As the 15th United Nations Climate Change Conference gets under way in Copenhagen, the pages of what one might call the skeptical press are filled with scandalized accounts of the many ways the assembled delegates will be—get this—wasting carbon.
A report in the Sunday Telegraph reckons the total number of limousines commissioned for the event “has already broken the 1,200 barrier,” while as many as 140 private jets are said to be flying VIPs in and out of the city. An editorial in the National Post laments that delegates will be treating themselves “to jumbo Indian Ocean shrimp, Norwegian salmon and fruits and vegetables from South America, Africa and Southern Europe, all flown in daily to ensure maximum freshness.” The columnist George Will predicts the delegates’ collective carbon footprint, estimated at 41,000 tonnes of CO2, “will be the only impressive consequence” of the gathering.
You see a lot of this kind of thing. “That Al Gore, preaching restraint on the rest of us, but have you seen the size of his house?” It’s supposed to highlight the hypocrisy of global warming activists. But all it really does is tacitly endorse the doomsters’ most alarmist assumptions. The planet will not be consigned to a warming hell because Al Gore lives in a big house, or because the UN delegates eat too much Norwegian salmon. You can say it’s hypocritical, but only if you accept that stopping global warming requires us to abstain from imported foods, or large houses, or flying. It doesn’t.
In truth, both sides of the global warming debate, the skeptics as much as the activists, share a common interest in exaggerating the stakes: either global warming will destroy the earth, or the effort to prevent it will destroy the economy. But that is not what the evidence indicates, on either side.
The most comprehensive attempt to date to estimate the costs to the world economy, both of global warming and of the measures needed to prevent it, is the Stern Review, prepared by the economist Sir Nicholas Stern for the British government in 2006. On Stern’s reckoning, a warming of up to three degrees Celsius over the next few decades—Copenhagen aims to hold it to two degrees—would cost between zero and three per cent of GDP annually.
Only in more severe warming scenarios, about five degrees or more, does the projected cost rise above five per cent of GDP per year. That’s not five per cent out of today’s economy, or tomorrow’s, mind you. That’s five per cent over the next century. A century from now, that is, annual output would be five per cent less due to the effects of global warming than it would otherwise be.
Bear in mind, among economists who study climate change, these are generally regarded as overestimates. The economist Richard Tol, for example, whose work Stern cites, puts the long-run costs of global warming at closer to two per cent of GDP. “A deep recession,” he writes, “wreaks as much havoc in a year as climate change would do in a century.”
On the costs of preventing climate change, however, the two economists are agreed. Provided countries adopt the most efﬁcient, market-oriented means of reducing carbon emissions—whether via carbon taxes or so-called cap and trade schemes—the costs of holding global warming to two degrees are in the range of one per cent of GDP.
That isn’t to say it will be easy: we’re talking reductions in carbon emissions by 2020 on the order of 25 to 40 per cent. But neither will it require adopting the sort of hair-shirt lifestyle that either the activists or their critics imply. It might mean taking fewer flights. It does not mean giving up flying altogether. That is, it will require adjustments at the margin: do I really need to eat the next piece of Norwegian salmon, or could I do without?
Which is where “pricing carbon” comes in. As long as fighting global warming remains a matter of Gore-style consciousness-raising and cheery advice columns on how to “Go Green,” it hasn’t a prayer. Only when it becomes a part of every economic decision, every day—only, that is, when people stop thinking about it—will we be on the way to meeting our targets.
If that sounds vaguely totalitarian, it is exactly what happens every day with regard to the more fundamental economic problem of scarcity. Rather than calculate our “cotton footprint,” or perform complex “copper audits” on our house, we just let prices do the job. That’s what prices do: they tell us where and when we should economize our consumption, without our having to think about it, or lecture others to follow our example.
What we are facing, then, is less a crisis than a problem. Consider the matter in insurance terms. If you thought there was a 20 per cent chance of global warming costing five per cent of GDP, or a 50 per cent chance of it costing two per cent, then you should be willing to pay up to one per cent of GDP to avoid incurring those costs.
I don’t want to minimize the costs either way. You can, as they say, drown in a pool that is on average a foot deep; global averages can likewise conceal some quite dire results for particular regions or industries. But we’re a few horsemen short of an apocalypse—on either side.