Today, the president's Council of Economic Advisors (CEA) released a report that describes the costs that would ensue if the world fails to get its greenhouse gas emissions under control. The report doesn't break new ground, but it neatly summarizes the current state of economic analysis on carbon emissions. The report suggests that allowing the Earth to warm by three degrees Celsius from preindustrial levels (we've already used up one of those three degrees) would entail costs of $190 billion every year, with the price rising steeply thereafter.

But the report also lays out the case that acting sooner rather than waiting makes better economic sense. And it notes that any action at all would function as an insurance policy against some of the more extreme scenarios that haven't been ruled out.

The White House's CEA is meant to be a clearinghouse for national economic data. Various other government agencies prepare reports on things like the GDP and employment rate; the CEA aggregates this data, prepares reports on the general state of the economy, and analyzes the implications for the president's economic policies.

With President Obama using his second term to push for action on greenhouse gas emissions, the CEA has chosen to examine the economic implications of these policies. Much of the results read a bit like Econ 101, such as the report's description of the externalized costs of fossil fuel use:

The emission of greenhouse gases such as carbon dioxide (CO 2 ) harms others in a way that is not reflected in the price of carbon-based energy, that is, CO 2 emissions create a negative externality. Because the price of carbon-based energy does not reflect the full costs, or economic damages, of CO 2 emissions, market forces result in a level of CO 2 emissions that is too high. Because of this market failure, public policies are needed to reduce CO 2 emissions and thereby to limit the damage to economies and the natural world from further climate change.

As the CEA notes, climate change is already happening; we've already seen about 0.9 degrees Celsius of warming in industrial times, and the last decade was the warmest on record, both globally and in the US. Within the States, the changing climate is coming with more intense and frequent heat waves (mostly in the West) and heavier downpours, mostly in the Midwest and Northeast. Ultimately, these changes (along with others, like rising sea levels) will create a drag on the US' economy.

As the report notes, "economists who have studied the costs of climate change find that temperature increases of 2° Celsius above preindustrial levels or less are likely to result in aggregate economic damages that are a small fraction of GDP." By a rise of three degrees Celsius, the global GDP would likely see a drain of 0.9 percent annually; that translates to $190 billion in the US. By the time it rises to four degrees Celsius, the cost is over two percent of the global GDP annually, or close to half a trillion dollars.

Acting to limit carbon emissions will have many secondary benefits, such as reduced pollution, greater energy security, and lowered health costs. Nevertheless, the report notes that doing so may create a net expense in the short term. But it argues that the total costs in the longer term still favor immediate action.

The simplest reason is that delay will mean more carbon gets into the atmosphere before action is taken, making it more likely that we'll slip past the two degree Celsius target and into areas where the costs get significantly higher. The alternative, acting later to hit the same target, means paying significantly more for the same effect: "net mitigation costs increase, on average, by approximately 40 percent for each decade of delay."

The report points to several reasons that acting sooner will be cheaper. Part of it is simply that the research needed for the technology improvements involved happen sooner, and the cost of producing the necessary equipment drops as economies of scale kick in. Early action, the CEA argues, also sends the appropriate signals to the market, causing it to invest in lower-emissions facilities sooner rather than later. This helps us avoid situations where we're either locked in to high-emission facilities even after their cost becomes obvious or get forced to abandon them before their planned lifetime is up.

Finally, the report suggests that an aggressive emissions policy will act as what it terms "climate insurance." The current estimates of the amount of warming we can expect cover a range. It could be that reality will end up on the low end of the range, which would be nice. But there's also the chance that it will be on the higher end, which means the impacts of climate change on the GDP would be much more severe for a given level of carbon emissions. There's also the possibility of what are termed "low probability, high consequence" events, like a rapid melting of ice sheets that rapidly raise sea levels. Acting sooner would be like buying insurance against these unlikely events.

Overall, if people have been following the economics of climate change, none of the arguments made in the report are the least bit surprising. But these things do tend to be ignored in the public debate, which is frequently focused entirely on the cost of shifting away from fossil fuels. The report makes it clear that there are also costs to staying with fossil fuels, and figuring out how to balance all the variables is far more complicated than most people seem to assume.

You can read the report yourself, which is on the White House's site.