Will Global Warming Make Future Generations Worse Off? (No, according to realistic analysis)
Some people argue that we are morally obliged to reduce greenhouse gases aggressively because otherwise the world’s current development path would be unsustainable, and our descendants will be worse off than we are.
But will a warmer world be unsustainable, and leave our descendants worse off?
I have examined these claims out to the year 2200, using the IPCC’s own assumptions regarding future economic development and results generated by the Stern Review on the economics of climate change. Note that both the IPCC and Stern are viewed quite favorably by proponents of drastic GHG reductions (see, e.g., here).
The first figure (see below) shows for both developing and industrialized countries, the GDP per capita — an approximate measure of welfare per capita — used in the IPCC’s emissions scenarios in the absence of any climate change in 1990 (the base year used to develop the IPCC’s emission scenarios) and 2100.
For 2100, the figure shows the GDP per capita assumed in each of four representative IPCC scenarios used in the Stern Review. These scenarios are arranged with the warmest (A1FI) scenario on the left and the coolest (B1) on the right. Below each set of bars, the figure indicates the IPCC’s designation for that scenario (A1FI, A2, B1 and B2) and the corresponding projected increase in average global temperature from 1990 to 2085 (which ranges from 2.1–4.0°C).
This figure shows that, per the IPCC, in the absence of climate change, GDP per capita would grow between 11- and 67-fold for developing countries, and between 3- and 8-fold for industrialized countries. [Some people have complained that these GDPs per capita are implausibly high. If that’s the case then the IPCC’s estimates of climate change are also implausibly high, since these GDPs per capita are used to drive the IPCC’s emissions and climate change scenarios.]
Although the IPCC did not provide any estimates for 2200, the Stern Review assumed an annual growth rate of 1.3 percent after 2100 (Stern Review, Box 6.3). In my calculations below I will assume a more modest growth rate. Specifically, I assume that GDP per capita would double between 2100 and 2200, which is equivalent to an annual increase of 0.7 percent. This is also conservative in light of historical experience: GDP per capita quintupled between 1900 and 2000 (per Maddison 2003).
But climate change might reduce future welfare per capita. Stern famously estimated that unmitigated climate change would reduce welfare by an amount equivalent to a reduction in consumption per capita of 5-20 percent “now and forever” if one accounts for market impacts, non-market (that is, health and environmental) impacts, and the risk of catastrophe. He also raised the spectre that under the warmest (A1FI) scenario, the 95th percentile of the welfare losses due to climate change could rise from 7.5 percent in 2100 to 35.2 percent in 2200.
For the sake of argument and extreme caution, I will assume that the loss in welfare due to uncontrolled climate change under the warmest scenario (A1FI) will indeed equal Stern’s 95th percentile estimate of 35.2 percent. I make this assumption despite the fact that one can’t be too skeptical of centuries-long projections based not only on uncertain climate models but equally uncertain socioeconomic and technological trends. To quote from a paper commissioned by the Stern Review: “changes in socioeconomic systems cannot be projected semi-realistically for more than 5–10 years at a time.” [Emphasis added.] Second, the Review itself emphasizes “strongly” that the numbers should not “be taken too literally.” No less important, many notable economists have even disputed the Stern Review’s more modest 5-20% estimate for losses as overblown (e.g., Yale’s William Nordhaus and Hamburg’s Richard Tol). [The IPCC itself uses 5 percent as the upper limit.]
[For details on the methodology used to estimate welfare losses for the other scenarios check out my paper, Discounting the Future, in the latest issue of Regulation magazine. ]
The figure below shows the net welfare per capita in 2100 and 2200 after adjusting GDP per capita in the absence of climate change downward to account for welfare losses due to uncontrolled climate change per the Stern Review’s 95th percentile estimate. To put the numbers in this figure into context, in 2006, GDP per capita for industrialized countries was $19,300; the United States, $30,100; and developing countries, $1,500.
Note that net welfare per capita in 2200 is underestimated for each scenario because the GDPs per capita in the absence of climate change were underestimated while welfare losses due to climate change were overestimated.
This figure shows that notwithstanding gross inflation of the adverse impacts of uncontrolled climate change:
· Under each scenario, for both developing and industrialized countries, net welfare increases from 1990 to 2100, and from 2100 to 2200. Thus Nobelist Robert Solow’s (1993) criterion for sustainable development — namely, that current generations should “endow [future generations] with whatever it takes to achieve a standard of living at least as good as our own” — should be easily met. In other words, if the world’s current developmental path is unsustainable, it won’t be because of climate change.
· Well-being in both 2100 and 2200 should, in the aggregate, be highest for the richest-but-warmest (A1FI) scenario and lowest for the poorest (A2) scenario, again regardless of climate change. That is the richest-but-warmest world is to be preferred over poorer-but-cooler worlds. Thus, if humanity could choose between the four IPCC scenarios, for the next several decades it should choose to realize the richest-but-warmest (A1FI) world. In other words, in order to improve net welfare, governments should be striving to push their countries on the path of higher wealth rather than lower carbon. So why are the world’s governments trying to negotiate a deal in Copenhagen later this year that would make their populations poorer and reduce their welfare?
· Net welfare per capita in both developing and industrialized countries should be much higher in 2100 than in 1990, and higher still in 2200, notwithstanding any climate change or which scenario one picks. That is, regardless of the circumstance, future generations, particularly in today’s developing countries, will be better off than current generations. Thus the premise underlying the argument that we are morally obliged to control emissions now to ensure that future generations won’t be worse off isn’t supported by the Stern Review’s own analysis.
In fact, the above raises the question whether it is moral to require today’s poorer generations to spend their scarce resource on anthropogenic GHG-induced global warming — a problem that may or may not be faced by future, far wealthier, and technologically better endowed generations — instead of the more urgent, real problems that plague current generations and will continue to plague future generations as well.