Fraser Institute News Release: Misguided cost-benefit analysis undermines climate policy

Vancouver, British Columbia, CANADA

TORONTO, June 20, 2019 (GLOBE NEWSWIRE) -- Cost-benefit analysis is a powerful tool for guiding climate policy but easily falls prey to two common errors, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“People often compare the wrong things when trying to decide if a policy is worth pursuing,” said Ross McKitrick, professor of economics at the University of Guelph, Fraser Institute senior fellow and author of Apples to Apples: Making Valid Cost-Benefit Comparisons in Climate Policy.

The first error involves comparing the cost of an additional climate policy to the benefits of stopping all climate change.

For example, claiming that a Canadian climate policy would stop all climate change exaggerates its benefits. Since Canada represents about two per cent of global carbon dioxide emissions, policies such as the recently-implemented federal carbon tax will reduce total global emissions only by a fraction of one per cent, which will have a very small effect on the global climate. 

The second error involves looking at policies in isolation and ignoring the way they interact with other policies. Economists have devised techniques to adjust cost estimates for this, but the implications are often ignored.

“When debating climate policy, policymakers and advocates should understand the actual costs and benefits of any policy including carbon taxes,” McKitrick said.

Ross McKitrick, Senior Fellow, Fraser Institute

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit