Most policies to bring down carbon emissions raise the cost of energy. What happens then? According to conventional economic models, the first result is inflation: The cost of goods and services goes up. In this view, climate policy is a kind of castor oil for the economy—good for you, but really unpleasant.
But what if energy users, assisted by smart public policies, interpreted high energy prices not as a pain, but as an incentive to use energy more wisely? What if there were copious opportunities to increase efficiency, those investments paid handsome returns, and the energy savings made up for the price increase? Real-world studies show that businesses and consumers actually can reduce emissions and come out ahead—as John "Skip" Laitner, an economist at the American Council for an Energy-Efficient Economy, puts it, "The evidence is everywhere but in the models." Laitner, who also spent a decade at the epa, has been working to integrate the news about efficiency into modeling. In June, he showed Congress' Joint Economic Committee that transportation measures alone—such as "crusher credits" for low mileage cars, energy driver's ed, and telecommuting and videoconferencing—could save the equivalent of 46 billion barrels of oil by 2030, as much as the country uses in six years.