Topic: Energy and Environment

Another Shot Fired in the Carbon Tariff Debate

I’ve written before about the “carbon tariff” debate, and will continue to do so as the Senate gears up to write a climate change bill. Indeed, I have a paper coming out in early September with a fuller analysis of the effects of slapping tariffs on countries in an effort to force them to sign up to international carbon-limiting agreements. [Spoiler alert: you’ll be shocked to know that I conclude that using trade measures in climate change policy is possibly illegal under world trade rules, definitely costly to the U.S. economy, and more than likely counterproductive in the efforts to forge a climate agreement (for what that’s worth).]

Seemingly unconcerned about the costs of green protectionism, ten Democratic senators crucial to the upcoming Senate vote (long-standing protectionists all, with the exception of newbie Al Franken) sent a letter to the White House yesterday, urging President Obama to rethink his (lukewarm) resistance to carbon tariffs. They argue that a dreaded “unlevel playing field” would result from saddling U.S. industries with higher carbon costs while, say, Chinese ones remain unencumbered.

You’ll have to wait for my paper for a full examination of those arguments, but in the meantime here’s some excellent analysis of the politics of it all by former Catoite, international trade lawyer, and friend of liberty Scott Lincicome. He assesses the scorecard as follows:

Pro carbon tariffs - Ten protectionist Senators, the US House of Representatives (in Waxman-Markey), France [link added], and Paul Krugman.

Anti carbon tariffs - the rest of the world.

Flood Insurance: Mend It or End It, But Don’t Just Extend It

Before leaving for the August recess, the House of Representatives passed a bill (HR3139) to extend the authority for the National Flood Insurance Program (NFIP) until March 2010.  The program was set to expire on Oct. 1, 2009.   The bill now goes to the Senate.  Instead of taking up HR3139, the Senate should insist on real reforms to the NFIP, rather then a blanket extension.

Since Hurricane Katrina, the NFIP has operated under a deficit of close to $17 billion, which had to be borrowed from the Treasury in order to pay claims.  Under the NFIP’s current structure, it cannot even make the interest payments on its borrowing; these losses will ultimately hit the taxpayer. 

The Senate last Congress passed a strong reform bill that would have eliminated almost half of the subsidies in the NFIP.  The House decided to instead seek an expansion of the broken program, adding wind coverage and raising the coverage levels (despite the availability of private flood insurance).

Many of the homes receiving subsidies under the NFIP are either vacation/second homes or properties where the government has paid repeated claims.  In one instance, a house in Houston this is valued at around $100,000 received over $800,000 in flood insurance claims over a 20-year period, before it was finally destroyed. 

Not only does the NFIP subsidize at taxpayer expense beach-front vacation homes, but there is growing evidence that the program causes substantial harm to the environment and local fisheries.  Just last year, the National Marine Fisheries Service issued a finding that the NFIP is pushing orcas and some runs of salmon to extinction.  Before the federal government forces significant costs on the private sector to protect the environment, perhaps it should take a close look at the damage its own activities inflict.

Cherry Picking Climate Catastrophes: Response to Conor Clarke, Part II

Conor Clarke at The Atlantic blog, raised several issues with my study, “What to Do About Climate Change,” which Cato published last year.

One of Conor Clarke’s comments was that my analysis did not extend beyond the 21st century. He found this problematic because, as Conor put it, climate change would extend beyond 2100, and even if GDP is higher in 2100 with unfettered global warming than without, it’s not obvious that this GDP would continue to be higher “in the year 2200 or 2300 or 3758”. I addressed this portion of his argument in Part I of my response. Here I will address the second part of this argument, that “the possibility of ‘catastrophic’ climate change events — those with low probability but extremely high cost — becomes real after 2100.”

The examples of potentially catastrophic events that could be caused by anthropogenic greenhouse gas induced global warming (AGW) that have been offered to date (e.g., melting of the Greenland or West Antarctic Ice Sheets, or the shutdown of the thermohaline circulation) contain a few drops of plausibility submerged in oceans of speculation. There are no scientifically justified estimates of the probability of their occurrence by any given date. Nor are there scientifically justified estimates of the magnitude of damages such events might cause, not just in biophysical terms but also in socioeconomic terms. Therefore, to call these events “low probability” — as Mr. Clarke does — is a misnomer. They are more appropriately termed as plausible but highly speculative events.

Consider, for example, the potential collapse of the Greenland Ice Sheet (GIS). According to the IPCC’s WG I Summary for Policy Makers (p. 17), “If a negative surface mass balance were sustained for millennia, that would lead to virtually complete elimination of the Greenland Ice Sheet and a resulting contribution to sea level rise of about 7 m” (emphasis added). Presumably the same applies to the West Antarctic Ice Sheet.

But what is the probability that a negative surface mass balance can, in fact, be sustained for millennia, particularly after considering the amount of fossil fuels that can be economically extracted and the likelihood that other energy sources will not displace fossil fuels in the interim? [Remember we are told that peak oil is nigh, that renewables are almost competitive with fossil fuels, and that wind, solar and biofuels will soon pay for themselves.]

Second, for an event to be classified as a catastrophe, it should occur relatively quickly precluding efforts by man or nature to adapt or otherwise deal with it. But if it occurs over millennia, as the IPCC says, or even centuries, that gives humanity ample time to adjust, albeit at a socioeconomic cost. But it need not be prohibitively dangerous to life, limb or property if: (1) the total amount of sea level rise (SLR) and, perhaps more importantly, the rate of SLR can be predicted with some confidence, as seems likely in the next few decades considering the resources being expended on such research; (2) the rate of SLR is slow relative to how fast populations can strengthen coastal defenses and/or relocate; and (3) there are no insurmountable barriers to migration.

This would be true even had the so-called “tipping point” already been passed and ultimate disintegration of the ice sheet was inevitable, so long as it takes millennia for the disintegration to be realized. In other words, the issue isn’t just whether the tipping point is reached, rather it is how long does it actually take to tip over. Take, for example, if a hand grenade is tossed into a crowded room. Whether this results in tragedy — and the magnitude of that tragedy — depends upon how much time it takes for the grenade to go off, the reaction time of the occupants, and their ability to respond.

Lowe, et al. (2006, p. 32-33), based on a “pessimistic, but plausible, scenario in which atmospheric carbon dioxide concentrations were stabilised at four times pre-industrial levels,” estimated that a collapse of the Greenland Ice Sheet would over the next 1,000 years raise sea level by 2.3 meters (with a peak rate of 0.5 cm/yr). If one were to arbitrarily double that to account for potential melting of the West Antarctic Ice Sheet, that means a SLR of ~5 meters in 1,000 years with a peak rate (assuming the peaks coincide) of 1 meter per century.

Such a rise would not be unprecedented. Sea level has risen 120 meters in the past 18,000 years — an average of 0.67 meters/century — and as much as 4 meters/century during meltwater pulse 1A episode 14,600 years ago (Weaver et al. 2003; subscription required). Neither humanity nor, from the perspective of millennial time scales (per the above quote from the IPCC), the rest of nature seem the worse for it. Coral reefs for example, evolved and their compositions changed over millennia as new reefs grew while older ones were submerged in deeper water (e.g., Cabioch et al. 2008). So while there have been ecological changes, it is unknown whether the changes were for better or worse. For a melting of the GIS (or WAIS) to qualify as a catastrophe, one has to show, rather than assume, that the ecological consequences would, in fact, be for the worse.

Human beings can certainly cope with sea level rise of such magnitudes if they have centuries or millennia to do so. In fact, if necessary they could probably get out of the way in a matter of decades, if not years.

Can a relocation of such a magnitude be accomplished?

Consider that the global population increased from 2.5 billion in 1950 to 6.8 billion this year. Among other things, this meant creating the infrastructure for an extra 4.3 billion people in the intervening 59 years (as well as improving the infrastructure for the 2.5 billion counted in the baseline, many of whom barely had any infrastructure whatsoever in 1950). These improvements occurred at a time when everyone was significantly poorer. (Global per capita income today is more than 3.5 times greater today than it was in 1950). Therefore, while relocation will be costly, in theory, tomorrow’s much wealthier world ought to be able to relocate billions of people to higher ground over the next few centuries, if need be. In fact, once a decision is made to relocate, the cost differential of relocating, say, 10 meters higher rather than a meter higher is probably marginal. It should also be noted that over millennia the world’s infrastructure will have to be renewed or replaced dozens of times – and the world will be better for it. [For example, the ancient city of Troy, once on the coast but now a few kilometers inland, was built and rebuilt at least 9 times in 3 millennia.]

Also, so long as we are concerned about potential geological catastrophes whose probability of occurrence and impacts have yet to be scientifically estimated, we should also consider equally low or higher probability events that might negate their impacts. Specifically, it is quite possible — in fact probable — that somewhere between now and 2100 or 2200, technologies will become available that will deal with climate change much more economically than currently available technologies for reducing GHG emissions. Such technologies may include ocean fertilization, carbon sequestration, geo-engineering options (e.g., deploying mirrors in space) or more efficient solar or photovoltaic technologies. Similarly, there is a finite, non-zero probability that new and improved adaptation technologies will become available that will substantially reduce the net adverse impacts of climate change.

The historical record shows that this has occurred over the past century for virtually every climate-sensitive sector that has been studied. For example, from 1900-1970, U.S. death rates due to various climate-sensitive water-related diseases — dysentery, typhoid, paratyphoid, other gastrointestinal disease, and malaria —declined by 99.6 to 100.0 percent. Similarly, poor agricultural productivity exacerbated by drought contributed to famines in India and China off and on through the 19th and 20th centuries killing millions of people, but such famines haven’t recurred since the 1970s despite any climate change and the fact that populations are several-fold higher today. And by the early 2000s, deaths and death rates due to extreme weather events had dropped worldwide by over 95% of their earlier 20th century peaks (Goklany 2006).

With respect to another global warming bogeyman — the shutdown of the thermohaline circulation (AKA the meridional overturning circulation), the basis for the deep freeze depicted in the movie, The Day After Tomorrow — the IPCC WG I SPM notes (p. 16), “Based on current model simulations, it is very likely that the meridional overturning circulation (MOC) of the Atlantic Ocean will slow down during the 21st century. The multi-model average reduction by 2100 is 25% (range from zero to about 50%) for SRES emission scenario A1B. Temperatures in the Atlantic region are projected to increase despite such changes due to the much larger warming associated with projected increases in greenhouse gases. It is very unlikely that the MOC will undergo a large abrupt transition during the 21st century. Longer-term changes in the MOC cannot be assessed with confidence.”

Not much has changed since then. A shut down of the MOC doesn’t look any more likely now than it did then. See here, here, and here (pp. 316-317).

If one wants to develop rational policies to address speculative catastrophic events that could conceivably occur over the next few centuries or millennia, as a start one should consider the universe of potential catastrophes and then develop criteria as to which should be addressed and which not. Rational analysis must necessarily be based on systematic analysis, and not on cherry picking one’s favorite catastrophes.

Just as one may speculate on global warming induced catastrophes, one may just as plausibly also speculate on catastrophes that may result absent global warming. Consider, for example, the possibility that absent global warming, the Little Ice Age might return. The consequences of another ice age, Little or not, could range from the severely negative to the positive (if that would buffer the negative consequences of warming). That such a recurrence is not unlikely is evident from the fact that the earth entered and, only a century and a half ago, retreated from a Little Ice Age, and that history may indeed repeat itself over centuries or millennia.

Yet another catastrophe that greenhouse gas controls may cause is that CO2 not only contributes to warming, it is also the key building block of life as we know it. All vegetation is created by the photosynthesis of CO2 in the atmosphere. In fact, according to the IPCC WG I report (2007, p. 106), net primary productivity of the global biosphere has increased in recent decades, partly due to greater warming, higher CO2 concentrations and nitrogen deposition. Thus , there is a finite probability that reducing CO2 emissions would, therefore, reduce the net primary productivity of the terrestrial biosphere with potentially severe negative consequences for the amount and diversity of wildlife that it could support, as well as agricultural and forest productivity with adverse knock on effects on hunger and health.

There is also a finite probability that costs of GHG reductions could reduce economic growth worldwide. Even if only industrialized countries sign up for emission reductions, the negative consequences could show up in developing countries because they derive a substantial share of their income from aid, trade, tourism, and remittances from the rest of the world. See, for example, Tol (2005), which examines this possibility, although the extent to which that study fully considered these factors (i.e., aid, trade, tourism, and remittances) is unclear.

Finally, one of the problems with the argument that society should address low probability high impact events (assuming a probability could be estimated rather than assumed or guessed) is that it necessarily means there is a high probability that resources expended on addressing such catastrophic events will have been squandered. This wouldn’t be a problem but for the fact that there are opportunity costs associated with this.

According to the 2007 IPCC Science Assessment’s Summary for Policy Makers (p. 10), “Most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations.” In plain language, this means that the IPCC believes there is at least a 90% likelihood that anthropogenic greenhouse gas emissions (AGHG) are responsible for 50-100% of the global warming since 1950. In other words, there is an up to 10% chance that anthropogenic GHGs are not responsible for most of that warming.

This means there is an up to 10% chance that resources expended in limiting climate change would have been squandered. Since any effort to significantly reduce climate change will cost trillions of dollars (see Nordhaus 2008, p. 82), that would be an unqualified disaster, particularly since those very resources could be devoted to reducing urgent problems humanity faces here and now (e.g., hunger, malaria, safer water and sanitation) — problems we know exist for sure unlike the bogeymen that we can’t be certain about.

Spending money on speculative, even if plausible, catastrophes instead of problems we know exist for sure is like a starving man giving up a fat juicy bird in hand while hoping that we’ll catch several other birds sometime in the next few centuries even though we know those birds don’t exist today and may never exist in the future.

French Folly

Following the dubious example set recently by U.S. legislators, French politicians have informally proposed slapping punitive tariffs on goods from countries who refuse to curb greenhouse gas emissions. The German State Secretary for the Environment has, quite rightly, called foul:

There are two problems – the WTO (World Trade Organization), and the signal would be that this is a new form of eco-imperialism,” Machnig said.

 ”We are closing our markets for their products, and I don’t think this is a very helpful signal for the international negotiations.”

I have a paper forthcoming on the carbon tariff issue, but in the meantime here’s a recent op-ed (written jointly with Pat Michaels) on climate change policy mis-steps.

Remembering the Good Old Days

Actress and former Miss America Vanessa Williams reminisces on NPR about the long car trips her family used to take “when gas was like 30 cents a gallon, and my parents would complain that it was going up to 35 cents.” No wonder families could take car trips then.

But wait a minute. Williams was born in 1963. So let’s say she’s remembering family trips from about 1970-75. This chart from the Department of Energy does show that retail gasoline prices were around 35 cents a gallon at the beginning of that period, going above 50 cents by 1975. But adjusted for inflation, that was more like $1.50 in 2000 dollars.

And as Jerry Taylor and Peter Van Doren show (click on the chart to enlarge), the price then was about $3.00 adjusted for inflation and changes in disposable per capita income — just about what it is now. So Williams’s memory was correct — gas was about 35 cents when her family went on trips. But the implication that those were the good old days of cheap gas isn’t quite right. In terms of the family budget, gas costs about the same now as it did then.

Julian Simon used to write about how people have been deploring the lost ”good old days” since ancient times. Sometimes he quoted the columnist and Algonquin Round Table regular  Franklin Pierce Adams: “Nothing is more responsible for the good old days than a bad memory.”

Randal O’Toole Takes on Smart Growth in the NYT

The New York Times has a long profile today of Cato’s Randal O’Toole, scourge of urban planners.

But O’Toole doesn’t fit the portrait of a corporate advocate. On visits to Capitol Hill, he blends in as a middle-aged, middle-height man in a dark suit – but his beard gives him away, its shaggy twists seemingly fitting for a forest dweller. He wears a string tie that most Americans would only recognize on Colonel Sanders. His lapel doesn’t carry the standard-issue flag pin but a bronze bust of his dog, Chip. The Belgian tervuren won it in a dog show.

O’Toole routinely hikes and bikes dozens of miles, and he proudly announces that he has never driven a car to work. Far from living on a luxurious Virginia manor, he left his last Oregon town when it added a third stoplight.

Now, from his home computer in Camp Sherman, Ore., population 300, O’Toole rails against smart-growth policies as money sponges that never calm traffic, fill seats on trains, or help the environment.

The story ends with Randal on his way to a conference in Las Vegas, which I also attended. There in the 80-degree early morning heat, he biked 50 miles each morning, on a folding bicycle that he could fit into a suitcase – and still got back to the hotel in time to fix my Powerpoint before my speech. He’s a Renaissance man.

Response to Conor Clarke, Part I

Last week Conor Clarke at The Atlantic blog , apparently as part of a running argument with Jim Manzi, raised four substantive issues with my study, “What to Do About Climate Change,” that Cato published last year. Mr. Clarke deserves a response, and I apologize for not getting to this sooner. Today, I’ll address the first part of his first comment. I’ll address the rest of his comments over the next few days.

Conor Clarke: 

(1) Goklany’s analysis does not extend beyond the 21st century. This is a problem for two reasons. First, climate change has no plans to close shop in 2100. Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758. (This depends crucially on the rate of technological progress, and as Goklany’s paper acknowledges, that’s difficult to model.) Second, the possibility of “catastrophic” climate change events – those with low probability but extremely high cost – becomes real after 2100.

Response:  First, I wouldn’t put too much stock in analyses purporting to extend out to the end of the 21st century, let alone beyond that, for numerous reasons, some of which are laid out on pp. 2-3 of the Cato study. As noted there, according to a paper commissioned for the Stern Review, “changes in socioeconomic systems cannot be projected semi-realistically for more than 5–10 years at a time.”

Second, regarding Mr. Clarke’s statement that, “Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758,” I should note that the conclusion that net welfare for 2100 (measured by net GDP per capita) is not based on a belief.  It follows inexorably from Stern’s own analysis.

Third, despite my skepticism of long term estimates, I have, for the sake of argument, extended the calculation to 2200. See here. Once again, I used the Stern Review’s estimates, not because I think they are particularly credible (see below), but for the sake of argument. Specifically, I assumed that losses in welfare due to climate change under the IPCC’s warmest scenario would, per the Stern Review’s 95th percentile estimate, be equivalent to 35.2 percent of GDP in 2200. [Recall that Stern’s estimates account for losses due to market impacts, non-market (i.e., environmental and public health) impacts and the risk of catastrophe, so one can’t argue that only market impacts were considered.]

The results, summarized in the following figure, indicate that even if one uses the Stern Review’s inflated impact estimates under the warmest IPCC scenario, net GDP in 2200 ought to be higher in the warmest world than in cooler worlds for both developing and industrialized countries.


Source: Indur M. Goklany, “Discounting the Future,” Regulation 32: 36-40 (Spring 2009).

The costs of climate change used to develop the above figure are, most likely, overestimated because they do not properly account for increases in future adaptive capacity consistent with the level of net economic development resulting from Stern’s own estimates (as shown in the above figure).  This figure shows that even after accounting for losses in GDP per capita due to climate change – and inflating these losses – net GDP per capita in 2200 would be between 16 and 85 times higher in 2200 that it was in the baseline year (1990).  No less important, Stern’s estimate of the costs of climate change neglect secular technological change that ought to occur during the 210-year period extending from the base year (1990) to 2200. In fact, as shown here, empirical data show that for most environmental indicators that have a critical effect on human well-being, technology has, over decades-long time frames reduced impacts by one or more orders of magnitude.

As a gedanken experiment, compare technology (and civilization’s adaptive capacity) in 1799 versus 2009. How credible would a projection for 2009 have been if it didn’t account for technological change from 1799 to 2009?

I should note that some people tend to dismiss the above estimates of GDP on the grounds that it is unlikely that economic development, particularly in today’s developing countries, will be as high as indicated in the figure.  My response to this is that they are based on the very assumptions that drive the IPCC and the Stern Review’s emissions and climate change scenarios. So if one disbelieves the above GDP estimates, then one should also disbelieve the IPCC and the Stern Review’s projection for the future.

Fourth, even if analysis that appropriately accounted for increases in adaptive capacity had shown that in 2200 people would be worse off in the richest-but-warmest world than in cooler worlds, I wouldn’t get too excited just yet. Even assuming a 100-year lag time between the initiation of emission reductions and a reduction in global temperature because of a combination of the inertia of the climate system and the turnover time for the energy infrastructure, we don’t need to do anything drastic till after 2100 (=2200 minus 100 years), unless monitoring shows before then that matters are actually becoming worse (as opposing merely changing), in which case we should certainly mobilize our responses. [Note that change doesn’t necessarily equate to worsening. One has to show that a change would be for the worse.  Unfortunately, much of the climate change literature skips this crucial step.]

In fact, waiting-and-preparing-while-we-watch (AKA watch-and-wait) makes most sense, just as it does for many problems (e.g., some cancers) where the cost of action is currently high relative to its benefit, benefits are uncertain, and technological change could relatively rapidly improve the cost-benefit ratio of controls. Within the next few decades, we should have a much better understanding of climate change and its impacts, and the cost of controls ought to decline in the future, particularly if we invest in research and development for mitigation.  In the meantime we should spend our resources on solving today’s first order problems – and climate change simply doesn’t make that list, as shown by the only exercises that have ever bothered to compare the importance of climate change relative to other global problems.  See here and here.  As is shown in the Cato paper (and elsewhere), this also ought to reduce vulnerability and increase resiliency to climate change.

In the next installment, I’ll address the second point in Mr. Clarke’s first point, namely, the fear that “the possibility of ‘catastrophic’ climate change events – those with low probability but extremely high cost – becomes real after 2100.”