If you want to accept the global warming doom-saying being peddled by the likes of Al Gore, there are three propositions that you must accept. They form the legs of the global warming scare stool and without all three you don't have a platform to stand on.
1. Global temperatures are in fact rising: This is the one that I have the easiest time with, although there are wide discrepancies in just how much warming is actually going on and what the consequences of that warming will be.
2. Increased CO2 emissions in the last fifty years have had a SIGNIFICANT impact on this increase in global temps: This one is a little tougher to accept. While there appears to be plenty of evidence that CO2 emissions have had an impact on warming, it's far from clear just how much that impact is. Whether CO2 emissions are responsible for 10% or 90% of the increase is critical, especially when it comes to choosing what to do or not do about it.
3. Whatever costs are involved in reducing CO2 emissions are worth the future benefits of decreased warming. This is where argument that we MUST act now to stop global warming is really on thin ice (sorry, couldn't resist).
The inability of environmental activists to take such cost/benefit considerations into account was brilliantly demonstrated by Bjorn Lomborg in The Skeptical Environmentalist: Measuring the Real State of the World. In the past, such activists were content to wail that since X causes Y we must do Z to save the planet, without ever considering the costs of Z. In the real world of limited resources and capital, such ignorance was naïve at best, dangerous at worst.
Now an attempt is being made to justify acting now to stop global warming based on a cost/benefit analysis. It's a report (seven-hundred sleep inducing pages) produced by Nicholas Stern and the government of the U.K. In an editorial in Thursday's Wall Street Journal Bjorn Lomborg deftly tore it apart:
The Stern review's cornerstone argument for immediate and strong action now is based on the suggestion that doing nothing about climate change costs 20% of GDP now, and doing something only costs 1%. However, this argument hinges on three very problematic assumptions.
First, it assumes that if we act, we will not still have to pay. But this is not so -- Mr. Stern actually tells us that his solution is "already associated with significant risks." Second, it requires the cost of action to be as cheap as he tells us -- and on this front his numbers are at best overly optimistic. Third, and most importantly, it requires the cost of doing nothing to be a realistic assumption: But the 20% of GDP figure is inflated by an unrealistically pessimistic vision of the 22nd century, and by an extreme and unrealistically low discount rate. According to the background numbers in Mr. Stern's own report, climate change will cost us 0% now and 3% of GDP in 2100, a much more informative number than the 20% now and forever.
In other words: Given reasonable inputs, most cost-benefit models show that dramatic and early carbon reductions cost more than the good they do. Mr. Stern's attempt to challenge that understanding is based on a chain of unlikely assumptions.
Moreover, there is a fourth major problem in Mr. Stern's argument that has received very little attention. It seems naïve to believe that the world's 192 nations can flawlessly implement Mr. Stern's multitrillion-dollar, century-long policy proposal. Will nobody try to avoid its obligations? Why would China and India even participate? And even if China got on board, would it be able to implement the policies? In 2002, China decided to cut sulfur dioxide (SO2) emissions by 10% -- they are now 27% higher despite SO2 being nationally a much bigger health and environmental problem than climate change.
Instead of taking action to stop global warming based on dubious assumptions, Lomborg suggests that we commit our resources to actions with a much higher rate of return, especially for the poor of the world:
Why does all this matter? It matters because, with clever marketing and sensationalist headlines, the Stern review is about to edge its way into our collective consciousness. The suggestion that flooding will overwhelm us has already been picked up by commentators, yet going back to the background reports properly shows declining costs from flooding and fewer people at risk. The media is now quoting Mr. Stern's suggestion that climate change will wreak financial devastation that will wipe 20% off GDP, explicitly evoking memories of past financial catastrophes such as the Great Depression or World War II; yet the review clearly tells us that costs will be 0% now and just 3% in 2100.
It matters because Gordon Brown, Tony Blair and Nicholas Stern all profess that one of the major reasons that they want to do something about climate change is because it will hit the world's poor the hardest. Using a worse-than-worst-case scenario, Mr. Stern warns that the wealth of South Asia and Sub-Saharan Africa will be reduced by 10% to 13% in 2100 and suggests that effect would lead to 145 million more poor people.
Faced with such alarmist suggestions, spending just 1% of GDP or $450 billion each year to cut carbon emissions seems on the surface like a sound investment. In fact, it is one of the least attractive options. Spending just a fraction of this figure -- $75 billion -- the U.N. estimates that we could solve all the world's major basic problems. We could give everyone clean drinking water, sanitation, basic health care and education right now. Is that not better?
We know from economic models that dealing just with malaria could provide economic boosts to the order of 1% extra GDP growth per capita per year. Even making a very conservative estimate that solving all the major basic issues would induce just 2% extra growth, 100 years from now each individual in the developing world would be more than 700% richer. That truly trivializes Mr. Stern's 10% to 13% estimates for South Asia and Sub-Saharan Africa.
Last weekend in New York, I asked 24 U.N. ambassadors -- from nations including China, India and the U.S. -- to prioritize the best solutions for the world's greatest challenges, in a project known as Copenhagen Consensus. They looked at what spending money to combat climate change and other major problems could achieve. They found that the world should prioritize the need for better health, nutrition, water, sanitation and education, long before we turn our attention to the costly mitigation of global warning.
We all want a better world. But we must not let ourselves be swept up in making a bad investment, simply because we have been scared by sensationalist headlines.
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