Pragmatism and Anthropogenic Global Warming

“U.S. to be pragmatic on Climate Issue,” is the headline that Roger Harrabin chose for his BBC article describing the Obama administration's policy on reducing carbon emissions. A pragmatic stance depends on the consequences of possible actions. If I am a smoker concerned with my health, a pragmatic response is to quit smoking. If a man in a neighboring community is a smoker who is knowledgeable about the health consequences and alternative programs to quit, a pragmatic response is to mind my own business. If my wife was an informed smoker, and her smoking affects my health, a joint solution is needed even if she is unconcerned with her health.  The final example describes an externality or spillover affect; a third party, me, the non-smoker, is affected by my wife's decision to consume tobacco.  It is the same problem caused by carbon emissions on an international basis; one country's consumption may affect other countries. 

There have been a great number of dire predictions of the climatic consequences of unabated carbon emissions.  The Stern Review is an important example of a document listing severe consequences.  The "Executive Summary" of the Stern Review estimates the cost.

The evidence shows that ignoring climate change will eventually damage economic growth. Our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes. Tackling climate change is the pro-growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries. The earlier effective action is taken, the less costly it will be.

War Chronicles estimates World War II deaths, both civilian and military, at 48 million, or approximately 2% of world population.  If the same percentage of deaths occurs, the approximate deaths would be 167 million assuming a population of 8 billion.  GDP losses would be of a similar magnitude, and would be caused by flooding, declining crop yields, deaths from malnutrition, heat stress, and vector-borne diseases.  Irreversibility of climate change is often called a tipping point.  The Stern Review states that annual emissions would have to fall by 80% to achieve a sustainable world climate. 

Harrabin interviews Jonathan Pershing, the head of the U.S. delegation to the United Nations meetings on climate change.  A few quotes from the article suggest that the administration assessment is in line with the Stern Review, but it pushes off much of the cost on future administrations.

But he [Pershing] said the US should not make promises for 2020 that it could not keep: "It is not the point in time in 2020 that matters - it is a long-term trajectory against which the science measures cumulative emissions.

"The president has also announced his intent to pursue an 80% reduction by 2050.

"It is clear that the less we do in the near-term, the more we have to do in the long-term. But if we set a target that is un-meetable technically, or we can't pass it politically, then we're in the same position we are in now… where the world looks to us and we are out of the regime...

Mr Pershing did promise that the US would help poor countries to fund clean technology. He would not mention figures but he hinted the sums would be much less than many developing countries demanded.

"The notion that the USA would transfer funds to pay for the entirety of the world's development is implausible. The characterisation often made in these meetings [from developing countries] is that we will only do actions that are paid for. That's a limited vision and we'd like to turn that round."

In "The Cost of Cap-and-Trade," I note that current implementation of a cap-and-trade system is estimated at $2 trillion over an eight year period, about 175% of the cost suggested by the Stern Review that would be necessary to reduce carbon emissions by 80%.   Congressmen who always seem ready to spend and reluctant to tax has voiced considerable opposition to the plan.  
There are methods of forcing reluctant countries to fund their own "clean" technology.  Some are discussed in a note by The United Nations Framework Convention on Climate Change.  The note lists negative and positive consequences for poor countries of carbon reduction policies by wealthy countries.  To be sure, the note envisions large transfers from wealthy countries to the poor, and expresses concern that lowering carbon emissions will be used as a pretext to impose protectionist policies.  The note also describes how tax regimes could force poor countries to fund carbon reduction technologies.  The numbers refer to the paragraph of the note.

21.  Carbon taxes or levies have been implemented in several countries, and have been proposed in many others.  They are generally based on the carbon content of the covered items, and tend to be focused on energy products such as fuels.  Imported fuels are also subject to the schemes, as the tax is typically levied at the point of domestic sale.  The key overseas consequences of such taxes would fall upon foreign exporters of relatively carbon-intensive energy products such as oil and coal, who could see their market share drop as the relative prices of their goods increased.  Conversely, foreign exporters of environmentally sound energy technologies would see increased market share...

34.  Border carbon adjustment:  Countries that take strong measures to address climate change often also consider parallel measures to address what they see as competitiveness and carbon leakage problems.  Among these measures are two types of border measures that have been widely proposed to impose costs on imports equivalent to that faced by domestic producers.  The first, usually considered as a complement to a carbon tax regime, is a tax adjustment, which imposes a levy on imported goods equal to that which would have been imposed has they been produced domestically.  The second, considered as a complement to a cap-and-trade regime, is a requirement to buy offsets at the border equal to that which the producer would have been forced to purchase had the good been produced domestically.  The impact of such schemes would be functionally equivalent to an increased tariff: decreased market share for covered foreign producers.  While border carbon adjustments would involve negative consequences for foreign producers, such schemes would not likely be implement in isolation, but would function as parallel initiatives to climate change action in the implementing state.  If they were implemented fairly, such schemes would leave trade and investment patterns unchanged, being aimed at just offsetting the competitiveness impacts of domestic policies such as carbon taxes or cap-and-trade.

My pragmatic response is somewhat different based on what I believe to be a possible overestimation of the cost of AGW based on a lower probability of extreme negative costs, the positive externalities of trade, negotiating complexities, and the negative tendencies of politicians to follow populist and badly reasoned trade policies.

After a review of the IPCC cited papers used to support claims of drastic climate change, Kesten Green and Scott Armstrong researched ("Global Warming: Forecasts by Scientists Versus Scientific Forecasts," Energy and Environment, Vol. 18, No. 7+8, 2007 ) conclude,

The forecasts in the Report were not the outcome of scientific procedures. In effect, they were the opinions of scientists transformed by mathematics and obscured by complex writing. Research on forecasting has shown that experts’ predictions are not useful in situations involving uncertainly and complexity. We have been unable to identify any scientific forecasts of global warming. Claims that the Earth will get warmer have no more credence than saying that it will get colder.

Green, Armstrong and Soon, ("Validity of Climate Change Forecasting for Public Policy Decision Making," International Journal of Forecasting, forthcoming) find that a model predicting no temperature change is as accurate in short range predictions, and more accurate in long range predictions than the .03 degree Celsius per year rate of change claimed by the IPCC. The policy implication is that government should not take action to reduce carbon dioxide emissions.

Beginning with Adam Smith, economists have stressed the good economic and moral value of trade.  Specialization through trade makes countries wealthier, and wealthy people demand a cleaner environment.  Trade results in shared ideas which are often converted into new production methods and products.  Finally, trade may result in a lower probability of war, as positive associations between people in different countries create an economic constituency for peaceful international relations--a sort of anti military industrial complex complex. 

Negotiations to reduce carbon emission are very complex.  The citizens of some nations would benefit from a warmer climate.  Others may not trust the science behind AGW.  Still others would cheat on agreements, viewing cheating as beneficial to them if others live by the agreement.  It is the prisoners' dilemma problem on an international stage, and peaceful enforcement of any agreement would be difficult.

Finally, politicians do what's best for them.  That may include continued employment and wealth as well as the public interest.  If their constituents want to seek in protectionist trade restrictions, they are likely to get them.  If inefficient "green" technologies benefit some constituents, we are likely to see impoverishing "green" technologies supported through law and tax subsidies.  Unless carbon emissions result in dire consequences, the cost of a global solution is likely to be higher than any associated benefit.