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Chill Out: An Economic Triage for Global Climate Change

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Are you a global warming skeptic, or are you skeptical of the global warming skeptics? Your answer depends on how you answer these five questions: 1. Is the earth getting warmer? 2. Is the cause of global warming human activity? 3. How much warmer is it going to get? 4. What are the consequences of a warmer climate? 5. How much should we invest in altering the climate? Here are my answers.

Global warming is real and primarily human caused. With questions 3 and 4, however, estimates include error bars that grow wider the further out we run the models because complex systems like climate are notoriously difficult to predict. I provisionally accept the estimate of the United Nations' Intergovernmental Panel on Climate Change (IPCC) that the mean global temperature by 2100 will increase by 4.7 degrees Fahrenheit, and that sea levels will rise by about one foot (about the same as they have risen since 1860). Moderate warming with moderate changes.

Question 4 deserves even more skepticism. In his carefully-reasoned and politically-bipartisan book Cool It (Alfred Knopf, 2008), the "skeptical environmentalist" Bjorn Lomborg notes that if global warming continues unchecked through the end of the century there will be 400,000 more heat-related deaths annually; there will also be 1.8 million fewer cold-related deaths, for a net gain of 1.4 million lives. This is not to say that global warming is good, only that its consequences must be weighed in the balance. For example, Lomborg sites data from the World Wildlife Fund that at most we will lose 15 polar bears a year due to global warming, but what doesn't get reported is that 49 bears are shot each year. What would be more cost-effective to save polar bear lives -- spend hundreds of billions of dollars to lower CO2 emissions and (maybe) the mean global temperature, or limit hunting permits?

This leads to question 5 -- the economics of global climate change -- which I think needs a sound dose of skepticism, particularly since the collapse of our economy. Even if all countries had ratified the Kyoto Protocol and lived up to its standards (which most did not), according to the IPCC, at best it would have postponed the 4.7 degrees Fahrenheit average increase just five years from 2100 to 2105, at a cost of $180 billion a year! By comparison, although global warming may cause an increase of two million deaths due to hunger annually by 2100, the U.N. estimates that for $10 billion a year we could save 229 million people from hunger annually today. It's time for economic triage.

Economics is about the efficient allocation of limited resources that have alternative uses. And after the U.S. government allocated a trillion dollars of our limited resources to shore up our flagging financial foundations, those alternative uses have never seemed so pressing. Should we (can we?) really allocate the equivalent of a Manhattan Project to lower CO2 emissions 50 percent by 2050 and 80 percent by 2100, as the IPCC recommends in order to divert disaster? My answer is no. Why? Because the potential benefits for the costs incurred are simply not warranted.

If you had, say, $50 billion a year to make the world a better place for more people, how would you spend it? In 2004, Lomborg asked this question to a group of scientists and world leaders, including four Nobel laureates. This "Copenhagen Consensus," as it is called, ranked reduction of CO2 emissions 16th out of 17 challenges. The top four were: controlling HIV/AIDS, micronutrients for fighting malnutrition, free trade to attenuate poverty, and battling malaria. A 2006 Copenhagen Consensus of U.N. ambassadors constructed a similar list, with communicable diseases, clean drinking water, and malnutrition at the top, and climate change at the bottom. A late 2008 meeting that included five Nobel Laureates recommended that President-elect Barack Obama allocate his promised $150 billion in subsidies for new technologies and $50 billion in foreign aid be allocated for research on malnutrition, immunization, and agricultural technologies. For a cool Kyoto $180 billion you can buy a lot of condoms, vitamin tablets, and mosquito nets and rescue hundreds of millions of people from disease, starvation, and impoverishment.

If you are skeptical of Lomborg and his branch of environmental skepticism, read the Yale University economist William Nordhaus' technical book A Question of Balance (Yale University Press, 2008). Nordhaus computes the costs-benefits of various recommendations for changing the climate by either 2105 or 2205, primarily focused on the cost of curbing carbon emissions. Economists like to compute future profits and losses based on investments made today, adjusting for the value of a future dollar at an average interest rate of four percent. If we spent a trillion dollars today (the equivalent of the recent bailout or the Iraq war), how much climate change would it buy us in a century at four percent interest? Nordhaus's calculations are compared to doing nothing, where a plus value is better and a minus value worse than doing nothing. Kyoto with the U.S. is plus one and without the U.S. zero, for example, and a gradually increasing global carbon tax is a plus three. That is, a $1 trillion cost today buys us $3 trillion of benefits in a century. Al Gore's proposals, by contrast, score a minus 21, where $1 trillion invested today in Gore's plans would net us a loss of $21 trillion in 2105.

Add to these calculations the numerous other crises we face, such as the housing calamity, the financial meltdown, the coming collapse of social security and medicare, two wars, a failing public education system, etc.

In my opinion we need to chill out on all extremist plans that entail expenses best described as Brobdingnagian, require our intervention into developing countries best portrayed as imperialistic, or involve state controls best portrayed as fascistic. Give green technologies and free markets a chance.

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