November 1, 2006
Compelling case for action to avoid catastrophe
Repent, for the end of the world is nigh. That is a warning one would expect to come from an evangelical preacher or an environmental doomsayer, not from a sober economist. Yet that is, in essence, what Sir Nicholas Stern, author of the British government’s new report on climate change, is saying. The tone may be sober, but the conclusion – act now before it is too late – is not.
Hitherto many economists, business-people and politicians, particularly in the US, have argued that, given both the uncertainties and the high costs of taking possibly unnecessary action, the best policy is to wait, see and, if necessary, adapt. The contribution of this report is to reverse that logic. It argues that, given these very same uncertainties and the relatively low costs of acting now, the best policy is action.
How and how convincingly does the review make this case? The answer, I suggest, is: “Sufficiently so.”
The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free - click ‘Comments’ below.
Willem Buiter: Emissions of greenhouse gases that contribute to global warming are perfect, textbook examples of public goods (or bads): completely non-rival (if UK emissions affect the Inuit it does not mean they affect the Khoi any the less) and non-excludable (short of leaving planet earth, there is no way to avoid being affected). Not only is the bulk of the impact of greenhouse gas emissions external to the entity responsible for producing them (factories, cars, cows), it is also external to the most effective political decision making units capable of dealing with them: the nation state in which the producers of greenhouse gases are located.
The production of greenhouse gases represents a truly global externality. The attractions to every nation of free riding on the abatement efforts of other nations have been hard to resist. They will remain that way. To handle global externalities we need global governance or global intergovernmental agreements. For global governance, we have the United Nations. The UN plus global intergovernmentalism have produced the Kyoto Protocol: better than nothing, but miles from being adequate.
While we should strive for and hope for binding global agreements capable of limiting greenhouse gas emissions, it would be foolish to have high hopes of success. The Stern Report’s cost-benefit analysis of prevention versus mitigation points very emphatically to prevention, but only for the world as a unitary decision maker. For any individual country, leaving the prevention to the rest of the world is likely to be perceived as the dominant strategy. As a result, the world is likely to be confronted with the need to mitigate the consequences of something like the worst-case scenario sketched in the Stern Report.
Combining the science reported in the Stern Report with my personal assessment of the likelihood of effective globally coordinated action, I conclude that it is unlikely that global agreements will stabilise the carbon dioxide concentration in the atmosphere at 550 ppm. The most likely scenario is for an increase well beyond that level, with associated increases in average global temperatures of between 2º and 5º Celsius b the middle of this century, and more to come beyond that.
Since prevention is unlikely to work, all that’s left is mitigation through preparation and adaptation for the effects of global warming. Here action at the national level (and/or at the EU level for European nations) is likely to be more effective.
Low-lying coastal areas should start preparing for rising sea levels now. Where mass relocation of people to higher ground is not possible or too costly, dikes, levees, dams, barriers etc will have to be raised and strengthened. A serious cost-benefit analysis of the choice, where it exists, between moving to higher ground vs staying and investing in staying dry should, however, not be avoided. It isn’t obvious, for instance, that rebuilding the flooded parts of New Orleans makes sense. Here in London, we should begin to prepare forthwith for the design and construction of the Thames Barrier’s big brother. Where the need is greatest but the financial means are manifestly inadequate, as in Bangladesh, significant additional aid will have to be provided by the rich nations of the world. We can plan for the adverse effects of global warming on crop yields and on the availability of fresh water. If global warming brings local ice ages, we again should plan for that contingency as soon as objective indicators (such as changes in the Gulf Stream) suggests that these risks are apt to materialise.
My pessimism as regards the likelihood of effective preventive action at the global level makes effective mitigation at the national, regional and local levels all the more urgent. As an individual, the only other thing I can do (other than voting early and often for political parties most likely to strive for effective global action) is to buy stock in civil engineering companies specialising in large-scale flood defences.
Posted by: Willem Buiter, London School of Economics | November 2nd, 2006 at 6:36 am | Report this commentMartin Wolf: I agree with Willem that the chances of effective action are very low indeed. For that reason, what those engaged in this debate call “adaptation”, as opposed to “mitigation” (which Willem calls prevention), is bound to be the dominant part of the response. Adaptation is necessary, anyway, if, as the climate scientists argue, further warming is now inevitable.
If the extreme outcomes occur, however, the challenge of adaptation could become very large indeed. If water supplies were strongly affected or climate changed profoundly, adaptation might require very large-scale movement of people across frontiers. Historically, such movements of peoples have led to conflict. In today’s world, they could lead to huge wars.
The chances of agreeing on mitigation are further reduced by the powerful voices arguing that the science is uncertain and action too costly. I hope to discuss the position of the sceptics - many of them intellectual and personal friends - in the near future.
Posted by: FT Forum - Martin Wolf | November 2nd, 2006 at 9:53 am | Report this commentMonty Graham: Martin Wolf has written a compelling column regarding global warming, based on the Stern Report. I do have a quibble, however, and this is that, unlike as reported by Martin, the science behind global warming is not that “greenhouse gases trap heat”. Moreover, even if it requires going a bit further into technical details, it is important in my view to get the scientific story correct; otherwise, we put ourselves at risk of the sort of criticism offered in today’s print copy of the FT as offered by Barrie Bain, who writes (about the Stern report) that it is based on “assumptions that, though good in theory, are not necessarily true”. Okay, to begin, a theory that is not true is not good; but, beyond this, global warming is on a lot more solid ground than this comment might suggest.
What is happening is essentially this: Each day the earth receives, mostly from the sun, an enormous amount of energy that arrives in the form of electromagnetic radiation or EMR. EMR includes visible light but also radiation in the infrared and ultraviolet regions. Much of this EMR is bounced back into space, but some of it reaches the lower atmosphere or surface of the earth and is absorbed in a process explained by appeal to quantum physics. Were this energy retained, the surface of the earth would heat up to become inhospitably hot in a matter of days. However, also involving a quantum-mechanical process, almost all of this EMR energy absorbed by the earth (more than 99.9999%) is then re-emitted and sent back into space, mostly at night.
The key thing is that, while the bulk of the energy received during the day is in the visible light and ultraviolet spectrum of the EMR, the nocturnal re-emission occurs mostly as infra-red EMR. Infrared is not visible to the human eye, and thus this re-emission is invisible to us; from outer space, the portion of the earth cloaked in night appears dark, but to instruments capable of detecting infra-red, it is anything but dark.
The earth’s atmosphere is largely transparent to visible light (barring cloud cover) and ultraviolet; moreover, the main components of the atmosphere, nitrogen and oxygen, are transparent to infrared. (”Transparent” in this case means that this EMR is not absorbed by these gases.) However, carbon dioxide and certain other “greenhouse gases” are not completely transparent to infrared. Thus, the nocturnal emissions of infrared are partly absorbed (quantum mechanics again!) by these gases. And, furthermore, as the concentration of these gases rises, the amount of reabsorption also increases.
Fortunately, these same gases then re-emit the infrared, sending some of it back to earth (where it again is absorbed and re-emitted) but much of it into outer space, where it is, from a terrestial point of view, out of harm’s way. The problem is, as the concentration of these gases increases, the mean temperature at which the absorption and re-emission into space are at balance rises. This rise in the equilibrium temperature is the “greenhouse effect”.
The greenhouse effect has been long known — it was first described (for actual greenhouses!) by the eminent French mathematician Jean Baptiste Fourier (best know for “Fourier analysis) in the early 1800s, and its existence is a proven scientific fact, not a “good theory based on incorrect assumptions” or anything of the sort. Then, one might ask, why is there any debate on global warming whatsoever?
The answer is that increases in carbon dioxide and other greenhouse gases in the atmosphere trigger effects that can offset the greenhouse effect. Thus, for example, increases in photosynthesis might, over time, remove the additional carbon dioxide as fast as it is added, especially via the photosynthetic actions of plankton in the ocean. EMR energy from the sun is more concentrated in the tropical regions than in the polar regions, but, as mean temperature in the tropics rise, energy can be “transported” from these regions, via ocean currents and or the atmosphere, to polar regions, such that infrared re-emission is accelerated in these latter regions, thus partly offsetting the greater absorption of infra-red in the tropical atmosphere.
A last word: The greenhouse effect is proven science, and not a theory based on questionable assumptions. What is “questionable science” is whether any “mitigating effects” as described above are of sufficient magnitude as to offset the greenhouse effect. So, Mr. Bain: The “real scientists” have a pretty clear picture of the mechanism of global warming, and it is as depicted above! The burden of proof of those who would deny global warming is to show that possible mitigating effects are indeed powerful enough so as to offset this proven mechanism.
Monty Graham
Posted by: Monty Graham | November 2nd, 2006 at 6:21 pm | Report this commentThe author, a new member of the Forum, studied physics at MIT prior to assuming his current and arguably scurrilous identity
Martin Wolf: I thank Monty for correcting my scientific ignorance. But it amounts to the same thing, doesn’t it? Greenhouse gases act like a heat trap.
How did Fourier work this out before quantum mechanics, by the way?
Posted by: FT Forum - Martin Wolf | November 3rd, 2006 at 1:13 pm | Report this commentRichard N Cooper: I have not had the opportunity yet to read the hefty Stern Report, but the main thrust of Wolf’s column that draws on it sounds sensible. I offer two qualifications and a practical suggestion.
The first qualification is that the Stern/Wolf proposition that the costs of reducing greenhouse gas emissions will rise over time is probably not correct, at least on a unit cost basis. There are many technical experiments in the pipeline that, if successful, will reduce significantly the future costs of mitigation.
The second qualification concerns the claim that a low discount rate should be used in evaluating actions that will benefit our grandchildren. Surely the best way to benefit our grandchildren, at lowest cost to us, is to choose those investments that promise the highest payoff during the next few generations. An affirmative case must be made that mitigating climate change is among them. It should compete with actions now that we know have high pay-off: improvements in nutrition and sanitation for the poor, and education in poor and rich countries alike. If we are going to spend 1 per cent of world product (about $400bn annually these days) to benefit future generations, we should do it in best way possible.
The practical suggestion builds on the fact that China is building power plants at a great rate, roughly one a week, and that despite vigorous programmes for nuclear, hydro, and wind power China will build more coal-fired power plants during the next two decades than all the OECD countries put together. Once built, they will last half a century. The whole world has an interest both in the technical efficiency of those power plants, and in creating the possibility that their CO2 emissions can be captured and stored (CCS in the jargon). A number of techniques are in principle available, but we do not know which one(s) will be effective and lowest cost. The rich countries should engage China to run field experiments, providing both the technology and the funds for the incremental costs associated with CCS, both to reduce rapidly growing emissions in China, and to learn the practical possibilities for CCS elsewhere in the world.
Posted by: FT Forums | November 3rd, 2006 at 7:49 pm | Report this commentMartin Wolf: Dick Cooper has thought much longer and harder about these issues than I have. So I make some tentative comments. Also I have no difficulty with his practical suggestion on China. So let me comment briefly on his other two points.
The argument that there would be rising costs of action if we were to delay relates not to greenhouse emissions, but to stocks of greenhouse gases in the atmosphere. I agree that the marginal cost of reducing emissions should fall over time, though Nick Stern argues that this would partly be the result of “learning by doing”. So the declining costs would themselves be the result of action.
The bigger point, however, is something else. At present, net anthropogenic emissions of CO2 equivalent are 2.5 parts per million per year. Over time this rate of emissions will rise, if business continues as usual. Now assume that there are concentration levels at which powerful feedback effects may push climate into a different state from today’s and that the costs and indeed the likelihood of that are unknown and unknowable, but potentially grave. The argument then is that we should stay below those concentration levels.
It is from this that 550ppm is drawn as a sensible target (against about 420ppm today). The longer we continue on the business as usual path, the bigger the cut in emissions needed to hit that
target. If we reach 550ppm, human emissions would have to be eliminated. The bigger the cut in emissions, the bigger the cost of achieving it. So it is not just a question of the cost of achieving a given cut in emissions, but the size of the cut needed to achieve a given stabilisation target.
I have two comments on choosing the highest return investments. The first and most obvious point is that deciding whether to do something about climate change doesn’t have to be compared with alleviating world poverty and disease. We should do the latter anyway. Doing something about climate change should be compared with all the ways in which we now use our resources. The Pentagon’s budget alone would cover the cost. Does anybody believe that US security is much, if at all, enhanced by the last $100bn of the defense budget? Or what about our spending on cosmetics or tobacco? So I regard the choice that has been put forward in the so-called Copenhagen consensus as a dishonest one. It is not on offer, anyway, and it is certainly not the only possible choice.
But there is a far bigger point here, to which I intend to return. I don’t believe that the standard discount rate approach is of great use when we are discussing a problem like climate change. In this case, we are trying to decide between different states of the world. Taking the wrong decision may leave our descendants in an entirely different world from today’s, with no capacity to reverse that process.
I cannot think of any other decision quite like that. It is entirely different, I suggest, from deciding whether to build a railway or a road. These can be considered as isolated decisions, with finite time-horizons, against the next best alternatives. A set of decisions that may determine the habitability of the planet can’t be viewed in this way. This is simply not a marginal investment decision.
So we have to deconstruct the discount rate into its components, to decide what our pure rate of time preference is (i.e. what weight we put on the welfare of future generations) and what the likely growth of relevant forms of consumption is going to be (to estimate the rate of decline of the marginal utility of consumption). And, in doing this, we will find ourselves making distributional judgements that must be incorporated explicitly into our assessment of the costs and benefits of action or inaction.
Posted by: FT Forum - Martin Wolf | November 4th, 2006 at 1:13 pm | Report this commentMonty Graham: Martin’s question about Fourier is a very good one and I must admit that I had to scurry to find an answer. Indeed, not only did Fourier live a century prior to the development of quantum mechanics, his work was more than a half a century ahead of James Clerk Maxwell’s theories, based on experiments of Michael Faraday, establishing the electromagnetic characteristics of light and other, non-visible EMR. Maxwell, inter alia, predicted the existence of low frequency EMR, what today we call “radio waves” that were then unknown. When these waves were discovered, they not only verified Maxwell’s theory but also opened the door to the development of broadcasting, the BBC and, ultimately, the American TV series “Desperate Housewives”.
In Fourier’s time, about 200 years ago, it had however been established that (1) light has wave-like characteristics, even if exactly what were the mechanisms by which light was created, or propagated, were unknown (hence, there was speculation of the existence of an “ether” through which light propagates but later shown not to exist). Further development would have to await quantum theory about one hundred years later; (2) solar radiation (“sunlight”) consists of light of many frequencies where, in the visible spectrum, violet corresponds to high frequency radiation and red to low frequency radiation; moreover, this radiation contains invisible components, both of lower frequency than visible light (hence, “infrared”) and greater frequency (hence, “ultraviolet”); and (3) this radiation embodies energy; hence, sunlight striking a rock tends to heat the rock. Moreover, this last phenomenon can be reversed: If matter is heated , it produces radiation, e.g., heated hot enough, metal will visibly glow and the hotter it becomes, the higher the frequency of the emitted radiation.
All of these facts were known. What Fourier contemplated was that the interior of a greenhouse, when exposed to solar radiation, becomes warm. Moreover, the most obvious explanation, that the glass traps the heat that is released when the radiation is absorbed by objects inside the greenhouse, did not stand up to observation and logic. In particular, the temperature inside a greenhouse rises only up to a certain limit and then rises no further. This limit might have been achieved at that temperature where the amount of heat escaping the greenhouse was just equal to the amount being generated by the solar radiation but, again, this did not stand up to scrutiny. In particular, the temperature limit proved almost constant on a sunny day irrespective of whether the outside temperature was cold or quite warm; on a cold day, one would expect the rate of heat loss to be greater than on a warm day, and thus the equilibrium temperature to be lower. Moreover, on a day when solar radiation was partly blocked (e.g., if it was cloudy or misty outside), the equilibrium temperature attained was lower than on a bright, sunny day and, again, the equilibrium temperature did not seem to depend upon whether it was a warm or cool day. On a cloudy day, if heat loss explained the equilibrium, one might expect the greenhouse to warm more slowly than if the sun were bright but also for the warming to continue until the same equilibrium temperature were attained. But, again, it just didn’t seem to work this way.
Fourier thus, correctly as it happened, deduced three things: First, the equilibrium temperature was reached when re-radiation of radiation by the greenhouse balanced the in-coming radiation; second, the re-radiated energy was of lower frequency, on average, than the in-coming radiation; the former was mostly in the infrared range while the latter was mostly in the visible and ultraviolet ranges; and (3) the glass in the greenhouse interfered with the re-radiation process so as to raise the equilibrium temperature at which the energy of the in-coming radiation was at balance with the out-going radiation. In particular, Fourier demonstrated that glass, while largely transparent (non-absorptive) to visible light and to lower-frequency ultraviolet radiation, is almost opaque to infrared radiation. Thus, the outgoing infrared radiation was re-absorbed by the glass, which then heated until it itself began emitting radiation (also in the infrared range) and balance was achieved. Again, this process of re-absorption and re-emission, and the ensuing change of the equilibrium temperature at which balance is achieved, is the “greenhouse effect”, and its discovery it properly attributed to Jean Baptiste Fourier, even if his explanation had, as it were, many “holes” in it that were later “filled” by quantum theory.
By the way, Fourier’s explanation of the greenhouse effect gives us the one scientifically respectable alternative to “increased greenhouse gases” as an explanation to global warming. If it is happening that solar radiation reaching the earth is intensifying, perhaps because of some long-run solar phenomenon not fully understood, this intensification would also serve to increase the mean temperature at which re-radiation of solar EMR balances the rate at which this EMR is received to increase, just as would increased concentration of greenhouse gas. As I understand, there are experts on solar phenomena who believe that such an increase might be taking place although the empirical data backing up such a belief are not conclusive on the matter. However, if there is such an increase, it must then be recognized that increased concentration of greenhouse gas actually would exacerbate the effect; in other words, this alternative explanation by no means gets us, as it were, “off the hook”. A problem in fact still exists, and action is if anything more urgently needed than if there is no intensification of solar radiation actually happening.
Posted by: Monty Graham | November 6th, 2006 at 5:01 pm | Report this comment