Bjorn Lomborg on Climate Costs in the Australian

Australian Climate Madness blog points to an article, “Wrong way, go back“, in the Australian Newspaper by Skeptical Environmentalist Bjorn Lomberg on Australia’s climate policies. This is my comment.

This statement in the article is significant

When economists estimate the net damage from global warming as a percentage of gross domestic product, they find it will indeed have an overall negative impact in the long run but the impact of moderate warming (1C-2C) will be beneficial. It is only towards the end of the century, when temperatures have risen much more, that global warming will turn negative.

Now consider the Apocalypse Delayed? posting of March 28th. Referring to an Economist article, it says that a number of empirical studies show that climate sensitivity is much lower than the climate models assume. Therefore, moving into the net cost range seems much less likely.
But why are there net costs? Lomberg’s calculations are based on William Nordhaus’s DICE model that

calculates the total costs (from heat waves, hurricanes, crop failure and so on) as well as the total benefits (from cold waves and CO2 fertilisation).

I would claim that the destablisation of the planet’s climate by rapid warming has very little evidence. Claims in AR4 that hurricanes were getting worse; that some African countries would see up to a 50% reduction in crop yields by 2020; that the Himalayan Glaciers would largely disappear by 2035; that the Amazon rainforest could catastrophically collapse – all have been over-turned.
Thus the policy justification for avoiding climate catastrophe as a result rising greenhouse gases is a combination of three components. First, a large rise in temperatures. Second, the resulting destablisation of the climate system having net adverse consequences. Third, is that the cost of constraining the rise in greenhouse gases is less than the cost of doing nothing.
It is only this third aspect that Bjorn Lomberg deals with. Yet despite that he shows that the Australian Government is not “saving the planet for future generations”, but causing huge net harm. Policy-making should consider all three components.

That is, there are three components to the policy justification to combatting “climate change” by constraining the growth in greenhouse gas emissions

  1. That there will be a significant amount of global warming.
  2. That this is net harmful to the planet and the people on it.
  3. That the net harm of policies is less than the net harm of warming. To use a medical analogy, the pain and risks of treatment are less than the disease.

Lomberg, using the best cost model available, comes up with far less costs of global warming than, say, the Stern Review of 2006. He also uses actual policy costs to assess the net harm of global warming. Lomberg does not, however, challenge the amount of warming from a given quantity of CO2 rise, nor the adverse consequences of that warming. The Economist article
and editorial of March 30th conversely challenges the quantity of warming from arising from a given rise in CO2, but just sees it as “apocalypse delayed” and not “apocalypse debunked“.

Kevin Marshall

Kyoto Protocol is now dead – DNR

The first stage of the 1997 Kyoto Protocol officially comes to an end today. We should say DNR – Do Not Resuscitate

The underpinnings of the Kyoto Protocol used benefit-cost analysis to achieve a compromise solution. To achieve is goal it needed ALL of the following assumptions to be true.

  1. CO2 causing a massive increase in global warming.
  2. For that warming to have massive catastrophic consequences.
  3. For economic theory to provide a theoretical solution with benefits ≥ costs.
  4. The actual solution matches the theory.
  5. There are no unintended consequences of actual policy implementation need to be taken into account.
  6. That the Kyoto Protocol was originally estimated at being 97% useless in constraining temperature rises.

CO2 causing a massive increase in warming.

If you still believe the hype that CO2 is going to cause a massive increase in global warming, you are now at odds with the latest estimates from the IPCC. David M. Hoffer at Wattsupwiththat shows why.

Massive catastrophic consequences

Where is the evidence of accelerating sea level rise; increasing tropical storms; desertification; accelerating rate of polar ice melt; disappearing Himalayan glaciers causing water shortages; or massively reduced crop yields in Africa leading to famines? Where is all the talk of reaching climate “tipping points”, which must be avoided at all costs? You will not find them in the latest AR5 SPM, because there is no half-decent scientific evidence to support these claims,

Support from economic theory?

William Nordhaus, the world’s leading climate change economist, calculates that the benefit-cost ratio is 1/7. Nordhaus accepts the first two points, but still calculates that on economic terms you should not touch the scheme with a bargepole. More recently, Dieter Helm has described emissions trading schemes as the most expensive way of reducing emissions. Both advocate a carbon tax.

Actual scheme matches theory

Kyoto proposed that countries adopt an emissions trading scheme. In the EU it did not work because credits were issued at too low a cost.

Unintended Consequences

The emissions trading schemes have essentially collapsed, mostly because there has been no commitment to extend Kyoto. Given that there have been numerous fraud scandals from the large through to the small, this is no bad thing. The schemes are open to abuse, yet the investment banks that run them make billions of dollars annually.

Kyoto is Limited

The Kyoto Protocol, if it has been fully implemented would have only constrained a projected 2 celsius rise in CO2 by 2050 by just 0.06 degrees. At the outset policy-makers knew it would be 97% worthless, yet still went ahead anyway.

Continued support for Kyoto must disregard the latest opinions of climate science, economic theory, and the practical problems of public policy-making. Continued support must implicitly support the investment banks to make profits at the expense of ordinary folk, and numerous fraudsters. You must also support a policy that was pretty close to useless at the outset, and now is positively harmful.


Prof Nordhaus forgets some basic Economics

Wattsupwiththat today carries a summary of William D. Nordhaus’s latest paper on climate change policy. The paper “The architecture of climate economics: Designing a global agreement on global warming” is published at the Bulletin for the Atomic Scientists here.

The basic economic fundamental for any policy is to have a net welfare improvement. Therefore in designing this policy, there should be a reasonable expectation that benefits will outweigh the costs. Prof. Nordhaus simply looks at the improvements to be made from switching from cap and trade (per Kyoto Agreement) to a carbon tax. Not just any carbon tax, but one that is uniform throughout the world.

Nordhaus claims that people should face the social costs of their activities. A carbon tax provides four strong incentives:-

First, it provides signals to consumers about what goods and services produce high carbon emissions and should therefore be used more sparingly. Second, it provides signals to producers about which inputs (such as electricity from coal) use more carbon, and which inputs (such as electricity from wind) use less or none. It thereby induces producers to move to low-carbon technologies. Third, high carbon prices provide market signals and financial incentives to inventors and innovators to develop and introduce low-carbon products and processes that can eventually replace the current generation of carbon-intensive technologies. Finally, and most subtle of all, the use of carbon pricing provides simple, straightforward information that market participants need to undertake each of these three tasks. Of course, placing a market price on carbon use will not work magic.

As a means of making consumers use fossil fuels more sparingly, taxes on fuel are highly inefficient. With no close substitute (at least in cost) for fossil fuels (whether for transport, domestic fuel and light, or industry) rises in price are highly inelastic with respect to demand. That is why in the UK, it is a great way of raising tax revenue – you can raise with impunity without major fall-off in demand. Prof Nordhaus can check this out from the effect on demand to the rising price of oil.

As for making producers move to non-carbon sources of power, it is mostly being driven by government policy. The costs of wind and solar power are still far beyond those of fossil fuels and prone to supply problems. For instance, the recent extreme cold in the UK was accompanied by weak sunlight (it is winter with less than 8 hour days) and virtually no wind.

The incentives to producers to switch to alternative energy sources are already there from the high oil price. It has more than tripled in price in less than a decade. The marginal impact of increases energy prices through taxes will be small, if not insignificant.

The fourth is just a combination of the three. It is only a reason if the word “subtle” is replaced by “insignificant”.

The disadvantages of a carbon tax

What Nordhaus does not look at are the disadvantages.

  1. Carbon Tax is regressive within countries. Those who will have to give up cars and foreign holidays and suffer lower heating and lighting in their homes are the poorest. In Britain, where death rates already surge in cold weather, this will be exacerbated.
  2. A carbon tax works by providing a stark choice – you either reduce energy consumption (and reduce your standard of living) or see your living standards fall in other areas. Without
  3. For many in the poorer, but developing countries, aspirations will be dashed. Economic growth is closely related to increase in energy usage per capita. In India and China with rapid economic growth, hundreds of millions of families will be aspiring to cars, foreign travel, washing machines, refrigerators and warmer (or air conditioned) homes. To control CO2 emissions means denying them these opportunities for many years. This is not just making them less affordable. It is also through slowing those high rates of economic growth. For these people – 40% of the world population – this welfare loss will be far greater than anything that runaway global warming can engender.
  4. A uniform tax is ludicrous. In the UK of the £1.23 per litre I last paid for petrol ($7.30 per US gallon of gasoline) over 50% was in taxation. Yesterday the VAT went up 2.5%, adding another 3p per litre. In the USA it is much lower. In Brazil, diesel is restricted to goods vehicles only and carries no tax. In Iran fuel is subsidized. In the UK (and much of Western Europe) a uniform tax would lead to a reduction in tax in an area where you want to reduce emissions most, whilst achieving large emission reductions in some of the poorest, but developing countries.
  5. Society bears the costs of individual consumption externalities. You should compensate the losers whilst punishing the polluters. But to do this efficiently you need to first identify the losers and the gainers from CO2 emissions. Who will lose from the consequences of climate change is purely speculative.

 

Prof Nordhaus’s mistake is only to look at the advantages of a Carbon Tax over Cap and Trade. He does not look at improving the situation on having no policy at all. He ignores the poor, proposing a policy that will deny the aspirations of billions. Further, he does not take into account the political dimension. The democratic and rich countries will not vote for a policy that can only be effective by significantly reducing their living standards. In Western Europe, this is further exacerbated by most studies showing climate change will do little harm, or be of slight benefit. In China, constraint on CO2 emission growth will also strongly constrain economic growth, which will probably cause political turmoil. Yet without China and other emerging economies buying into CO2 constraint, then Western CO2 reductions are in vain. See a talk by Roger Pielke Jr.

However, Prof Nordhaus recognizes that non-participation costs are very high for achieving emissions targets

Follow

Get every new post delivered to your Inbox.

Join 30 other followers