December 5, 2007
Why the climate change wolf is so hard to kill off
By Martin Wolf
The point of the story of the boy who cried wolf is that, finally, a wolf did appear. I feel the same way about the intellectual heirs of Thomas Malthus. Malthusians have finally found a wolf called climate change. Many now agree. But it is far away and coming slowly. “If the worst comes to the worst,” mutter the rich to themselves, “we can always let our children cope.”
This is the complacency that the latest Human Development Report from the United Nations Development Programme attacks. It does a good job, too. But does it do a good enough job to turn the Bali climate change conference into a call for effective action? I fear not. This is not because it fails to make a morally sound case. It is rather because humanity will change its behaviour only when convinced that the lifestyle the better off enjoy now – and the rest of the world aspires to – remains in reach.
This cynical view of human behaviour is fully consistent with what has happened so far. For it is as if the Kyoto treaty had never been. Is this judgment too harsh? Consider just a few of the many facts contained in this report: atmospheric concentrations of carbon dioxide continue to rise at a rate of 1.9 parts per million a year; over the past 10 years the annual growth rate of emissions has been 30 per cent faster than the average for the past 40 years; if the rate of emission were to rise in line with current trends, stocks of CO2 in the atmosphere might be double pre-industrial levels by 2035; and that, argues the International Panel on Climate Change, would give a likely temperature increase of 3°C, though rises of over 4.5°C cannot be excluded. If the science is right, the world is doomed to significant climate change.
The remainder of this column can be read here. Debate from our guest economists appears below.
Julian Morris (guest): The UNDP Report says nothing really new and is in many ways unconvincing.
First, as Martin notes, it repeats the claim that the global mean temperature of the Earth’s lower atmosphere must be kept less than 2C above pre-industrial levels on the grounds that if it is allowed to rise above that level the Earth will reach a tipping point. As justification for claiming “scientific” consensus it cites: a Defra report, an EU press release, a paper from the Dutch Environment Ministry, a presentation given to the Prince of Wales Business and the Environment meeting, and a report from the Government of France. None of these are peer reviewed and none provide convincing, objective, reasons for supporting a 2C limit – as opposed to 1.5C, 2.5C, or 3.5C. If the climate is a non-linear dynamic system, which it does indeed appear to be, then the tipping point might already have been passed. Or there may be no such tipping point. Either way, the prospect of a tipping point does not appear to offer an immediate guide to policy.
Second, the premise of rapid warming is that poor countries grow rich - at least that underlies the high emission-high warming scenarios produced by the IPCC, which underpins most other UN studies and also the Stern Review. But if poor countries become rich, then they presumably won’t suffer the problems that they currently suffer, including such things as water-borne diseases, malaria and respiratory infections. They will also be able to afford investments in better water management systems. Analysis by Dr Indur Goklany of the IPCC’s Special Report on Emission Scenarios shows that under the most fuel intensive, highest growth scenario, the average GDP per capita in “developing countries” (including LDCs) will, by 2100, be approximately seven times as large as the average GDP per capita was in “developed countries” in 1990. When the effects of climate change are taken into account the multiple falls to six-fold. Which begs the question: should people even in rich countries today be making sacrifices on behalf of people who will be considerably richer than us?
Third, the detailed economic analyses of the impacts of warming on agriculture suggest that with suitable adaptation (new crops, better water management, etc.) the net costs will be very low – possible zero.
Fourth, access to water is a major problem now; if it is addressed properly, by enabling decentralized management, then climate change need not cause significant problems.
Fifth, the UNDP’s estimate of the cost of taking action seems comfortably low. Other estimates of the costs of halting climate change come out with very different figures: Lombard Street Research estimates a net present value of $18 trillion. Do we want to take the risk of suffering the more substantial losses?
Sixth, as we point out in a recent report (see www.csccc.info), there are much better ways to address moderate climate change (e.g. perhaps up to 3C in the coming century), namely adaptation.
This does imply specific policies, namely removing barriers to adaptation, which mainly exist in the form of egregious government intervention, especially in poor countries but also in rich countries.
Seventh, if governments of rich countries transfer even more massive amounts of money to the governments of poor countries, under the pretext of ‘adaptation’, they will likely undermine the incentives for those latter governments to remove barriers to adaptation. In other words these aid transfers will be counterproductive.
Eighth, if climate change does look like it might be catastrophic, attempting to control it by limiting emissions of greenhouse gases may well be unsuccessful, so we should look at alternative strategies, such as geoengineering.
Julian Morris is executive director of the International Policy Network, a UK think-tank
Posted by: Julian Morris | December 5th, 2007 at 6:41 pm | Report this commentPaul Seabright: Martin is right that persuading people to take action to combat a distant threat is hard, and requires appealing to their self-interest as well as to morality. It is doubly hard when the argument from feedback effects (that the climate may have a tipping point that threatens truly catastrophic outcomes) cuts two ways: it may be that we are the point where the returns to truly heroic carbon-reduction efforts are very high, but it may also be that we are too late, and catastrophic outcomes are already inevitable. To the extent that the latter is at least possible, there is an urgent need to spell out what they might mean and what kinds of adaptation they would require. Large-scale population movements are one possibility: clever agricultural techniques would not stop the bulk of Africa from becoming uninhabitable at global temperature increases of 10 degrees or more, and a billion people or their even more numerous descendants would be looking, in increasing desperation, for temperate zones in which to live. This would challenge the self-interest of the rich world no less than its morality: no conceivable immigration barriers could stop such a tide, and by the late twenty-first century several countries suffering from intolerable climatic conditions may have become nuclear-armed.
The Stern report did the world a great service in showing that calling for emissions reduction need not preclude thinking about adaptation, but an even greater disservice in downplaying the likely consequences of failure to halt the temperature rise: the Report suggests the main consequence will be to hurt countless generations of rich people who would otherwise have been even richer. The Report also emphasized the need for policies to curb emissions per capita without stressing the need to reduce the numbers of capita: for most of us the most carbon-profligate decisions we shall ever take are those to have children (I write as a father of three).
I hope policy discussion will do much more to spell out some of these catastrophic consequences in the kind of detail that might bring home to politicians and voters that thinking about adaptation is a matter of self-interest and not just morality, is about massively ambitious social and economic policies and not just about technology, and is in no way incompatible with thinking hard about emissions reduction as well.
Posted by: Paul Seabright | December 6th, 2007 at 9:58 am | Report this commentDavid Tipping: I have been trying to sort out, in my own mind, the various methods that have been proposed for reducing carbon emissions. This comment is triggered by your article on December 5. I am not a specialist in this field, and my purpose here is to elicit further comment on the issues I raise below.
Like you, I start with the hypothesis of the world as a single, rational state. Carbon emissions could then be treated as a monopoly product, subject to regulation much as our privatised utilities have been. Investment targets and corresponding price limits would be set, and subject to regular review. There could well be the application of rising block tariffs. Such a model would at least remind us of what an ideal world might look like.
For the present there are various approaches to be compared. First and weakest is to impose targets for arbitrarily selected activities, like taxing out of town car parks for shoppers, or rationing the number of holiday flights. This is the least market-oriented approach. Second, there is the cap-and-trade scheme, a hybrid combination of market and diktat. It should in principle lead to lower emissions, but requires global co-ordination to meet a global supply target. In practice it seems to fall short of universality. Third, demand can be regulated by use of a carbon tax, applied universally, at a rate to keep demand below the critical level. Tesco’s aim to give the carbon footprint of each of their thousands of products suggests that such measurement is feasible.
A fourth approach, favoured by America, is through technology. Carbon scrubbing and use of renewables are part of it, but I have seen little said of the economics. For example, at what oil price would it be feasible to cover their blazing-hot deserts with solar panels? The break-even oil price would be lower by including the benefits of reduced reliance on imports, improving national security, and perhaps reducing the defence budget. (Come to that, what are the economics of oil versus nuclear in Iran?). Technology is not an alternative to the fiscal approach: it is an essential complement.
The hardest part is how to reach agreement on sharing the global burden. A formula that might be examined is the equalising of total past and present emissions per head, country by country, by an agreed target date. Higher taxes in rich countries could subsidise investments made in poorer countries. Most people seem to recognise that some such deal will have to be made. It is time to get down to the details.
I would like to see the EU taking the lead in this, both in adopting an effective EU-wide system, and in attempting, through the UN and WTO, to give impetus to international agreement on targets and strategy.
Posted by: David Tipping | December 10th, 2007 at 7:25 pm | Report this commentBrian Davey (guest): If it were possible to distribute the scarcity rent for using the earth’s atmosphere as a greenhouse gas dump on an equal per capita basis to every adult individual on the planet, we would soon have the climate change problem under control. The reason is that most people on the planet, being poor, do not have a carbon-intensive lifestyle. Thus they would make more from their per capita share of the scarcity rent than they would lose out in the price rises that resulted from creating an artificial scarcity in rights to use the atmosphere. In fact the higher the carbon price the more the world’s poor would make.
It would not be impossible to organise this either. Since climate change is the result of burning fossil fuels the production and sale of fossil fuels would be only allowed to those with permits. The permits would be denominated in the greenhouse gas content of the fuel when burned. To allow for the greater damage of burning fuels at altitude a multiplication factor would be added for production authorisation permits for aviation fuels. The number of permits would be capped and the cap reduced over time. This would effectively pull back the level of emissions.
But how would the permits be distributed? Instead of giving them free to the companies or auctioning them they could be given to everyone on a per capita basis. Because most people do not sell or produce fuels they would have no use for them but to sell them to the fossil fuel producers, thereby capturing the scarcity rent.
The Irish government is currently considering this system, called cap and share, as a mechanism for bringing its transport emissions under control. If it is found to work in practice, it would be a powerful example to be applied to control EU transport emissions and all non-ETS greenhouse gases. Beyond that cap and share would ideally be generalised up to a global system…
As already explained, most of the world’s population would gain more from such a scheme than they would lose. The majority of the world’s population would have an incentive in driving up the carbon price as high as possible - rather than an incentive to push their governments for a carbon intensive life style.
Why do we not have such a system? Because we are not managing the global atmosphere as a commons, we are privatising it. The assumption in cap and trade regimes is that the Earth’s atmosphere belongs to the polluters - a pay the polluter principle. The alternative is that the earth’s atmosphere belongs to states. It is belongs to neither. The atmosphere is a commons and should be managed as one. It is fine to propertise the global atmosphere - but propertise it as a commons, owned by all, including future generations. Trustees of a propertised commons would and should be under a legal duty to manage it in the interests of all. Since we all own it we all have a right to a share in the scarcity rent from its use and it should be managed in reflection of that principle.
Also, in reflection of the fact that a commons should be first and foremost managed sustainably in the interests of future generations , anyone wanting to emit in the climate danger zone, when it is already being overused, should only do so if they put aside extra resources to rehabilitate the atmosphere later. This means a commitment to take the greenhouse gases out of the atmosphere what they are putting into it now. (The technologies for withdrawal of CO2 do exist like biosequestration of bio-char). Put in another way any emissions from now on would be regarded like rented car parking space which is time limited with a prohibitive bill put on if the time limit before withdrawal of an equivalent amount of CO2 is overshot.
Brian Davey, an ecological economist, is a member of the Energy and Climate Working Group of Feasta, the Dublin-based Foundation for Sustainable Economics
Posted by: Brian Davey | December 11th, 2007 at 8:40 pm | Report this commentPaul Klemperer: Unlike Paul Seabright, I think technology is the crucial issue. In David Tipping’s words, it is “an essential complement” to any other climate-change policies. Why?
Martin is absolutely correct that a successful policy must appeal to peopleâs self interest. It follows that no strategy will work unless it is consistent with developing countries’ continued economic growth. So we are unlikely to be able to reduce the use of “dirty” energy enough â either through carbon taxes or through a “cap and trade” permit system - unless we can find a cheap clean substitute. And that requires innovation.
Developing countries are not going to give up the immediate aspirations of their (often growing) populations for climate-change benefits that are largely in the future. Worrying about preserving the environment for our great-grandchildren is a luxury developing nations do not have.
China, for example, stresses even in the foreword to its National Climate Change Programme that “economic and social development and poverty eradication are [its] first and overriding priorities” - hardly a surprise when the latest figures show 300 million of its people live below the World Bank’s dollar-a-day poverty line, and perhaps 100 million are illiterate.
Although China will this year overtake the US to become the world’s number one polluting nation, its officials state that it “does not have the obligation to cut emissions”. Nicolas Sarkozy is right to suggest taxing China’s exports based on their embodied emissions, but this threat gives us only limited leverage over it.
So China will do little for which it is not compensated; this is probably the binding constraint on any deal. (India matters hugely too, of course, but its per-capita emissions are so much lower that it will probably accept any deal we offer China.)
What follows?
First, whether we like it or not, China (and India and others) are going to continue to develop nuclear energy. So unless the West continues to develop it too, the safety and storage and handling issues will be resolved in environments with less democratic accountability than in Europe and the US, and with more pressure to take shortcuts than in richer countries.
Second, China (and India and others) will continue to exploit their enormous coal reserves. So we urgently need research and development on lower cost Carbon Capture and Storage (CCS) technologies to remove coal plants’ emissions. The UK government is right to subsidise a demonstration CCS plant. It should probably subsidise several. It is also right to insist that the technology chosen is one that can be retrofitted to traditional plants. China is building one such plant every five days.
Crucially, however, it will always be cheaper to burn coal (and oil and gas) without CCS than with it. We can encourage developing countries to use CCS through a revised Clean Development Mechanism or â better - by including them in an Emissions Trading Scheme that allocates them enough permits that they make money by participating. But Western electorates will only be willing to transfer limited resources to the developing world. There may also be problems monitoring whether CCS technology is being used as claimed.
So CCS alone will not suffice. Only clean energy sources that are cheaper than those currently available are likely to prevent further emissions growth in the developing world.
If large-scale nuclear power is politically unacceptable, substantial investment in clean energy R&D is the only alternative. But the private sector will not do this unaided. Businesses know that when an innovation is sufficiently important, the innovator gets little of the benefit: the developers of drugs for AIDS, and of vaccines for Anthrax and bird flu were threatened with compulsory licenses in many countries (including in the United States) until they “voluntarily” licensed their innovations cheaply.
The difficulties of getting effective patent protection in the first place, the riskiness of much energy R&D, and the large scale of some of the necessary investments (for example, research into fusion) are further reasons why business is reluctant to undertake the needed R&D without subsidies.
So it is catastrophic that public expenditure on energy R&D has been falling in most countries over the last 30 years, and it is shameful that Europe spends a much smaller fraction of GDP on public energy R&D even than the USA and Japan. The UK is one of the worst offenders.
There are other priorities too, of course. In particular, curbing deforestation is cheap and cost-effective, and has the collateral benefit of preserving biodiversity.
But more R&D into clean energy is probably the highest priority of all. Finding a clean energy source that is cheaper than those currently available is the only politically-plausible way of curbing continuing growth in developing nationsâ emissions.
This comment is based on Paul Klemperer’s talk to the Potsdam Global Sustainability Symposium which drafted the Potsdam Memorandum presented today to the UN Climate Change Conference in Bali.
Posted by: Paul Klemperer | December 12th, 2007 at 10:48 am | Report this comment