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Study: Green New Deal Could Cost More Than $90 Trillion

Whether its supporters care is another question.

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Alex Edelman/CNP/AdMedia/Newscom

The Green New Deal—a brainchild of progressive Democrats, particularly Rep. Alexandria Ocasio-Cortez (D–N.Y.)—has been controversial since it was released earlier this month. Several Democratic presidential candidates endorsed it, while others have noted that it's not realistic and would be fiscally impossible.

How much would it cost? At least $50 trillion and possibly in excess of $90 trillion, according to a report released today by the American Action Forum (AAF).

The AAF, a center-right think tank that focuses on economic issues, projected costs for six aspects of the Green New Deal: reworking the electricity grid in an environmentally friendly manner, revamping the nation's transportation network to reduce transmissions, and its guarantees of well-paying jobs, universal health care, affordable housing, and food security for each person in the U.S.

First, the power grid. One of the Green New Deal's goals is to meet "100 percent of the power demand in the United States through clean, renewable, and zero-emission energy sources" in the next 10 years. Achieving net-zero greenhouse gas emissions in this area would cost at least $5.4 trillion by 2029, the AAF says—not including another $387 billion per year for things like operations and maintenance.

Why so much? The study explains:

We assume that states without nuclear moratoriums build approximately 50 percent of their needed capacity with nuclear power, and cover the remaining 50 percent with wind, solar, hydro, geothermal electricity, and battery storage. States with nuclear moratoriums are assumed to replace fossil fuels with wind, solar, and storage. This approach raises issues in dispatching electricity, because one needs to cover the difference between available nuclear and peak capacity with both solar and wind resources. Most renewable resources are non-dispatchable, and must be supplemented by storage and other available assets.

This estimate is not an outlier. As Reason's Ron Bailey has noted, a similar plan outlined in 2015 would have cost roughly $7 trillion, while a previous version of that proposal might have cost up to $13 trillion.

For comparison, the electric industry pulled in roughly $390 billion in revenue in 2017, according to the Energy Information Administration (EIA). Around 59 percent of that was accounted for by "generation" costs. Assuming that $230 billion rose to the aforementioned $387 billion, then subtracting $70.5 billion in annual "avoided fuel costs" from the net difference, total electricity costs would go up by 22 percent for consumers, the AAF says. Residential customers, who paid an average of $111.67 per month in 2017, would pay an average of about $300 more per year for electricity. This does not include the trillions it would cost to achieve a completely clean power grid in the first place.

The Green New Deal also proposes "overhauling transportation systems…to eliminate pollution and 19 greenhouse gas emissions from the transportation sector as much as is technologically feasible." The AAF's estimate of the cost for this proposal assumes that high-speed trains would replace air travel. While this is not specifically noted in the Green New Deal itself, an overview of the resolution that was apparently published by mistake did include the goal of "build[ing] out highspeed rail at a scale where air travel stops becoming necessary."

Doing so would cost between $1.3 trillion and $2.7 trillion, the AAF estimates. The lower figure can be reached by multiplying the 2018 proposed capital cost per mile of California's since-toned-down high-speed rail system ($129.8 million) by 8,263 miles, which is the difference between the number of miles covered by transit rail and by airports in the U.S., as of 2013. Then add on another $166.9 billion for the trains themselves, which in California would have cost about $71.2 million. The higher figure, meanwhile, "assumes replacing all [19,453] air route miles without using existing track," the report says. (There are other reasons why replacing air travel with high-speed rail doesn't make sense, which I outlined here.)

The Green New Deal's jobs guarantee would also cost a considerable amount. The AAF based its estimates here on a 2018 report from the Center for Budget and Policy Priorities, which found that reaching full employment would involve putting roughly 10.7 million unemployed or underemployed people to work. Assuming the average annual cost per job (including an average wage of $32,500) would be $56,000, this would cost a total of $543 billion.

The AAF updated some of those numbers with 2019 data, and found that a federal jobs guarantee would cost $547 billion in 2019, and $6.762 trillion from 2020 to 2019. Both of those numbers would rise if, with a guaranteed job waiting for them, many of those who aren't currently looking for work decide to join the labor force.

Of course, there are also plenty of workers who earn less than $32,500 per year (or $625 each week) who would naturally want to switch jobs in order to make more. Including them "would increase the cost to $3.8 trillion in 2019, $44.6 trillion between 2020 and 2029," the AAF says.

The report also estimates that providing universal health care "will cost roughly $36 trillion between 2020 and 2029." The AAF simply built off a 2016 estimate of Sen. Bernie Sanders' (I–Vt.) Medicare for All Plan, which the Center for Health and Economy said would cost $34.67 trillion over 10 years. It's likely an accurate projection, roughly in line with a July 2018 Mercatus Center report, which said Medicare for All would cost the federal government more than $32 trillion over 10 years.

Whether those in favor of the plan care about the cost is another question. Asked on CNN yesterday about the Green New Deal's massive price tag, particularly for Medicare for All, Democratic presidential candidate Sen. Kamala Harris (D–Calif.) suggested that "it's not about a cost."

The fifth aspect of the Green New Deal that AAF addresses is its guarantee of "affordable, safe, and adequate housing." Simply housing the homeless could cost under $12 billion, AAF estimates, citing Department of Housing and Urban Development (HUD) data. But the Green New Deal also calls for "upgrading all existing buildings in the 19 United States and building new buildings to achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification." This could cost trillions, as AAF explains:

A 2012 HUD study evaluated the costs involved in having affordable housing meet the "National Green Building Standard." The results varied across a series of case studies and efficiency levels. Assuming the highest level ("Emerald") is a reasonable proxy for a GND rubric, upfront improvement costs ranged from $13,257 to $34,422 per unit. Applying such costs to simply the 5 million currently available HUD-subsidized housing units yields a cost range of between $66.5 billion to $172.8 billion. Applying such costs to all housing units—since the resolution calls for upgrading "all existing buildings"—yields a potential cost of $1.6 trillion to nearly $4.2 trillion.

Finally, the AAF calculated how much it would cost to ensure that all Americans have food security. Since 2011, the federal government's Healthy Food Financing Initiative has secured about $245 million in taxpayer money. Assuming, based off data from a Pennsylvania food access initiative, that it would cost $75 to improve food access for the 23.5 million people who needed it as of 2009, the AAF said such a program would cost $1.76 billion. Since taxpayers have already put in $245 million, we're left with a remainder of roughly $1.5 billion. "This increased access to fresh food, in conjunction with the income guarantees provided elsewhere in the GND, should meet the plan's goal of food security for all Americans," the AAF says.

All told, implementing the Green New Deal would cost untold trillions. For more, watch Peter Suderman interview Veronique de Rugy, a senior research fellow at the Mercatus Center and a columnist for Reason: