In Matt Ridley’s recent Wall Street Journal article he claimed that a rise of 1.2 degrees over the next 70 years would be largely beneficial. He doesn’t back this up with any evidence and, as far as I’m aware, there really is none. There may be regions where the effects could be positive, but many regions where they will likely be negative. I’m, however, no expert at this so thought I would reblog this interesting post from someone who appears to know more than me.
Surprisingly, the most common question I get asked isn’t about whether climate change is happening. More typically, people are curious about how I feel about climate change and often ask about what worries me about the future.
Many of the scientific concepts that we use to talk about possible future climatic change are just that – complex scientific concepts. So when asked, I like to talk about how I feel about potential future climate change.
For example, climate scientists are concerned with pinning down a number for the Equilibrium Climate Sensitivity (ECS). This refers to the global average surface warming response to a doubling of atmospheric carbon dioxide concentrations after the system has settled and reached a new steady state.
In the real world, it could take hundreds of years or longer to see what temperature change would result from carbon dioxide doubling.
This concept is hard to…
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He might have a point here, though I suspect that he is playing with words, rather than pointing out the concept he’s talking about clearly. There is a very fundamental difference between total costs/benefits and marginal costs/benefits, and there is the important, but mostly ignored concept of sunk costs. This gets typically screwed up in the blogosphere for whatever purpose it might serve (unfortunately, not only by skeptics, Joe Romm comes to mind, too – but of course also WUWT).
I’ll just quote:”Even if, initially, economic impacts may well be positive, it does not follow that greenhouse gas emissions should be subsidized as the climate responds rather slowly to changes in emissions. The initial impacts cannot be avoided; they are sunk benefits. (…) Even though total impacts of 1-2ºC warming may be positive compared to today, incremental impacts are negative.” And provide the link:
Click to access 584378270.pdf
As you not, on should never forget that there might be some implicit Kaldor-Hicks-type efficiency behind it: that there are losers and winners, and that just the losers do not lose enough to make the global impact negative.
Indeed, you may well be right. However, according to Matt Ridley’s response to John Abraham’s rebuttal it appears to be based on a statement on the UNFCC website that says “A global warming of less than 2.5°C could have no significant effect on overall food production,”. He seems to rather underplay the term, could. As you indicate, it is possible that the net effect of a 1 – 2 degree rise could be overall positive, but there will be winners and losers. We should at least acknowledge this. We also, presumably, do not know that this is likely to be true. Stating it as though it is a fact is disingenuous. Additionally, we’ve also locked in about 1 degree of extra warming (which is what I assume you mean by sunk benefits). So what we should be discussing now is whether or not we’re comfortable with more than 2 degrees of warming. I suspect that we shouldn’t be, but if we want to avoid this we presumably have to start doing something now. The uncertainties in the ECS estimates also means we should at least consider the possibility that the warming could be on the high side of the estimate rather than assuming (as many seem to be doing) that the lower estimates are more credible.
And he’s just discussing food production. Sea level rise? Population dislocation? Disease spread? The list goes on. The benefits of warmth are dwarfed by the disbenefits. And we’re going to blow through 2.5C anyway – so it’s a moot point.
Yes, we should include uncertainty and catastrophic risk. Though, this alone does not tell us much about how we should respond to it: the perception of risk depends, like everything, on our preference parameters (risk aversion, in this onctext). To be fair, though, this is not absent in SCC assessments (notably PAGE), but one can of course argue to what extent they capture it in a satisfactory way.
With regard to ECS estimates, a (stylised) fat-tailed distribution of the ECS (as we estimate it) is exactly the basis of Weitzman’s Dismal Theorem (invalidating standard CBA analysis and with it IAM assessments of SCC). Pindyck made a very similar point in a recent NBER working paper, though – as far as I can see – it contains exactly nothing new, and some obvious blunders. Still, it may be a good overview over criticisms of IAMs (if a bit one-sided?):
However, it should be noted that neither Weitzman, nor Pindyck, offer an alternative decision criterion. “Catastrophe insurance” makes sense, intuitively speaking, but what, exactly, does it mean, e.g. in terms of a carbon tax (understood as a policy instrument to reduce emissions)? It’s telling that both suggest, for starters, to go with IAM based SCC estimates anyway (as sort of benchmark estimates – they are as good as any guess, so to speak) and then adjust “as we learn more” (see Pindyck). That is because a consequence of the Dismal Theorem is that any arbitrarily high carbon tax might be justified on the basis that expected utility of this policy might be unbounded (as the castastrophe scenario has unbounded expected disutility).
I am not sure if a linked this already, but here are Anthoff/Tol suggesting minimax regret as an alternative decision criterion in the face of potential catastrophe:
Click to access art%253A10.1007%252Fs10479-013-1343-2.pdf
All that said, I really think that getting preference parameters right as restraints on what can be accompished is really important – this is not some narrow-minded economists’ obsession merely springing out of optimal growth theory (though it does). Whatever one thinks about the Stern Review, for example, his SCC estimate of 85 dollars per ton CO2 is so far away from anything any political entity is even considering to do that I am not sure if ethical considerations are a good way to make policy proposals. In recent years I tend more and more to see some wisdoms in Nordhaus’ old argument that a carbon tax should start low (even if it has not much effect), and then ramp up as time passes – meaning that we should keep preference parameters as policy choices rather than ethical ones (though this is not how he sees is). Climate policy is, I think, much more about what can be done than about what “should” be done (in principle, not considering specific cases of gridlock as in the US in the moment): overall drastic measures might be self-defeating if they go against real parameters and, as a consequence, more damaging than insufficient measures (measured against what “should” be done). And I think this is really a topic where economics can deliver some insights (though not dictate policies) and environmentalists tend to get a bit silly, at times (say, confusing the discount rate with time preference, and suggesting that decision should be made according to the gut feeling of the concerned):
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