Reprinted below is a letter-to-the-editor that I wrote to The Electricity Journal in response to an essay by Michael Shepard, “Turning the Climate Challenge into Business Opportunity” (The Electricity Journal, 1999, vol. 12, issue 10, pages 82-84).
The test of scholarship is how one’s arguments hold up over time. The state of knowledge changes as new evidence accumulates, so it is important to keep past work in the context of the year it was written (1999).
But what do we know now versus then? And how do you think this rebuttal reads 11 years later? (One data point: Robert Mendelsohn of Yale still believes in the conclusions of his work that I reference below as he communicated to me by email.)
Michael Shepard guest editorial, “Turning the Climate Challenge into Business Opportunity,” is premised on such statements as “the climate problem is real” and “the imperative [is] to stabilize the atmosphere’s loading of greenhouse gases.” Such alarmism and jawboning to get energy companies to divert resources toward carbon dioxide abatement is premature at best and counterproductive at worse.
Everyone who takes the climate change issue seriously—including the readers of Shepard’s article—should familiarize themselves with the recent work of Robert Mendelsohn, the E. W. Davis Professor in Yale’s School of Forestry and Environmental Studies. An anthology of essays by 26 specialists co-edited by Mendelsohn, including agricultural economics from 11 colleges and universities, reached a very interesting conclusion from an economic analysis of anthropogenic warming:
New models and methods predict that mild warming will result in a net benefit rather than a net loss to the economy. The likely warming over the next century is expected to make the US economy better off on average. . . . . Efficient private adaptation is likely to occur, even if there is not official (government) response to global warming.
In The Greening of Global Warming published by the American Enterprise Institute, Mendelsohn looked at the world economy to assess damages and benefits from a moderately warmer and wetter world. His economic conclusion: “The range of predicted effects has clearly shifted from being strictly harmful to being ambiguous.” His environmental conclusion: “Ecophysiology models . . . suggest that net primary productivity is likely to increase with warming. That is, a warmer, wetter world, with enhanced CO2, is likely to be a greener world as well.” His public policy conclusion: “Spending trillions of dollars on abatement over the next few decades is simply wasting resources, given what we now understand about climate change.”
Given that the above analysis takes the base warming case of the Intergovernmental Panel on Climate Change (IPCC) modeling community as the point of departure, an estimate that could be exaggerated by a factor of two or more, the alarmists must fall back onto “surprises” and the precautionary principle as the basis for “act now.” Sir John Browne of BP-Amoco has taken this approach.
Yet a seminal study by Tom Wigley of the National Center for Atmospheric Research calculated that a perfect Kyoto reverses only around 5% of the model-predicted anthropogenic warming and sea level rise by the year 2100. Since the Kyoto Protocol is far beyond what most developed countries can do or are willing to do, including the United States, all the business initiatives trumpeted by Shepard are a tiny fraction of the Kyoto case, equating to an effect in the hundredths or thousandths of a degree less warming 50 or 100 years out.
The conclusion for business responsibility and business strategy could be quite different from what is suggested in Shepard’s article. Businesses should not penalize stockholders by deviating from business as usual (including energy optimization) because there will be no discernible climate effect beyond business as usual. Expending scarce resources on the black hole of “climate stabilization” takes the same dollars away from other initiatives and causes (business and philanthropic) that are tangible.
Good Samaritans and good corporate citizens can do better with their time and money than embarking on a futile crusade with no clear destination or purpose. The Kyoto Protocol is dead, and it is time to consider quite seriously that global warming—anthropogenic or not—is a net benefit. Warmer, wetter, and greener surely preferable to colder, drier, and browner in any realistic scenario.
Robert Mendelsohn & James Neumann, “Synthesis and Conclusions,” in The Impact of Climate Change on the United States Economy (Cambridge, UK: Cambridge University Press, 1999), pp. 5, 321, 324.Robert Mendelsohn, The Greening of Global Warming (Washington: American Enterprise Institute, 1999), pp. 8, 24, and 27.Tom M.L. Wigley, “The Kyoto Protocol: CO2, CH4 and Climate Implications,” Geophysical Research Letters, July 1, 1998, pp. 2285, 2288.