual basis, such factors as technological change and costs, consumer choice behavior, and changes to energy infrastructure.”

GAO concluded that compared to CEA, EIA’s estimate of economic loss is a broader measure of the costs of implementing the Protocol.