The climate change thing is worse than this

One reason Britain has gone so far down the green path is that politicians have not been honest about its economic implications. During the passage of the Climate Change Act in 2008, which commits Britain to cutting net carbon emissions by at least 80 per cent by 2050, the energy minister Phil Woolas rejected his own department’s estimate that the costs could exceed the benefits by £95?billion. The House of Commons never debated the costs and the Bill was passed, with only five MPs voting against.

An even more egregious example is provided by Ed Miliband, when he was climate change secretary. The Tory MP Peter Lilley had written to Mr Miliband to say that, based on his department’s own impact statement, the Climate Change Act would cost households an average of between £16,000 and £20,000. The future Labour leader replied that the statement showed that the benefits to British society of successful action on climate change would be far higher than the cost. Mr Miliband should have known this was untrue; if he didn’t, he had no business certifying that he’d read the impact statement, which he’d signed just six weeks earlier. The statement only estimated the benefits of slightly cooler temperatures for the world as a whole, not for the UK.

Whether there is climate change is a matter of climate science. That complex mix of physics, chemistry and any number of ologies.

What to do about it is an economic question to be solved using the methods of economics.

For once the ologists have pronounced (and, just for the sake of argument, let us agree that the IPCC is correct in every detail here, even down to the Himalayan glaciers) we then know that there will be costs associated with the continued use of fossil fuels, with land use change and so on. Excellent, we have more knowledge about our world.

But we also know, ineluctably, that doing something about such emissions, land use changes etc, has costs. To take but one, trivial, example. If we all move over to battery powered cars instead of ICE then there are costs involved with this. We\’ve got to invest to design the new batteries for example (and yes, investment is indeed a cost. We could have used the same money to cure cancer. Thus the cost of investing in the batteries is the not curing of cancer). Got to invest to build new charging stations, got to invest to produce more electricity to replace the petrol we\’ll not be using and so on.

And there are further costs: currently battery powered cars are a great deal less safe (for they must be made lighter, ex batteries, then ICE powered cars) so some more people will die in crashes. They are less convenient in some ways, this is indeed a cost to our convenience.

These are relatively trivial objections, this particular instance. But this logic applies to everything. Yes, there are costs to continued emissions: there are costs to limiting emissions.

Which is where the economics comes in. How much should we limit emissions therefore?

The general political (and, sadly, among a lot of the ologists as well, those expert in their own field but not in the one actually under discussion, what we do about what they\’ve found out) is that we should attempt to limit the temperature rise. This is, I\’m afraid, simply wrong.

We should be attempting to limit the cost of doing something. The limit being the cost of not doing something. Imagine, as an entirely made up number, that climate change will cause $1 trillion of damages. And by damages we mean reduction in the utility of people in the future (the only definition of \”damage\” that is usable here for it is the aggregate utility of humans that we are supposed to care about). Precisely because we care about said aggregate utility we don\’t want to then spend $2 trillion on averting those $1 trillion in damages. Because this clearly and obviously reduces aggreagate utility by $1 trillion. Nor do we want to spend nothing doing nothing: that also reduces aggregate utility by $1 trillion.

What we\’d actually like to do is spend $999,999,999.99 on reducing emissions to avoid that $1 trillion in damages from continued emissions. Sure, if we can do it for $0.01, for a cent, then that would be much better. But the absolute peak of our willingness to reduce emissions is when the cost of reducing emissions is equal to the damage that those emissions would cause. Spending more than that makes the future poorer. Which isn\’t our aim at all.

Thus it is not temperature itself which should be targetted. Nor the emissions themselves. It is the costs of doing something about those emissions. If it becomes cheaper to avoid emissions then we should do more of it. If it becomes more expensive we should do less. If the ologists tell us that the damages will be greater we should do more, if they tell us that the damages will be lower we should do less.

And here\’s what the real problem is in the whole debate. The actual economists all agree here. William Nordhaus, Richard Tol, yes, even Lord Stern, all agree in their published work that this is indeed the decision making method we should be using. Yes, I know that Tol in deeply unimpressed with Stern\’s working out of that the numbers are but that\’s a different matter. Yes, there are differences between Tol and Nordhaus on what the numbers are. But there is still that agreement on this basic logical premise. We should not spend more on trying to avert climate change than climate change will cost us.

And the problem is that absolutely none of the politicians or the environmentalists seem to agree. Or even grasp the point being made.

We desire to limit climate change in order to stop us causing the future to be poorer than it need be. It is simply entirely fucking insane to then cause the future to be poorer than it need be by overspending on climate change as a way of preventing the future from being poorer than it need be.

Yes, there are well known methods of implementing policies that achieve this desirable goal, of dealing with the problem identified. But before we go lauding the carbon tax everyone has to sign on to this basic point. The determinant of how much climate mitigation we do depends on the costs of mitigation as compared to the damage that non-mitigation will do. And until the decision makers realise this we\’re all screwed.

27 thoughts on “The climate change thing is worse than this”

  1. Yes – but there are non-cost pressures that the politicians are subject too.

    Let’s take a hypothetical small island nation. Which in the economically maximising scenario would get flooded. Quite obviously, unless there are some unique resources that couldn’t be mined underwater, it is going to be sensible to give the inhabitants $10m each and a Green Card. But imagine the outcry? And the loss of votes – which means loss of power, prestige and a decent income for the pols.

    Therefore the decision makers are not going to make this decision on purely economic grounds and there really is no point insisting that that is the rational solution. It’s analogous, I’m afraid, to the LHTD screaming about companies not obeying the law as he would want it to be, merely the law as it currently is.

    If you want political decisions to be taken on a purely economic basis, you are going to have to completely change the system of government. As as rule by appointed technocrats clearly works so well, that’s probably not a good idea anyway. (Insert specious Churchill quote.)

  2. A very good piece Tim.

    Like you, I think there probably is some climate change caused by man. It’s hard to imagine seven billion people, six billion ish of them having arrived very recently, at the same time as cars, jet aircraft, and huge factories, making no impact at all.

    I suspect the sun is a bigger factor, but – even insofar is there are anthropogenic motors to it all – I doubt the problem is as bad as some of the scare stories, though since they keep changing it’s hard to say which ones.

    I don’t even think some of the high priests think it’s as bad as they claim. If Al Gore really thought the planet was screwed unless we did something very big very quickly, he would set a better example than he does in jetting round the world and living in a house with a carbon footprint 20 times that of the average American (or whatever). At least the rape-lunatic feminists have the grace to dress down.

    The fact is, if people like Miliband and Woolas were sincere in their supposed efforts to prevent or ameliorate the negative affects of climate change, they wouldn’t do such stupid things.

    Ergo, I think a lot of the AGW stuff is about control and domination.

    I appreciate I’m preaching to the converted in many cases here.

  3. So Much For Subtlety

    Surreptitious Evil – “Let’s take a hypothetical small island nation”

    There are any number of hypothetical small island nations whose entire political and foreign policies are incomprehensible unless you assume they want to be air lifted to a functioning First World nation such as New Zealand or the US or Britain as soon as possible. See Nauru for instance.

  4. SMFS,

    You meant ‘non-hypothetical’, of course, and I was aware of them. But as we have no idea what the economically maximising amount of GW is, we have no idea what the impact would be on real countries. Except, ‘less than they claim and easily remedied.’

    By, as you say, the airlift. But they are actually unimportant in the wider context, except as something for the Greens in the industrial world to point at and scream “See all the damage you are doing!”

  5. Can we just re-frame this entire discussion with a simple point that pisses me off most about the whole AGW debat:

    Climate change =/= Global Warming

    Climate change is a direction-less term that could mean that the climate is warming or cooling as it has done several times in the past.

    Global warming is a term that has direction.

    So using set theory; all global warming is climate change, not all climate change is global warming.

  6. “And the problem is that absolutely none of the politicians or the environmentalists seem to agree. Or even grasp the point being made.”

    There is a body of thought which sees it as a moral issue: according to them, it is immoral for mankind to change the planet in any way, particularly such a sacrilegious way as ‘permanent climate change’. According to that same morality, it is not immoral to reduce the impact on the planet by reducing the number of people on it – that’s morally required.

    The Graun’s position is founded on the idea that the things being called for to ‘prevent climate change’ are benefits, not costs. From their misanthropic standpoint, the more that is spent on ‘decarbonisation’, the better.

  7. Bob,

    You’re right that “climate change” is not the same as “global warming” but that doesn’t mean it’s not appropriate to use the term to describe what is happening at the moment. Global warming is the immediate consequence of adding GHGs to the atmosphere, climate change is what happens as a result of that – the consequences can be wider than just increased temperatures. Of course climate change has happened in the past for all kinds of reasons but it’s usually pretty clear from the context when people are using the term to describe current and future climate change as a result of GW.

  8. Bob – you’re right if we’re talking literally (and I used both terms as though they were interchangeable, mainly because it’s easier to type AGW than climate change and we all sort of know what we mean).

    But where I think you’re wrong is that they *are* a set and their is equivalence, in that what used to be indisutable global cooling = then became indiputable global warming = then became climate change, because the real game is not actually about climate (which as I say I think probably is changing, probably partly because of man) but about power, tax and control (all of which predate by a long way any effect man could ever have had on the climate).

  9. There was never “indisputable global cooling”. Even when the possibility was being mooted by some in the 70’s there were far more people predicting warming.

  10. Fair enough, Andrew, a loose use of language. The point is, predictions are made, and often turn out to be wrong, but that doesn’t mean they can’t be used as a means of control.

  11. Interested,

    OK, but sometimes such predictions are correct, or at least reasonable given our current knowledge. So whilst I certainly agree that we should be wary of government initiatives which impact on our freedoms in the pursuit of some greater good we shouldn’t necessarily assume that because we don’t like particular polices there isn’t a problem, or the intentions of government are necessarily malign. I have argued as much as anyone against the abuses of civil liberties we saw under the last government (and this one) in their attempt to combat the threat of terrorism, but I still recognise that there is a real threat.

  12. Andrew, I agree – again.

    I dobn’t believe all politicians are liars or cheats or idiots, though I do think the machine sucks them in. I think it is very, very hard to go against the flow and achieve anything.

    However, my question is, if Miliband, Woolas and Gore (etc) really believe the science, why do they do the things they do?

    I can only assume they are stupid (a given), or venal, or that there is some other motive. None of which disproves the science, I accept.

    I must say the case of Al Gore really, really puzzles me. His carbon footprint etc immediately mark him out as a giant hypocrite, and in his own terms a dangerous one, and tend to mitigate against people believing him – so what IS his game?

    Is it JUST to make money?

  13. Re terrorism, there is a real threat. The question is, are the measures the government is putting in place the best means of defeating the terrorists? And even then, are they worth it?

    Is one downed airliner a year worth everyone’s phones being tapped?

    I think not, though I hope neither I nor any of mine are ever on that aircraft.

  14. “What to do about it is an economic question to be solved using the methods of economics.”

    Isn’t it a political question?

    (not saying that economic conclusions are not political at least in part)

  15. Interested,

    I don’t have any strong feelings about Gore but I agree that he isn’t necessarily the best figurehead (if it is fair to call him such a thing) for action on climate change, if only because he is naturally going to be a politically divisive figure. But to be fair, he does take steps to reduce his carbon footprint – he gets the power for his home from renewable providers, he offsets the emissions from his international travel (personally I think offsets are bollocks but that doesn’t mean he isn’t trying to do the right thing) and the money he has made from his book and film has been donated to his non-profit foundation. I think it’s also true that if it were not for his position and his wealth it is unlikely he would have been able to raise the public consciousness on the issue as much as he has so it’s a kind of double edged sword.

    I’m sure that despite all that his carbon footprint is still far bigger than ours, it will always be the case that rich people have a bigger CFP than poorer people. But what’s the answer – do we want all rich people to forego their comfortable lifestyles? After all, this can’t ultimately be just about Gore. If us “warmists” actually suggested such a thing we would be accused of using the issue as a pretext for waging class war. I think the wealthy (including Gore) will certainly have to pay their share of the costs of any action we might choose to take on AGW, but I think we have to accept that some people will have more luxurious lifestyles and thus greater energy needs than others and ensure that any policies take that into account.

  16. Interested,

    I think you raise very valid questions @15. I think a lot of the policies we have seen have been very blunt instruments and I’m not sure there is much evidence they have actually prevented terrorist attacks.

  17. So Andrew Adams

    When Gore pockets $100m for selling his TV channel to the oilmen of the middle east he is not being backed by Big Oil. And he is not in this for the money !!!

  18. Fred,

    I think Gore’s concern about climate change is genuine and not driven by financial considerations. That doesn’t mean he is not interested in making money at all – he is still a businessman.

  19. Going back to the original post, it’s not just a question of economics – there are moral, political and practical considerations as well. Not all impacts of climate change can be assigned a meaningful economic cost and how we assess them may depend on individuals’s value judgements. Also, even if we can determine that the overall cost of action to combat CC is less than the cost of inaction there is still the question of who pays. The people who would bear such costs are not necessarily the ones who would suffer the worst consequences of inaction. People living in certain locations now would end up bearing the costs for the benefit of others living elsewhere or in the future.

  20. Pingback: UK: When hysteria trumps economics | Religious Atrocities

  21. But politics is never rational. It’s about the exercising power. The Climate Change Act makes perfect sense in that value system: the players get to make us poorer & colder. What’s not for them to like?

    Take the bans on smoking and alcohol. People who do these tend to die sooner. Saves a boatload of healthcare and pensions. But making them change their behaviour is much more fun.

  22. One is reminded of the economist on a desert island with an unopened can of beer, “Assume we have a can opener.”

    Your analysis is absolutely correct but it entirely begs the prior question, “what is the cost, if any, of man made climate change, if any?” Unless and until we have hard numbers on the manmade component of climate change – assuming that there is one – and what fraction of that component is directly and unquestionably ascribable to CO2 emissions, the amount to be efficiently spent reducing such emissions pretty much defines the term “crap shoot”.

    And, remember, getting the crap shoot number wrong on the high side will mean significant opportunity costs for people alive right now. Money wasted on windmills is not being used to finance water security.

    As I so often say at this site, unless and until the science is a bit more certain, the models not completely flummoxed by a 17 year warming pause, a real connection established between “global warming” and actual extreme weather, it is economically insane to spend any money whatsoever dealing with a problem which may not exist and, if it does exist, may be far cheaper to work around.

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