They would do well to study how in the 105th and 106th Congresses, a GOP House committee chairman from Missouri single handedly debunked the Clinton-Gore administration’s economic analysis of the Kyoto Protocol. 

Kyotoism: Down but Not Yet Out

Politically, the last eighteen months have been remarkable. In June 2009, the House passed H.R. 2454, the “American Clean Energy and Security Act,” popularly known as the Waxman-Markey cap-and-trade bill. Waxman-Markey’s passage was the culmination of a 20-year PR/lobbying campaign waged by U.N. officials, regulatory bureaucrats, environmental activists, lefty politicians, and corporate rent seekers.

Many of them crowed that ultimate victory was inevitable. With Barack “Blueprint for Change“ Obama in the White House, Speaker Pelosi and Chairmen Waxman and Markey running the climate show in the House, and Majority Leader Reid and Chairman Boxer setting the agenda in the Senate, expectations ran high in green circles.

Their optimistic scenario went as follows: Congress would finally enact cap-and-trade, which would shame China into accepting binding emission limits at the Copenhagen conference, which would then remove the chief obstacle to U.S. ratification of a successor treaty to the Kyoto Protocol.

Things did not turn out that way. Waxman-Markey quickly became a political liability for many of its supporters, Copenhagen fizzled, and by the summer of 2010 the greenhouse bubble burst. Among the chief factors derailing the Kyoto agenda were the Climategate scandal, Waxman-Markey’s outing as a stealth energy tax, 15 years of no net warming, the worst recession since the 1930s, China’s unwavering rejection of binding emission limits, and growing realism about the economic and technical downsides of wind and solar power.

Energy realists, however, can ill-afford to become complacent. EPA is moving rapidly to “enact” Kyoto-like restrictions on the U.S. economy. The Supreme Court could also launch an era of CO2 tort litigation if it decides Connecticut v. American Electric Power in favor of plaintiffs.

Moreover, few defeats in politics are permanent. The greenhouse gang is nothing if not inventive in recycling their policy nostrums under new guises and rationales. What was cap-and-trade, after all, but an obfuscatory repackaging of Al Gore’s Btu energy tax? And when proponents could no longer sell cap-and-trade as climate policy, they blathered about air pollution and asthma, oil dependence and national security, stimulus and green jobs.

Bear in mind, too, that cap-and-trade is a wealth-transfer scheme, and there is never any shortage of politicians and interest groups eager to bilk the public. They count on the fact that most voters are so busy with work and family matters that they are rationally ignorant of the harm lofty-sounding regulatory initiatives can do to them. 

No, we dare not rest on our laurels. Frédéric Bastiat debunked the broken window fallacy more than 150 years ago, yet Obama officials say with a straight face that putting a price on carbon (smashing that very big “window” consisting of all companies that make or use energy from fossil fuels) will stimulate the economy and create jobs.

Man from Missouri

Missouri is the “Show Me State,” which also makes it the Skeptic State, a place where plain folks proudly insist on seeing the evidence before assenting to the “frothy eloquence” of experts. How fitting, then, that James Talent, Republican of Missouri, adroitly used the hearing process to challenge climate-related flim-flam when he was Chairman of the House Committee on Small Business. In the 112th Congress, House GOP chairmen will need something of Jim’s talent to consolidate the gains energy realists made in the November elections and to roll back EPA’s greenhouse power grab.

On June 4, 1998 during the 105th Congress, and then again on April 29, 1999 during the 106th Congress, Chairman Talent grilled Janet Yellen, head of the Council of Economic Advisors, about the Clinton-Gore administration’s Kyoto economic impact analysis. Despite repeated Web searches, I am unable to locate the committee print for the June 4, 1998 hearing. Fortunately, I wrote a column about that hearing and excerpted much of the pertinent exchange.  

Both hearings examined the Clinton-Gore administration’s estimate that implementing Kyoto the “smart way” would cost the United States only $14-23 per ton of carbon, or about 0.1% of GDP.

In the 1998 hearing, Yellen was the sole witness on the first panel. This allowed Talent to pursue a single line of inquiry. He asked her: $14-23 per ton — why so cheap? Yellen said it was because of the flexibility mechanisms (emission trading, banking, CDM credits, and the like) that the Clinton-Gore team negotiated in Kyoto.

So Talent asked, how much would complying with Kyoto cost absent the flexibility mechanisms, or “sweeteners,” as he called them? Yellen could not or would not say, raising the suspicion that Kyoto would be very costly if we had to meet the targets mainly via domestic policies and measures. 

Talent then asked the obvious follow up – if you don’t know how much Kyoto would cost without the sweeteners, how can you estimate what it costs with the sweeteners? Suppose the sweeteners do reduce the overall cost of compliance by some percentage. Still, if we don’t know the base case or “raw” cost of Kyoto, how can you calculate the discounted cost? Time and again Talent pressed Yellen on this, but  never got an answer. He put her on the horns of a dilemma. She could either acknowledge that Kyoto was potentially very costly or come across as incompetent or disingenuous.

In the 1999 hearing, there were only two witnesses — Yellen and Rob Reinstein, an environmental negotiator in the first Bush administration. Reinstein had estimated for each Kyoto Annex I (developed) country how many tons of emission allowances it would have to sell and how many it would need to buy. He added up the numbers and found that even with the inclusion of former Soviet bloc countries, whose economies and emission levels had collapsed, demand would exceed supply by anywhere from 1.3:1 to 12:1 (p. 33). Implication: The price of emission allowances would be higher than $14-23 per ton, potentially much higher.

Talent asked Yellen for her supply and demand estimates. She did not have the numbers but said they were ”implicit” in the administration’s model.  However, she offered no evidence that those “implicit”  numbers were based on the kind of country-by-country assessment that Mr. Reinstein performed. Talent commented:

We asked you, the Committee asked you, in a written question for estimates of the U.S. demand for emission credits by year for the period, 2008 through 2012. And we asked for the potential supply from Russia and the Ukraine. And here was your answer: “The Administration has no estimates of the demand for emission credits by year for the period, 2008 through 2012. Demand will be sensitive to a variety of factors that are quite different [sic] to forecast ten to fourteen years in advance, especially the rate of technological innovation and the diffusion and adoption of current innovations and those placed on the market over the next ten years. For the same reason, we have no estimates of the supply of emission credits.”

In short, Talent said “show me,” and Yellen gave him “frothy eloquence.”

Implications for current committee chairs

In two hearings, using simple logic and refusing to let the witness change the subject, Jim Talent, a lawyer, stumped the White House’s top economist, discrediting the Clinton-Gore Kyoto economic analysis. What lessons should today’s chairmen draw from this slice of climate policy history?

First, when conducting an oversight hearing, have a simple but carefully prepared prosecutorial plan of action. An oversight hearing is an adversarial proceeding. It is much like a trial, albeit conducted before the court of public opinion rather than a court of law. The chairman should have a clear idea what fact or facts he wants to bring to light, what headline he wants the media to report, what conclusion he wants fellow policymakers to draw. In the 1998 hearing, I believe, Talent wanted to reveal that the administration essentially pulled its Kyoto cost numbers out of thin air and could not or would not explain how it arrived at the $14-23 per ton estimate. In the 1999 hearing, I believe, Talent wanted to reveal that the administration estimated emission allowance prices without first doing the empirical (country-by-country) research needed estimate supply and demand. 

In addition to having clear objectives about what the hearing is to reveal, the chairman must be dogged in questioning the witness. He must accept only two results as satisfactory: (1) the witness finally comes clean and gives a straight answer, or (2) the witness finally exposes himself as evasive and non-responsive.

Second, limit the number of witnesses per panel to one or at  most two persons. Limiting the panel to one witness ensures that the witness is on the hot seat the whole time and gives the chairman more control over the back-and-forth, facilitating a prosecutorial mode of interrogation. Adding a second, friendly witness (Reinstein, for example, in the 1999 hearing) enables the chairman to grill the other team’s witness on the basis of competing expert testimony. 

A two-person panel can also be structured as an actual debate. Acting as referee, the chairman can ensure that the other team’s witness addresses the friendly witness’s arguments. He can repeatedly ask each witness to respond to the other’s arguments. Both formats — single witness or two witnesses – enhance the chairman’s ability to pursue a question until he gets a real answer or an obvious non-answer.

A debate format would be ideal for examining the claims of climate alarmists. For example, when University of Alabama in Huntsville Prof. John Christy challenged Columbia University Prof. James Hansen’s high-end climate sensitivity estimates at a Ways and Means Committee hearing in February 2009, Hansen declined to address Christy’s argument on the merits. Instead, Hansen advised the committee to ask the National Academy of Sciences (NAS) to produce a report and then accept its verdict as “authoritative.” Very convenient considering that Hansen is an NAS member and Christy is not, and that NAS is something of an old boys network. 

Unsurprisingly, Chairman Rangel let Hansen off the hook. I’ll bet Jim Talent would not have done so. He’d  have said something like: “You can’t refute Prof. Christy by ignoring him. And I am not going to be persuaded by a report that the NAS hasn’t written. I’m from Missouri. Show me!”

And yet, as Jim Manzi’s recent exchange with uber-alarmist Joe Romm makes perfectly clear, even the latest IPCC report punctures holes in the alarmist claims. Perhaps without realizing it, Romm implicitly admits that the IPCC AR4 report never supported the alarmist view.

Manzi Uses the IPCC to Take Down Al Gore

In his relatively new position as “in-house critic” at The New Republic, Manzi criticized a characteristically alarmist piece that Al Gore had published in the same venue. Manzi wanted to show that Gore was misleading the public on what the “scientific consensus” actually had to say about the risks of climate change.

First Manzi quoted Gore who had written:

Over the last 22 years, the Intergovernmental Panel on Climate Change has produced four massive studies warning the world of the looming catastrophe that is being caused by the massive dumping of global-warming pollution into the atmosphere.

To which Manzi responds:

According to the IPCC’s currently-governing Fourth Assessment Report, under a reasonable set of assumptions for global economic and population growth (Scenario A1B), the world should expect to warm by about 3°C over roughly the next century (Table SPM.3). Even in the most extreme IPCC marker scenario (A1F1), the best estimate is that we should expect warming of about 4°C over roughly the next century. How bad would that be? Also according to the IPCC (page 17), a global increase in temperature of 4°C should cause the world to have about 1 to 5 percent lower economic output than it would otherwise have. So if we do not take measures to ameliorate global warming, the world should expect sometime in the 22nd century to be about 3 percent poorer than it otherwise would be (though still much richer per capita than today).

Prior to consideration of the more detailed economic issues—e.g., costs versus benefits of attempts to forestall the problem; the danger of worse-than-expected outcomes, etc.—pause to recognize that according to the IPCC the expected economic costs of global warming under the plausible scenarios for future economic growth are likely to be about 3 percent of GDP more than 100 years from now. This is pretty far from the rhetoric of global destruction and Manhattan as an underwater theme park. [Emphasis in Manzi's original.]

Manzi is entirely correct: If you wade hip-deep into the actual chapters of the IPCC AR4 report, you will find that yes, most practicing scientists in the relevant fields believe that human activities are leading to climate change, and in particular global warming.

However, you will not find that these trends are pushing humanity towards Armageddon. Contrary to Al Gore’s claim, the IPCC’s latest report does not support the alarmist case.

Joe Romm Punts the IPCC AR4

Of course, Al Gore is not a professional climate scientist. We shouldn’t be looking to him as the standard-bearer of the alarmist position. Instead, let’s see what Joe Romm had to say about Manzi’s critique.

First, Romm quotes extensively from John Bruno, who is “a marine ecologist, Associate Professor at The University of North Carolina at Chapel Hill.” In the interest of brevity, I won’t address each of his responses to Manzi, point by point. Yet if you follow the link to Romm’s post, you will see that Bruno doesn’t dispute Manzi’s numbers per se; he simply says that the IPCC’s official figures leave out many important considerations. (To be clear, Bruno quotes the IPCC report itself on what things it is leaving out of its calculations. So it’s true that the IPCC itself admits its assessments of the dangers of climate change may be understating the risks.)

Then Romm comes back to offer his own, further criticisms of Manzi’s treatment of Gore:

Let me amplify some of Bruno’s points about Manzi’s errors on the science and economics.

If Manzi knows the scientific literature well, he keeps it to himself . The science since the IPCC has evolved considerably, as I review here:  “An illustrated guide to the latest climate science.”  In a AAAS presentation this year, William R. Freudenburg of UC Santa Barbara discussed his research on “the Asymmetry of Scientific Challenge”: “New scientific findings are found to be more than twenty times as likely to indicate that global climate disruption is “worse than previously expected,” rather than “not as bad as previously expected.” It simply isn’t true that 4°C is the worst-case scenario.  Here are two of the best recent analysis of business as usual warming…

Obviously, the sea level rise estimates have jumped in most every recent study (see “Scientists withdraw low-ball estimate of sea level rise and “Sea levels may rise 3 times faster than IPCC estimated, could hit 6 feet by 2100”

And if you really want the plausibly worst-case, go here:  UK Met Office: Catastrophic climate change, 13-18°F over most of U.S. and 27°F in the Arctic, could happen in 50 years, but “we do have time to stop it if we cut greenhouse gas emissions soon.”

And that is why scientists led by a former co-chair of the Intergovernmental Panel on Climate Change issued a major report last year concluding the “net present value of climate change impacts” of $1240 TRILLION on current emissions path, making mitigation to under 450 ppm a must…

…The areas where the IPCC underestimated adaptation costs include water resources, health, infrastructure, sea level rise, and ecoystems.  Anyway, if you’re interested in the important stuff — the enormous benefit of stabilizing at 450 ppm — just jump to Chapter 8, page 103, here.

For a cost-benefit analysis of just focusing on US legislation, New York University School of Law’s Institute for Policy Integrity demonstrated last year that the Waxman-Markey American Clean Energy and Security Act (H.R. 2454) is “cost-benefit justified under most reasonable assumptions about the likely social cost of carbon.’” In “The Other Side of the Coin: The Economic Benefits of Climate Legislation,” the Institute for Policy Integrity finds that the “benefits of H.R. 2454 could likely exceed the costs by as much as nine-to-one” (see “Waxman-Markey clean air, clean water, clean energy jobs bill creates $1.5 trillion in benefits“).

Now that is certainly an intimidating list of new papers and findings, which would make the average person think that Jim Manzi was out of his league! It looks like disaster really is imminent, after all.

But hold on …. Manzi was NOT arguing, “Governments around the world should do nothing, because the IPCC says there is no threat.” Rather, Manzi was merely pointing out that Al Gore was wrong to claim that the IPCC report justified the alarmist calls for drastic and immediate action.

Ironically, Bruno and Romm implicitly agree with Manzi. Their position is that if you look at all the factors that the IPCC omitted from its analysis, and if you look at the literature that has come out since the AR4 was released, then you will see that the alarmists are correct.

Yet this defeats the whole (ostensible) purpose of having an IPCC process in the first place. The public has been told that the IPCC takes all the divergent views of expert researchers in various fields, and boils them down into a “consensus” that the vast majority of true scientists can support. This will help policymakers make informed decisions, because obviously a politician can’t decide whether Expert A or Expert B is a credible source on the issue.

When all is said and done, the IPCC AR4 report gave the very modest projections that Manzi reported, concerning the benefits and costs from taking government action to arrest climate change. Manzi certainly wasn’t claiming these projections were infallible, he was merely correcting Al Gore’s misleading statement.

Conclusion

The climate alarmists are trying to have it both ways. On the one hand, they use the IPCC as a weapon to bash “deniers” over the head with, claiming that “the consensus” is clear. But then when someone like Jim Manzi comes along and actually reports what the IPCC has to say, the alarmists point out all the shortcomings of the IPCC analysis.

It is certainly true that there are reputable climate scientists and economists who think that the central projections of the IPCC AR4 report are woefully optimistic. But on the other hand, there are reputable climate scientists and economists who believe its conclusions are woefully pessimistic, and that humanity will be just fine even if governments do nothing to impede emissions.

To repeat, the whole point of having an IPCC was to consolidate these divergent views into a “consensus” that most experts could get behind, and that policymakers could take as a firm foundation for making their legislative decisions. As Manzi has tirelessly documented, the latest IPCC report does not support the case for climate alarmism.

[Editor note: This post from economist Robert Murphy originally appeared on 2-10-10. It is reprinted given the growing opposition to pricing carbon within the Democratic Party.]

George Carlin once asked, “Is it really possible to have a civil war?” Readers of Joe Romm’s pronouncements on greenhouse gas legislation would answer in the negative. Romm has always been a caustic critic of the “anti-science disinformers” who do not toe the line on the alleged scientific consensus, but lately he has turned his fire on former allies who dare to question the legislative developments in Washington.

An illustration of this internal squabbling is Romm’s recent post on the “cap and dividend” proposal put forth by Senators Cantwell and Collins. Here’s Romm’s take (emphasis added):

Climate politics can be very strange indeed. Because cap-and-trade bills like Waxman-Markey are seen as having no chance of passing the Senate, some enviros appear to be shifting their support to bills that are politically even less attractive and environmentally even less adequate.

The latest misguided missile is the Carbon Limits and Energy for America’s Renewal (CLEAR) Act put forward by Maria Cantwell (D-WA) and Susan Collins (R-ME) — full text and info here. Supporters call it “Cap-and-Dividend,” but right now I think the best term for it is, “Cap-and-Divide,” since it has no chance whatsoever of becoming law but is serving to undercut the tripartisan effort by Graham, Kerry, and Lieberman to develop a bill that might get 60 votes….

Cap-and-Divide…doesn’t even pass the environmental viability test, as the first-rate researchers at World Resources Institute have shown…. And while W-M is far from perfect environmentally, as I’ve said many times, it would enable a global deal. W-M’s biggest problem is that it can’t get 60 votes in the Senate or even close. But “cap-and-divide” is certainly less politically viable than Waxman-Markey or Kerry-Boxer.

On the plus side — from a climate perspective — CLEAR doesn’t allow any offsets and it auctions all of the allowances. Politically that would be fatal, of course, since it means little or no support for Cap-and-Divide from the utility industry, from the states with significant coal use, and from the agricultural states.…

The CLEAR Act does offer some token efforts to achieve regional equity, as the FAQ explains, but given the political uproar over even a small amount of (mis) perceived inequity in the Waxman-Markey allocation formula … this is one more reason the CLEAR Act approach is a political nonstarter. And again, the allowance formulation in the House bill is far more reasonable than is widely understood (see also Robert Stavins: “The appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry”).

It is interesting that Romm relies on Robert Stavins to bolster his point on this issue. In a previous post, when Stavins had the temerity to disagree with Romm’s position vis-a-vis greenhouse gas legislation, Romm wrote a post titled, “Robert Stavins can’t walk and chew gum at the same time.” Presumably Stavins is always sitting down when he writes things with which Romm agrees.

As far as Romm’s use of the term “cap and divide” to refer to the policy that is no doubt based on the proposal of Al Gore’s mentor James Hansen, I’ll let one of Romm’s disappointed fans explain the irony: “Joe, when you relabel Cantwell-Collins as “cap-and-divide”, you lower yourself to the level of the Republicans who refer to cap-and-trade as “cap-and-tax”.”

Other commenters were disappointed too, such as John Passacantando who wrote:

Joe, as a longtime reader of your blog I find your hostility towards an innovative approach perplexing and your blanket endorsement of WRI’s analysis out of character. We count on you to screen this stuff for us and WRI’s analysis is now in question as it appears it counts emissions reductions under the ACES bill in a perfect scenario and not so for the CLEAR Act….Further, I don’t think a legislative alternative to what appears to be a dead approach (cap and trade with its giant givebacks to the coal industry and its proposed creation of a new, unregulated trading bubble) is in any way divisive. Cap and dividend (the CLEAR Act) is a smart policy alternative, a real Plan B, filling in the current vacuum.

The various alliances in the pro-intervention camp have intrigued me. I disagree strongly with his recommendations, but the writings of James Hansen make sense to me. If I actually believed the world needed to sharply curtail global emissions very soon or risk catastrophe, I would be railing against Waxman-Markey (and the other political photo ops) from the rooftops too.

In contrast, it seems that many of the people in support of Waxman-Markey are incapable of seeing that even on their own terms it won’t achieve what they say is necessary to avert disaster. Global political leaders will not collectively take actions to sharply curtail fossil fuel use, when cheating will allow their own economies to flourish. The proponents of Waxman-Markey keep hoping against hope that a political compromise here, a backroom deal there, a concession until year XYZ … will all be worth it in the end, because the experts running the campaign will make sure of it.

Of course, interventionists who propose a straightforward globally-harmonized carbon tax are being similarly naive. But at least their policies are still abstract, and have not yet been codified into actual bills in Congress that we can analyze and see will clearly not achieve what their proponents claim. From the environmental left’s perspective, Waxman-Markey (and Kerry-Boxer) are very flawed bills indeed, and the only way Joe Romm (and Paul Krugman) can defend them is to dismiss any rivals as “politically infeasible.”

Romm and Krugman could very well be right when they tell their allies that a “better” bill is impossible. Yet this acknowledgment shouldn’t cause environmentalists to embrace Waxman-Markey–when they know it is a bad bill from their own point of view. It should instead lead them to reconsider their strategy of running to Washington, DC to save the world.

The civil war over cap and trade is how the political process works; its results are always crooked and counterproductive. In the debate over manmade climate change, the interventionists typically contrast a flawed, real-world market economy with a textbook vision of a benevolent and all-wise global dictator setting emission caps.

Such is a rigged comparison. When trying to decide whether to support new regulations coming out of DC and other legislative bodies, we must bring a healthy skepticism and indeed cynicism. How could anyone look at the history of politics and do otherwise?

————————————————–

Editor Note: MasterResource has a category under Climate Change, Left Civil War, with posts of related interest.

“[Robert] Mendelsohn’s position is rather similar to yours…. He believes the impacts are not negative at all for the US and most of the developed countries. Most impact studies seem to be showing this. It leads us to think that a little warming is not so bad. Glad I have kept my mouth shut on this issue of which I know so little.”

- Gerald North (Texas A&M) to Rob Bradley (Enron), November 12, 1999

“I agree that the case for 2C warming [for a doubling of manmade greenhouse gas forcing in equilibrium] is pretty strong.”

- Gerald R. North to Rob Bradley, email communication, August 13, 2007.

Yesterday, the Wall Street Journal published my letter-to-the-editor rebutting Kerry Emanuel’s letter, which, in turn, was critical of his fellow MIT climatologist Richard Lindzen’s op-ed, “Climate Science in Denial.”

My arguments opposing those of Professor Emanuel (see entire letter below) are fairly straightforward, but I end with this challenge:

“But when will many climate scientists, including Mr. Emanuel, face Climategate and the fact that the human influence on climate, on net, is as likely to be positive than negative?”

Is this challenge rash, or is it backed by the facts?  Well, let’s consider the views of an esteemed climate economist and an esteemed climate scientist. They are, respectively,

Robert O. Mendelsohn (Edwin Weyerhaeuser Davis Professor of Forest Policy; Professor of Economics; and Professor, School of Management)

Gerald R. North (Distinguished Professor, Physical Section, Department of Atmospheric Sciences and the
Department of Oceanography).

Dr. North’s long held sensitivity estimate of 2ºC for a doubling of atmospheric greenhouse concentrations is one-third below the “best guess” of the Intergovernmental Panel on Climate Change (or the IPCC’s best guess is one-half greater than that of Dr. North). That is a big difference, and if you believe Mendelsohn et al. that a 2ºC for 2x results in net positive benefits for the world, then voila!

Is it radical to believe that the human influence on climate, on net, has more positives than negatives for many decades out and even beyond a century or more?  After all, the CO2 fertilization effect is a strong positive, and warmer and wetter is going in the right direction for the biopshere…

Perhaps CO2 as the green greenhouse gas is ’closet’ mainstream, if North’s (private) views are considered.

Therein lies one of the peculiarities of the multi-disciplinary climate-change debate, for Gerald North may privately believe something that he is unwilling to admit in public.

Appendix: Robert Bradley Jr. “Doubts on Climate Are Reasonable” (Wall Street Journal letter-to-the-Editor)

Kerry Emanuel’s letter of April 28 illustrates some of the major points of Richard Lindzen’s op-ed, “Climate Science in Denial” (April 22). It is bad enough that Mr. Emanuel refers to major misrepresentations, errors and unethical behavior among scientists involved in the Intergovernmental Panel on Climate Change reports as “minor errors.” But claiming that Mr. Lindzen’s opinions are at odds with basic climate theory, which does not support climate alarmism, is worse.

Mr. Emanuel suggests that such disputed matters as sea-level rise and glacier dynamics (which depend on factors other than global warming) form a “vast body of evidence” for climate change. But no one disputes that climate is changing and has always been changing. So what is his point?

Mr. Emanuel implicitly attacks a recent paper by Mr. Lindzen and Yong-Sang Choi (2009) that, indeed, did have important errors as acknowledged by Mr. Lindzen. But according to the authors, corrections have not altered its conclusion of a low climate sensitivity to man-made greenhouse gases.

The majority of the public is right to discount anthropogenic climate change as an environmental concern. But when will many climate scientists, including Mr. Emanuel, face Climategate and the fact that the human influence on climate, on net, is as likely to be positive than negative?

Robert Bradley Jr.

CEO & Founder, Institute for Energy Research, Houston

Although he technically said nothing demonstrably false, Krugman gives the impression that there is widespread consensus that drastic action is needed to avert catastrophic climate change. This is simply not true, and all we have to do is actually read the consensus reports to see that Krugman is misleading his readers.

Krugman’s Summary of the Climate Science

After giving a good summary of the standard issues in the economics of climate change, Krugman pauses to comment on what the natural scientists (as opposed to the economists) have to say on the subject:

This is an article on climate economics, not climate science. But before we get to the economics, it’s worth establishing three things about the state of the scientific debate.

The first is that the planet is indeed warming. [I]f you look at the evidence the right way ­— taking averages over periods long enough to smooth out the fluctuations — the upward trend is unmistakable: each successive decade since the 1970s has been warmer than the one before.

Second, climate models predicted this well in advance, even getting the magnitude of the temperature rise roughly right. While it’s relatively easy to cook up an analysis that matches known data, it is much harder to create a model that accurately forecasts the future. So the fact that climate modelers more than 20 years ago successfully predicted the subsequent global warming gives them enormous credibility. [Krugman page 3, emphasis added.]

Now Krugman’s summary above is either accurate or not, depending on how much error we will tolerate in the predictions. But fair enough, we’ll agree with Krugman that climate models 20 years ago predicted higher average global temperatures, and that’s indeed what we’ve experienced.

Yet look at the move Krugman makes two paragraphs later:

And this brings me to my third point: models based on this research indicate that if we continue adding greenhouse gases to the atmosphere as we have, we will eventually face drastic changes in the climate. Let’s be clear. We’re not talking about a few more hot days in the summer and a bit less snow in the winter; we’re talking about massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades. [emphasis added.]

This is completely misleading. After establishing the rock-solid reliability of climate models that have made predictions 20 years out, Krugman changes his focus to “models based on this research” and then discusses their apocalyptic projections. But these aren’t the same models! It is simply not the case that there is a broad-based, modeling consensus on the imminent danger to the United States.

Yes, there are some alarming projections in new models; in one of his NYT op eds Krugman referred to recent work by a group at MIT. But to repeat, these alarmist projections do not have a 20-year track record; they are new projections that Krugman and other alarmists are pointing to, in order to say, “Things are worse than we thought!”

For one thing, to the extent that the 20-year projections have been verified (more or less), this is only true if we look at macro predictions such as globally averaged temperatures. It is not true that climate models have been developed which reliably predict local events (such as the temperature in the Southwestern United States) over a 20-year period. My point isn’t to suggest that these predictions are wrong, but merely to show that Krugman’s earlier point about forecasting reliability is largely irrelevant.

The Consensus Is Not Alarmist, Especially for the United States

I’m not asking the reader to take my word for it. Here is what the most recent Economic Report of the President [.pdf] had to say about the dangers of unmitigated climate change–meaning this is what they predict will happen if the government does nothing:

The…projected losses for the most likely range of temperature changes are relatively modest. For example, at the Intergovernmental Panel on Climate Change’s most likely temperature increase of 3°C for a doubling of CO2 concentration…the projected decline is 1.5 percent of GDP. [Box 9-2, p. 242, emphasis added.]

And even on the matter of American farmers, things are not as grim as Krugman led us to believe:

Although warmer temperatures may extend the growing season in the United States for many crops, large increases in temperature also may harm growth and yields…

That said, another study finds that expected changes in temperature in the United States will have a relatively small impact on overall agricultural profits (Deschênes and Greenstone 2007). Neither study accounts for the possible increase in yields from elevated carbon dioxide levels or the possible decrease in yields from increased pests, weeds, and disease.

Climate change is also likely to bring increased weather uncertainty. Extreme weather events—droughts and downpours—may have catastrophic effects on crops in some years. Growing crops in warmer climates requires more water, which will be particularly challenging in regions such as the Southeast that will likely face decreased water availability.

American farmers have substantial capacity for innovation and are already taking steps to adapt to climate change. For instance, they are changing planting dates and adopting crop varieties with greater resistance to heat or drought. They can also undertake more elaborate change. In areas projected to become hotter and drier, some farmers have returned to dryland farming (instead of irrigation) to help the soil absorb more moisture from the rain. How well the private sector can adapt to the effects of climate change and at what cost is still an open question. [Box 9-1, p. 241, emphasis added.]

Conclusion

Paul Krugman is a very smart guy, and has a gift for explaining technical issues in terms that the layperson can understand. Unfortunately, Krugman’s recent “summary” of the state of the climate science is very misleading. He makes it seem that only anti-empirical “deniers” can doubt that crisis is upon us, when in fact the case for climate alarmism is weak indeed.

Of course in the real world, if the politicians and/or EPA starts intervening in the energy sector, their actions will be far from the economist’s theoretical ideal. Then the case for such policy activism falls apart.

Frank’s Pros/Cons of Intervention

Frank’s opening paragraphs nicely summarize his views on climate policy:

FORECASTS involving climate change are highly uncertain, denialists assert — a point that climate researchers themselves readily concede. The denialists view the uncertainty as strengthening their case for inaction, yet a careful weighing of the relevant costs and benefits supports taking exactly the opposite course.

Organizers of the recent climate conference in Copenhagen sought, unsuccessfully, to forge agreements to limit global warming to 3.6 degrees Fahrenheit by the end of the century. But even an increase that small would cause deadly harm. And far greater damage is likely if we do nothing.

Frank goes on to quote a new MIT study, which paints an alarming scenario of damages from warming if world governments sit on their hands. In contrast, Frank argues that the cost to the economy of limiting greenhouse gases is not in the same ballpark. He sums up with, “In short, the cost of preventing catastrophic climate change is astonishingly small, and it involves just a few simple changes in behavior.”

So if the risks of inaction are potentially catastrophic, while the costs of preventive government measures are relatively trivial, then who but a fool or a stooge for Big Oil would question the need for immediate intervention?

Why Aren’t We Consulting the  “Scientific Consensus”?

The funny thing is, in order for me to present a less frightening scenario, I don’t have to dig up a paper from Richard Lindzen or a speech by James Inhofe. All I need to do is quote from the recent Economic Report of the President and the IPCC AR4.

From the Obama administration’s Economic Report, in a chapter ominously entitled, “TRANSFORMING THE ENERGY SECTOR AND ADDRESSING CLIMATE CHANGE” [.pdf], we learn:

[T]he projected losses for the most likely range of temperature changes are relatively modest. For example, at the Intergovernmental Panel on Climate Change’s most likely temperature increase of 3?C for a doubling of CO₂ concentration (concentrations in 2100 are likely to be higher), the projected decline is 1.5 percent of GDP. (Box 9-2, page 242, emphasis added)

To put that projected decline of 1.5 percent of GDP in context, note that the CBO puts the high-end estimate for the economic cost of Waxman-Markey above this figure (at 3.5 percent of GDP) for the year 2050. (Note that the two figures are measuring slightly different things, but the general point remains.)

In other words, we have the Obama administration’s own report admitting that the projected damages from “doing nothing” are lower than the high-end estimates of the cost of “doing something.” Granted, that might present a prima facie case for doing something, but it’s not nearly as open-and-shut as Frank would have you believe. Using the government’s own estimates, it’s entirely possible that government intervention would cause more damage than benefits, and that’s even with textbook policy implementation!

“Fat Tails”: The Small Chance of Catastrophe

Perhaps realizing that its admission of a likely 1.5 percent decline in the share of consumption in GDP would not inspire the public to gladly hand over the energy sector to the politicians, the president’s report went on to say:

The projected relationship between temperature changes and consumption losses is nonlinear—that is, the projected losses grow more rapidly as temperature increases. For example, while the projected loss for the first 3?C is 1.5 percent, the loss at 6?C is five times higher. And the estimated loss associated with an increase of 9?C is about 20 percent [of consumption’s share of GDP]…Overall, it is evident that policy based on the most likely outcomes may not adequately protect society because such estimates fail to reflect the harms at higher temperatures. (ibid, bold added)

Now we’re getting somewhere. A potential 20 percent hit to consumption is indeed frightening. But how likely is this outcome?

If we turn to the IPCC AR4, we have our answer, at least according to a suite of modeling teams across different emission scenarios:

To read the above chart, technically you need to integrate the curve over a range of temperature increases to find the probability that the actual warming will occur in that range. But simply eyeballing the chart shows that the Economic Report’s catastrophic 9C warming scenario has a virtually zero change of occurring.

Conclusion

I am not arguing that the MIT study is wrong, or that the CBO has correctly quantified the likely economic impacts of a cap-and-trade program. All I am pointing out is that the standard alarmist claims–as typified by Robert Frank–do not enjoy nearly as much evidence as their most vocal proponents would have us believe.

To take apart the case for climate alarmism, we don’t need to embrace the research of the “denialists.” We only need to look at the government and IPCC’s own reports.

Maybe Mr. Odum got his marching orders from The Hague (Netherlands), or maybe he really believes cap-and-trade is good for the oil (and natural gas) business. These are strange times. Confusion abounds in high places.

In this post, I provide a running commentary on Odum’s column.  Odum’s verbiage is indented; my comments follow in bold type. 

Today, Washington is having the wrong energy and climate debate, and the future of the U.S. economy may be the biggest casualty.

A rather amazing statement, considering that the party of cap-and-trade controls the White House and the leadership of both the House and Senate. Saint Barack, Czarina Browner, Lisa Endangerment-Finding Jackson, General Boxer, and Inquisitor Waxman occupy the commanding heights of energy and climate policy in the nation’s capital, yet ”Washington is having the wrong energy and climate debate.” How did they let that happen? Odum offers no explanation.

Rather than developing sensible legislation that creates a viable market for low-emission energy while developing more of our own oil and gas resources, Washington is engaged in a snowball fight over the science of global warming.

Yep, move along, nothing to see here. ”Snowball fight” indeed. Top IPCC-affiliated scientists conspired to bias the peer-reviewed literature they would assess, ignored research that did not fit into the “nice tidy story” they wanted to tell, and violated the UK freedom of information act to prevent independent researchers from checking their data and methods. These IPCC insiders repeatedly flouted U.S. Government standards of openness and transparency, rendering the IPCC reports  unsuitable as basis for policymaking, as Peabody Energy documents in its 240-page examination of the Climategate files.

In addition, the IPCC recently has been caught four times presenting false, biased, or unsubstantiated claims –that Himalayan glaciers will disappear by 2035, that hurricane damages are strongly linked to global temperature, that 40% of the Amazon rain forest is at risk, and that Antarctic sea ice is not growing significantly. 

More importantly, as Chip Knappenberger has shown (here and here), recent research calls into question the IPCC’s centerpiece assertion that “most” of the warming of the past 50 years is “very likely” due to greenhouse gas emissions.

Contrary to Odum, debating whether the IPCC really knows best is the right energy and policy debate. So is the debate over who should make climate and energy policy — the people’s elected representatives or politically unaccountable bureaucrats, trial lawyers, and activist judges. Alaska Sen. Lisa Murkowski’s Congressional Review Act resolution to veto EPA’s endangerment finding would safeguard not only our economy from regulatory excess but also the separation of powers and accountable policymaking (see here, here, here, and here). Murkowski’s resolution could come to a vote in the Senate as early as next week.  Although there is much debate about the Murkowski resolution, Odum says not a peep about it.

 Meanwhile, other countries are quietly going about building the vast infrastructure necessary to win the real fight — the one that will determine who will lead the new, clean-energy economy.

This is just a green variant of what Friedrich Hayek called the ”fatal conceit,” the belief that the “best and brightest” know what the “next big thing” is, and therefore should be allowed to rig the market via mandates, taxes, and subsidies to create the infrastructure of the future. Just describing this mindset should be enough to discredit it. If Odum and others are the visionaries they profess to be, they could all make a killing just by putting their money where their collective mouth is. Instead, they lobby for policy privileges because the future they envision utterly depends on the triumph of politics over markets. Their plan would lead to a net loss of jobs and wealth, as I discuss in a related post, Energy Secy. Chu’s convoluted climate economics.

Recent news reports concerning the withdrawal of three companies from the U.S. Climate Action Partnership have been cited as evidence that energy and climate legislation is stalled. If anything, these decisions indicate that we are closer to, not further from, enacting climate and energy legislation because difficult choices are being made about the best way to achieve legislation. The fact is, USCAP members continue to demonstrate a solid commitment to addressing the nation’s climate and energy challenge through strong cooperation among businesses, environmental organizations and policymakers.

This is whistling past the graveyard. Three companies withdraw from U.S. CAP, and “If anything these decisions indicate that we are closer to, not further from, enacting climate and energy legislation.” So if six members quit, that must mean we’re even closer to enacting climate and energy legislation. And if everybody quits, victory is assured!

So why has Shell Oil Co. remained an active member of this important organization? Consider that by 2050 the world’s population will increase 50 percent to 9 billion people and 98 percent of that growth will occur in what today are considered developing countries. In only 15 years’ time, about two-thirds of the world’s economic activity will be in these developing countries. Citizens there will naturally want the same standard of living we enjoy today — and this will create an enormous demand for energy.

These are reasons to oppose cap-and-trade policies! Cap-and-trade is designed to increase the cost and decrease the supply of fossil energy. Yet the pressing need in developing countries is to make energy more abundant and affordable. The top priority of the global warming movement is to stop new coal power plants from being built. Yet countries like India and China absolutely depend on the expansion of coal-based power to lift millions out of health- and life-destroying poverty (see here and here).

For Shell, the scale of our activities puts us on the front line of the global energy challenge. Shell operates in more than 100 countries, producing more that 3 million barrels of oil and gas every day. Worldwide, there are some 45,000 Shell service stations, selling transportation fuels to some 10 million customers a day. And we run more than 25 major refineries and chemical plants around the globe.

Yes, and that’s evidence of what exactly — that the world will need more fossil energy in the foreseeable future or that governments should gang up to restrict access to fossil energy and promote more costly, under-performing alternatives?

Our belief is shared by many, that in the coming decades all countries must find more energy at a much-reduced cost to the environment as we transition to a low-emission fuels economy. That transition will take time — decades. In the interim, a leading option is to expand access to oil and natural gas. Together these sources meet 60 percent of U.S. needs because they are reliable and abundant and technology has allowed new and innovative ways to lessen the environmental footprint of oil and gas operations.

Huh? How does “expand access to oil” help us ”transition” to a “low emission fuels economy?” Odum might as well say that drilling more oil will help us transition to a “beyond petroleum” economy. Yes, access to oil is critical to prosperity and wealth fosters innovation.  But that’s not what Odum means. He means that government should pick winners and losers. As soon becomes apparent, he wants government to hammer coal, which his company does not produce, in order to increase market demand for natural gas, which his company does produce. Such Enron-like behavior is par for the course at U.S. CAP.  

Natural gas, in particular, will play an important role. It is the fastest-growing and cleanest-burning fossil fuel, and some estimates say the U.S. contains enough natural gas resources to meet current demand into the next century. Shell and others are advancing technologies to safely access and develop these supplies. Enabling reasonable and environmentally sensitive access to these resources would strengthen U.S. energy security by making more domestic supply available to American consumers. It would also support the creation of American jobs and strengthen our economy while allowing research to continue on exciting new forms of energy, including biofuels and other alternative sources of energy.

Policymakers should lift moratoria and other political impediments to the development of natural gas supplies. But it would be folly for government to put all (or most) of our energy eggs in a single basket. Only a few short years ago, high natural gas prices were destroying manufacturing jobs and squeezing consumers. There is no guarantee this won’t happen again, especially if climate policies eliminate coal as an alternative to gas.

What does this mean for the United States? By working together, stakeholders, both individually and through organizations like USCAP, can set the course for comprehensive energy and environmental legislation that puts us on a path to a secure and sustainable energy future.

Okay, I’m sold, let’s all hold hands and sing Cumbaya!

It is easy to call for this kind of unified action. Delivering on-the-ground progress is a lot tougher. One thing is clear, though: Without cooperation across party boundaries and ideological divides, we run the risk of finishing the race for responsible energy and environmental legislation behind the pack.

Translation: Don’t let trifles like “party boundaries and ideological divides” hinder Shell’s quest for windfall profits!

And if there is one thing we all can agree on, it is that America cannot afford to receive the bronze medal in the race for our energy future.

The only race worth having is one in which contestants compete on a level playing field. Odum envisions a race in which government handicaps coal on behalf of oil and gas companies. If there’s a medal at the end of this race, it’s bound to be made of fool’s gold.

[Editor note: This post by Kenneth P. Green and Aparna Mathur of the American Enterprise Institute, is a slightly revised version that originally appeared at The American, AEI's flagship monthly publication.]

In December 2009, economists Hector Pollitt and Chris Thoung of Cambridge Econometrics published a self-described “short” modeling exercise on an 80 percent greenhouse-gas emissions reduction by 2050 in the United Kingdom.[1] Pollitt and Thoung used the Energy-Environment-Economy Model of Europe (E3ME), which they observe has been “used for a variety of analyses including greenhouse-gas mitigation policies, incentives for industrial energy efficiency, and sustainable household consumption.”[2] The E3ME model covers 29 European countries and uses detailed data on 42 economic sectors, 41 categories of consumer goods, 12 types of fuel, and 14 emissions, including the six major greenhouse gases.

Surprisingly, the study estimates that prices for most goods would rise by less than 1 percent. The highest price increases would be found for carbon-intensive fuels, such as natural gas, gasoline, and electricity. But it would be affordable overall.

Proponents of (forced) energy transformation trumpeted the findings. In a news piece “Low-carbon future: we can afford to go green,” Jim Giles of New Scientist quoted a climate policy expert at the London School of Economics: “These results show that the global project to fight climate change is doable” and “it’s not such a big ask as people are making out.”[3]

The New Scientist piece adds that these results correspond well to studies in the United States, quoting Manik Roy of the Pew Center on Global Climate Change as predicting that “even cutting emissions by 80 per cent over four decades has a very small effect on consumers in most areas.” The Pew Center would no doubt like to see a lot of rationing of CO2 here in the U.S.

No Inexpensive ‘Green’ Lunch

We disagree. Our prior research into the costs of indirect energy—that is, the energy used to produce, package, and distribute consumer goods and services—suggests that the Cambridge Econometrics numbers are unrealistically low. In a series of papers and studies conducted by us and coauthored with colleagues, we show that even a $15 permit price (one-fortieth of what Pollitt and Thoung model) would cause prices of most goods to rise by 1 percent or higher.[4] So hold on to your wallets.

Assumptions and models, naturally, explain the differences between our estimate than theirs. Let’s consider the major ones.

Pollitt and Thoung compared two “projections” with the E3ME model: a business as usual baseline projection extrapolated to the year 2050 and another scenario which assumes that the United Kingdom’s 80 percent reduction target is met by 2050. The two mechanisms modeled to attain the 2050 target were the European Union Emissions Trading System (EU ETS), with a cap that declines 3 percent per year, and a carbon tax levied on the sectors of the economy that do not trade in the EU ETS. Pollitt and Thoung also had to assume some significant technological achievements, including a switch from natural gas to electricity in the domestic sector, and an impressive (if implausible) assumption that electric vehicles will reach a market penetration of 90 percent by 2050.

Projecting forward to 2050, the E3ME model indicates that to achieve such reductions, the carbon price or the price of carbon permits would rise to almost €410 (about $600) per ton of CO2[j2] for the traded sector, and €210 (about $300) for the non-traded sector. These high prices are then passed forward to consumers in the form of higher prices for consumer goods.

Our own model, by contrast, uses input-output matrices to examine the effect of a carbon price increase on everyday consumption items. The direct impact of a carbon price is on fossil fuel costs, while the indirect effect comes from the use of these fuels in the production of consumption items. Our analysis, described in detail in Hassett, Mathur, and Metcalf (2009), was conducted for a period of three years: 1987, 1997, and 2003. We can use the results from this paper to see how a much higher price increase would translate to higher consumer goods prices.

To do so, we simply scale up our derived percentage price increases by the ratio of the estimated carbon price under the E3ME model to our assumed carbon price of $15 (all prices are in 2009 U.S. dollars). The table below shows the price increases that our model would predict if carbon prices did, in fact, rise to the level predicted by the E3ME model. As is amply clear, the price increases are likely to be significantly higher than 1 percent. The biggest price increases would be seen in fuel costs (to the tune of nearly 500 percent for electricity and natural gas) but would also be significant in food costs (20 to 30 percent) and transportation. So what, exactly, is causing the divergence in results between the Cambridge Econometrics numbers and our estimates?

Projected Price Increases (percent)

Why the Divergence?

There are several explanations for the sharp difference between our findings and those of Pollitt and Throug.

Our data relates only to the U.S. economy, while their results are derived from a simulation of the EU economy. Our analysis is not dynamic, in the sense that it does not allow for consumers and firms to alter their behavior in the face of rising prices, as their study does. Their study claims that the government revenues from the tax are used to encourage people to switch from natural gas to electricity in the domestic sector and to use more electric vehicles. The exact modeling of this is unclear. Also, prices in their model are affected by prices in other countries since certain products are tradable across regions.

However, even given these considerations, the Cambridge Econometrics results seem highly implausible. For instance, the assumption that by 2050, the market penetration of electric vehicles will be almost 90 percent is unrealistic given current and historical rates of adoption. There are currently no mass-market electric vehicles on the market. In Europe, fleet turnover involving only a change in fuel type (rather than a change in the nature of fuel) can take several decades.[5] Also, the assumption that the domestic sector will easily and quickly adapt and move from natural gas to electricity is questionable. A more realistic scenario is one which lies closer to our estimates, so that the dynamic response does lead to a lower incidence of the carbon tax over time, but not as much as assumed under the Cambridge Econometrics model.

Conclusion

Supporters of greenhouse gas controls often portray them as cheap and easy. But they must resort to economic models that rely on dubious assumptions of future rates of technology development and market penetration. A more straightforward input-output models suggest greenhouse gas controls will be anything but cheap, and they certainly won’t be easy. However, even small steps toward carbon rationing are proving to be unaffordable and politically dubious.

Reality bats last in the energy debate.

[1] Hector Pollitt and Chris Thoung (2009). “Modeling a UK 80% Greenhouse Gas Emission Reduction by 2050, A short modeling exercise for New Scientist” Cambridge Econometrics.

http://www.newscientist.com/data/doc/article/mg20427373.400/ce_new_scientist_report.pdf

[2] Ibid, p. 1.

[3] Jim Giles, “Low-carbon future: we can afford to go green,” New Scientist, December 2, 2009. Available at http://www.newscientist.com/article/mg20427373.400-lowcarbon-future-we-can-afford-to-go-green.html

[4]Kevin A. Hassett, Aparna Mathur and Gilbert E. Metcalf (2009), “The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis,” The Energy Journal, Vol.30, No.2, March 2009, NBER Working Paper 13554; Aparna Mathur and Kenneth P. Green (2008), “Measuring and Reducing Americans’ Indirect Energy Use, Energy and Environment Outlook, American Enterprise Institute, December 2008; Aparna Mathur and Kenneth P. Green (2009), “Indirect Energy and Your Wallet,” Energy and Environmental Outlook, American Enterprise Institute, March 2009.

[5] Kristian Bodek and John Heywood (2008) “Europe’s Evolving Passenger Fleet: Fuel Use and GHG Scenarios Through 2035.” (MIT: Laboratory for Energy and Environment) Available at http://web.mit.edu/sloan-auto-lab/research/beforeh2/files/Europe’s%20Evolving%20Passenger%20Vehicle%20Fleet.pdf

My arguments on Stossel tracked those offered here at MasterResource last month.  In short, I had no interest in engaging in a debate about the physical science of natural versus anthropogenic climate change.

I was entirely interested in the implications for public policy if we accept the most recent IPCC report at face value.  I think it’s quite interesting that even if one accepts the common definition of what constitutes “mainstream science” on this issue that one is still hard pressed to put forward a defensible mitigation scheme.

Alas, my inbox suggests that a number of people who watched the show thought I was too willing to accept the contention that there has been warming and that man likely has a lot to do with it.  Instead, a number of Fox viewers wanted me to launch World War III over the climate record. 

I didn’t for two reasons.  First, I am not a scientist and am more comfortable leaving that debate to those engaged fully in that field.  I know that this doesn’t stop a lot of people from holding forth regardless, but it stops me.  Second, one can be correct about the climate history being short of what Al Gore or Michael Mann make it out to be without being correct about the contention that anthropogenic greenhouse gas emissions has little to do with the warming at present.  For some reason, that’s an impossible point for many people to grasp.While preparing for the show, I was struck by how central the debate between Yale’s William Nordhaus and Harvard’s Martin Weitzman really is to the question of public policy and climate change (Round 1 – Nordhaus and Weitzman vs. Stern; Round 2 - Nordhaus vs. Weitzman).  Reporters and politicians almost always reach out to scientists when they want to know what the best and the brightest think we ought to do about climate change.

But it seems to me that, rather than reaching out to the scientists, these reporters and politicians should be reaching out to the economists.  They are the ones best equipped to translate prospective changes in climate (as reported to them by the IPCC) into real impact on human wellbeing … and to consider whether the costs of doing something about those impacts exceed the benefits.

Physical scientists can, of course, inform that discussion. But their work is but one source for the raw material that economists use to undertake this cost-benefit analysis.

All you really need to read to be on the knife’s edge of the “smart” debate about warming can be found in the back-and-forth between Nordaus and Weitzman.  There are other essays, of course, that are worthwhile, including Robert Murphy’s Independent Review essay, “Rolling the DICE: William Nordhaus’s Dubious Case for a Carbon Tax.” But for the most part, they are but footnotes to the conversation between those two as it now stands.

Editor’s Note: Jim Manzi is a Senior Fellow at the Manhattan Institute, and blogs at both National Review’s The Corner and at The American Scene.

It is amusing to watch advocates of rapid, aggressive carbon dioxide emissions reduction, when confronted with the plain facts of the consensus scientific projections for climate change and its associated damages, move from “science says we must do this or die” to “well, actually, the science is pretty uncertain, so it’s possible that we might die,” and then proceed to some restatement of Pascal’s Wager.

Friedman’s Throw

Tom Friedman’s recent New York Times column is a perfect illustration of this logic.  I’ll quote him at length, before demonstrating that his emission-cuts-as-insurance analogy breaks down once you plug in actual numbers:

This is not complicated. We know that our planet is enveloped in a blanket of greenhouse gases that keep the Earth at a comfortable temperature. As we pump more carbon-dioxide and other greenhouse gases into that blanket from cars, buildings, agriculture, forests and industry, more heat gets trapped.

What we don’t know, because the climate system is so complex, is what other factors might over time compensate for that man-driven warming, or how rapidly temperatures might rise, melt more ice and raise sea levels. It’s all a game of odds. We’ve never been here before. We just know two things: one, the CO2 we put into the atmosphere stays there for many years, so it is “irreversible” in real-time (barring some feat of geo-engineering); and two, that CO2 buildup has the potential to unleash “catastrophic” warming.

When I see a problem that has even a 1 percent probability of occurring and is “irreversible” and potentially “catastrophic,” I buy insurance. That is what taking climate change seriously is all about.

Computing the Odds

The United Nations Intergovernmental Panel on Climate Change (IPCC) is the leading bookie for this game.  The current IPCC consensus forecast is that, under fairly reasonable assumptions for world population and economic growth, global temperatures will rise by about 3°C by the year 2100 (Table SPM.3). Also according to the IPCC, a 4°C increase in temperatures would cause total estimated economic losses of 1–5 percent of global GDP (page 17). By implication, if we were at 3°C of warming at the end of this century, we would be well into the 22^nd century before we reached a 4°C rise, with this associated level of cost.This is the central problem for advocates of rapid, aggressive emissions reductions. Despite the rhetoric, the best available estimate of the damage we face from unconstrained global warming is not “global destruction,” but is instead costs on the order of 3 percent of global GDP in a much wealthier world well over a hundred years from now.

It should not, therefore, be surprising that formal efforts to weigh the near-term costs of emissions abatement against the long-term benefits from avoided global warming show few net benefits, even in theory. According to the modeling group led by William Nordhaus, a Yale professor widely considered to be the world’s leading expert on this kind of assessment, an optimally designed and implemented global carbon tax would provide an expected net benefit of around $3 trillion, or about 0.2 percent of the present value of global GDP over the next several centuries (page 84). While not everything that matters can be measured by money, this certainly provides a different perspective than the “Earth in the balance” rhetoric would suggest.

Now, in absolute terms, $3 trillion is normally thought of as an amount of money that’s worth pursuing. So why shouldn’t we implement such a tax?

Now to the Real World

To understand why, let’s move from the world of academic model-building to the real world of geostrategic competition and domestic politics. To realize this gain of $3 trillion, we would have to agree to, and enforce, a global, harmonized tax on all significant uses of carbon and other greenhouse gases in any material form. This would require the agreement of — just to take a few examples — the Parliament of India, the Brazilian National Congress, the Chinese Politburo, Vladimir Putin, John Dingell, and the U.S. ethanol lobby. Each of these entities and individuals has been known to elevate narrow, sectarian interests above the comprehensive good of all mankind through all time, to put it mildly.

All this aside, let’s imagine we actually could negotiate such a binding agreement. Isn’t it possible that all the side deals that would be required to get this done would create enough economic drag to more than offset the benefit of 0.2 percent of present value of global output? Our track record in closing and implementing such deals as the Kyoto Protocol, or even the current round of WTO negotiation — which, remember, is supposed to make the signatories richer — shouldn’t inspire much confidence that the theoretical net benefits will outweigh the costs created by the agreement. Indeed, today we are not even considering an actual U.S. carbon tax, which is preferred by almost all academic economists for this purpose, but instead a cap-and-trade system (i.e., emissions rationing) because it is more politically palatable to hide the costs to consumers this way. Yet even the staggering list of side-deals, offsets, special auctions, and so forth that were added to the ACES cap-and-trade bill were not enough to build a winning congressional coalition within this inefficient framework.

Further, even if we got to an agreement de jure, we would then have to enforce a set of global laws for hundreds of years that would run directly contrary to the narrow self-interest of most people currently alive on the planet. How likely do you think a rural Chinese official would be to enforce the rules on a local coal-fired power plant? These bottom-up pressures would likely render such an agreement a dead letter, or at least make it in effect a tax applicable only to the law-abiding developed countries that represent an ever-shrinking share of global carbon emissions.

A Summing Up

In summary, then, the best available models indicate that

1) global warming is a problem that is expected to have only a limited impact on the world economy and

2) it is economically rational only to reduce slightly this marginal impact through global carbon taxes.

Further, practical knowledge of the world indicates that

1) such a global carbon-tax regime would be very unlikely ever to be implemented, and

2) even if it were implemented, the theoretical benefits it might create would almost certainly be more than offset by the economic drag such a regime would produce. Other than that, it sounds like a great idea.  If our scientific forecasts turn out to be precisely correct, one could not rationally justify rapid, aggressive reductions in CO₂.

But climate models are, at a minimum, non-validated. Predicting the cost impact of various potential warming scenarios requires us to concatenate these climate predictions with economic models that predict the cost impact of these predicted temperature changes on the economy in the 21^st, 22^nd, and 23^rd centuries. It is hubris to imagine that these can guarantee accuracy, and impossible to validate such a claim in any event.  Exactly as Friedman says, “it’s a game of odds”.

But What About Extreme “Tail” Events?

Now, climate and economics modelers aren’t idiots, so it’s not like this hasn’t occurred to them prior to reading Friedman’s column. Competent modelers don’t assume only the most likely case, but build probability distributions for levels of warming and associated economic impacts (e.g., there is a 5 percent chance of 4.5°C warming, a 10 percent chance of 4.0°C warming, and so on).  The IPCC reports include extensive analyses of this handicapping, and in fact publish these probability distributions.  If you odds-adjust the forecasts to reflect that actual warming might be worse (or not as bad) as the expected case, you get just about exactly the same expected value of damages.  The economic calculations that comprise, for example, the analysis by William Nordhaus that I referenced earlier are executed in just this manner. In other words, this is a “game of odds” in which rapid, aggressive emissions reduction is a sucker bet.

What this of course leaves open is the inherently unquantifiable possibility that our probability distribution itself is wrong.  In econo-speak, there is always residual uncertainty, rather than mere risk, in any prediction.  (Note in passing that we have now moved all the way from “science says we will be destroyed” to “science says we might be destroyed” all the way to “the science might be wrong”.)

All that said, this is not an irrational concern.  The sophisticated version of this argument has been presented by Harvard economics professor Martin Weitzman.  Professor Weitzman’s reasoning on this topic is subtle and technically ingenious.  In my opinion, it is the most rigorous existing argument for a carbon tax or similar emissions reduction scheme.  Addressing it in detail is beyond the scope of this post, but I have previously responded to a slightly earlier version of it in a long online article.  Alternatively, you can watch a video of Professor Weitzman presenting his paper, and then my response to it in the exact same room a few months later.  I encourage anybody who is serious about the climate change debate to understand Weitzman’s logic in detail.

In very short form (recognizing that I will write somewhat loosely for purposes of brevity in this setting), Weitzman’s central claim is that the probability distribution of potential losses from global warming is “fat-tailed”, or includes high enough odds of very large amounts of warming (20⁰C or more) to justify taking expensive action now to avoid these low probability / high severity risks.

The big problem with this argument, of course, is that the IPCC has already developed probability distributions for potential warming that include no measurable probability for warming anywhere near this level for any marker scenario.  See, for example, WG1 SPM Figure SPM.6.  Even the scale on these charts — never mind actual predictions for the high end of the probability distributions — doesn’t go past 8⁰C.  That is, the best available estimates for these probability distributions are not fat-tailed in the sense that Weitzman means it.

Now, one can responsibly question the probability distributions developed by the IPCC.  A modest version of this is simply to recognize that we are not certain that they are correct.  But this is just a sophisticated restatement of one predicate of the Precautionary Principle.  Of course, this is true in principle for all probability distributions, and therefore for all risks.  As Weitzman himself clearly recognizes, in order for him to distinguish climate change dangers from other dangers in this matter, he must therefore show not only that it is possible that the true probability distribution of potential levels of warming is actually much worse than believed by the IPCC, but that a reasonable observer should accept it as likely that this is the case.  In order to do this, he is forced to do his own armchair climate science, and argue (as he does explicitly in the paper) that he has developed a superior probability distribution for expected levels of warming than the ones the world climate-modeling community has developed and published.  As noted above, this probability distribution is radically more aggressive than anything you will find in any IPCC Assessment Report.  I don’t think that it is credible to accept Professor Weitzman’s climate science in place of the IPCC’s.

You Can’t Prove a Negative

The only real argument for rapid, aggressive emissions abatement, then, boils down to the point that you can’t prove a negative. If it turns out that even the outer edge of the probability distribution of our predictions for global-warming impacts is enormously conservative, and disaster looms if we don’t change our ways radically and this instant, then we really should start shutting down power plants and confiscating cars tomorrow morning. We have no good evidence that such a disaster scenario is imminent, but nobody can conceivably prove it to be impossible. Once you get past the table-pounding, any rationale for rapid emissions abatement that confronts the facts in evidence is really a more or less sophisticated restatement of the Precautionary Principle: the somewhat grandiosely named idea that the downside possibilities are so bad that we should pay almost any price to avoid almost any chance of their occurrence.  This is Friedman’s update to Pascal’s wager, though he throws around the pseudo-quantification of “1%”, even though the scientific consensus he waves at doesn’t quantify anything like a 1% chance of what he describes.

But to force massive change in the economy based on such a fear is to get lost in the hothouse world of single-issue advocates, and become myopic about risk. We face lots of other unquantifiable threats of at least comparable realism and severity. A regional nuclear war in Central Asia, a global pandemic triggered by a modified version of HIV, or a rogue state weaponizing genetic engineering technology all come immediately to mind. Any of these could kill hundreds of millions of people. Scare stories are meant to be frightening, but we shouldn’t become paralyzed by them.

What Then Should Be Done?

In the face of massive uncertainty on multiple fronts the best strategy is almost always to hedge your bets and keep your options open. Wealth and technology are raw materials for options. The loss of economic and technological development that would be required to eliminate literally all theorized climate change risk would cripple our ability to deal with virtually every other foreseeable and unforeseeable risk, not to mention our ability to lead productive and interesting lives in the meantime. The Precautionary Principle is a bottomless well of anxieties, but our resources are finite — to extend Friedman’s metaphor, it’s possible to buy so much flood insurance that you can’t afford fire insurance.

Hedging against the risk to future generations of potential unanticipated impacts from global warming is a legitimate job for the U.S. government. Ideally, it would be tackled by the governments of the small number of countries with a sophisticated technology development capability acting in some kind of coordinated fashion. A massive carbon tax, a cap-and-trade rationing system, and the attempt to use the government to control the evolution of the energy sector of the economy are all billed as prudent reactions to this risk, but each is the opposite: an impractical, panicky reaction unworthy of a serious government.