Jousting on global warming

by Russ Roberts on February 21, 2007

in Environment

David Leonhardt at the New York Times (HT: Jim Morse) reports on a lively debate at Yale on global warming between Nicholas Stern and Yale economists including William Nordstrom and Robert Mendelsohn:

Last week, Sir Nicholas Stern, a top adviser to the British government, came to the United States to talk about climate change. In October, a commission he led released a 700-page report
calling for “urgent action” against global warming to prevent economic
damage that could rival that of the world wars and the Great
Depression. Given its source and its tone, the Stern Review has nudged
people to talk more seriously about climate change.

In the minds
of a lot of American economists, however, the review is a badly flawed
piece of work. These economists don’t doubt that earth is getting
hotter, that human activity is the cause and that the results could be
bad. But they think that Sir Nicholas may have exaggerated the likely
speed of warming, among other things, and overstated the case for big,
quick action.

The epicenter of the opposition has been here at Yale,
and so last week, after stopping in Washington to testify before
Congress, Sir Nicholas came to New Haven for a public debate with his
critics. With a couple of hundred students and professors in the
audience — and a sculpture of an angry Zeus-like figure looming above
the stage — the two sides went at it in the dignified, vicious way that
academics do.

I like Leonhardt’s summary of who won:

The Stern Review assumed that a dollar of economic damage prevented
a century from now (adjusted for inflation) is roughly as valuable as a
dollar spent reducing emissions today. In effect, the report argues for
spending the money to cut emissions because future generations have as
much claim on resources as current generations. “I’ve still not heard a
decent ethical argument” for believing otherwise, Sir Nicholas said at
the debate.

I’m guessing that your instinct is to agree with him.
Mine certainly was. The problem is that none of us actually behave this
way. If we really thought that our great-grandchild deserved our money
as much as we do, we would never go out to dinner again. Instead, we
would invest the $50 we would have spent on dinner, confident that it
would grow over time and become perhaps $1,000 for our great-grandchild
to put toward health care, education or a supercomputer. Any of that is
preferable to our measly dinner.

But a dollar today truly is more
valuable than a dollar a century from now. For one thing, your
great-grandchild will almost certainly be richer than you are and won’t
need your money as much as you do. So spending a dollar on carbon
reduction today to avoid a dollar’s worth of economic damage in 2107
doesn’t make sense. We would be better off putting the money toward
something likely to have a higher return than alternative energy, like

But then Leonhardt implicitly invokes the precautionary principle:

Technically, then, Sir Nicholas’s opponents win the debate. But in
practical terms, their argument has a weak link. They are assuming that
the economic gains from, say, education will make future generations
rich enough to make up for any damage caused by climate change. Sea
walls will be able to protect cities; technology can allow crops to
grow in new ways; better medicines can stop the spread of disease.

one knows whether this is true, let alone desirable, because no one
knows what life will be like on a planet that is five degrees hotter.

And so he concludes (Greg Mankiw will be happy) that it’s time for a tax on carbon emissions.

I’m not sure no one knows what life on the planet will be like if it were five degrees hotter. It’s a good question to explore.

I’d also like to see an estimate of the risks involved in living with an emissions tax large enough to stop five degrees of warming.

is it clear which risk is bigger?

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Mike Hammock February 21, 2007 at 10:51 am

At this point, I don't think any carbon tax can prevent all five degrees (or however much actually occurs–there is still some uncertainty) of warming. It's more a matter of reducing warming from five degrees to two or three degrees.

There is another uncertainty as well: We don't know the price elasticity of emissions of CO2. Suppose we decide to replace payroll taxes with taxes on CO2. It may turn out to be the case that getting rid of CO2 is significantly less costly than everyone expected. This is a good thing in that lots of CO2 emissions will disappear, but it's a bad thing in the sense that the tax revenue collected will be low, and we'll be forced to either cut spending or impose some other tax to make up the difference (and we all know how unlikely it is that spending will be cut).

David White February 21, 2007 at 12:47 pm

Everyone chill out and let advanced technology tack care of it:

"We are awash in energy (10,000 times more than required to meet all our needs falls on Earth), but we are not very good at capturing it. That will change with the full nanotechnology-based assembly of macro objects at the nano scale, controlled by massively parallel information processes, which will be feasible within twenty years. Even though our energy needs are projected to triple within that time, we'll capture that .0003 of the sunlight needed to meet our energy needs with no use of fossil fuels, using extremely inexpensive, highly efficient, lightweight, nano-engineered solar panels, and we'll store the energy in highly distributed (and therefore safe) nanotechnology-based fuel cells. Solar power is now providing 1 part in 1,000 of our needs, but that percentage is doubling every two years, which means multiplying by 1,000 in twenty years. Almost all the discussions I've seen about energy and its consequences, such as global warming, fail to consider the ability of future nanotechnology-based solutions to solve this problem." —

Slocum February 21, 2007 at 3:25 pm

"I'd also like to see an estimate of the risks involved in living with an emissions tax large enough to stop five degrees of warming."

Yes, the assumptions are always that the tradeoff is merely, say, 2% of GDP with no possibility of unexpected non-linear effects. For example, what would happen if the airline/leisure travel business shrunk to a small fraction of its current size, with a glut of used airplanes and orders to Boeing and Airbus drying up? This is not really far-fetched as high-altitude aircraft emissions are supposedly several times worse than an equivalent amount of CO2 and water vapor emitted at ground level.

I don't see any reason not to think the effects of manipulating global economy are any more inherently predictable than manipulating the global environment.

Tim Lundeen February 21, 2007 at 5:56 pm

I agree with Mike's post that this discussion about what we should do today totally disregards techological change — it is pretty linear thinking, when relevant technology is on an exponential path.

Bruce Hall February 21, 2007 at 6:14 pm

Read an online exhange (in the comments for this post) regarding the complexity of Global Warming issues between Dr. Gavin Schmidt of NASA who writes for RealClimate and Dr. Roger Pielke, Sr. of Colorado University (CIRES) who writes for Climate Science:

There is considerably more disagreement among scientists… who actually talk about those disagreements… regarding drivers of climate change than the IPCC (and politicians') pronouncements would lead people to believe.

It wasn't too long ago when we were all going to die from skin cancer if we didn't stop using air conditioning… ozone holes… remember? Policy based on hyperbole is probably not good economics.

Bruce Hall February 21, 2007 at 6:35 pm

You may also want to refer to Dr. Lubos Motl, Harvard physicist, who brings up some important points about models being used by the IPCC.

Again, this reinforces the point that organizations with political agendas are not necessarily the most reliable sources for interpreting science to politicians for purposes of policy making.

Sam Grove February 22, 2007 at 1:49 am
Ray February 22, 2007 at 8:44 am

Yes what are the effects of a carbon tax to mitigate the effects of global warming that the technical people say? I thought that's what you policy types were supposed to do. Why don't you do the research and come up with some scenarios of what might happen if what they say is true rather than just saying they're wrong? How about some win-win possibilities to meet their predictions with approaches that are flexible enough to remain win-win even if they are wrong or that can be adjusted if the predictions are simply slower that expected. Or is that too much more difficult than simply criticizing? You seem to give more weight to anyone who disagrees; but then I guess it's not any different for you to latch on to the 5% of the climatologists who disagree than it is for me to latch on to the 5% of the economists who disagree with you – mea culpa.

pj February 26, 2007 at 5:51 pm

So, what is the optimal global average temperature? Just asking the question should be sufficient to highlight the absurdity of the notion that we should impose carbon taxes, yet nobody is asking that question.

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