3.5.7.1  The Controversy over the Best Response to Global Warming

(This is an archived extract from the book Patterns of Power: Edition 2)

The attempt to mitigate global warming by limiting the emissions of ‘greenhouse gases’, particularly carbon dioxide, has captured a lot of attention.  Two influential reports were produced:

·      The Intergovernmental Panel on Climate Change (IPCC) report, which summarised scientific findings, forecast that continued global warming would create a number of problems, including rising sea levels, water shortages and a reduction in food production at low latitudes.[1]  It said that it is “very likely” that mankind contributed to the sea level rise.[2]

·      The Stern Review recommended mitigating the effects of climate change by limiting emissions of greenhouse gases.  It concluded that:

“Using the results from formal economic models, the Review estimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more. In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.” [3]

These recommendations have been contested.

·      The Copenhagen Consensus (3.5.7) didn't identify climate-change mitigation as one of the most cost-effective projects. 

·      The IPCC report can be challenged on the grounds that it is impossible to prove that man-made carbon emissions have caused the rise in temperatures, particularly since the rise has not been uniformly parallel to the growth in industrial output; causality can never be proved from even a strong correlation in data.

·      The Stern Review has been challenged on economic grounds:

      It took no account of the beneficial effects of warming.[4]

      It didn't take seriously the alternative possibility of adaptation to climate change (3.5.7.3) rather than trying to prevent it.[5]

      It used too low a discount rate.[6]

      It took insufficient account of the probable increases in wealth of the future generations who would be dealing with the problem.[7] 

There is also a serious question on the feasibility of reducing emissions, given that China, India and America have all refused to ratify the Kyoto Protocol – which was an international commitment to targets.[8]

Whereas these criticisms might all be valid, this does not mean that no action is called for to prevent climate change.  Rather, it means that any actions taken should be cost-effective (3.5.7.2) because there are always other uses for funding.

© PatternsofPower.org, 2014



[1] The Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report: Climate Change 2007: Synthesis Report: Summary for Policymakers forecast several adverse effects due to global warming on p. 10.  It was available in April 2014 at http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf.

[2] Ibid., p. 6.

[3] Stern Review, Summary of Conclusions, p. vi.  It was available in April 2014 at http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/stern_review_report.htm.

[4] Stern took no account of the benefits of warming, although the IPCC report at http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf pointed out that agriculture “at mid- to high latitudes” would become more productive (p. 10); it was available in April 2014

There are also some health benefits from having a warmer climate, as Nigel Lawson pointed out in An Appeal to Reason, p. 34, quoting three different health studies.

When the benefits of warming are taken into account, it has been argued that there might be no net loss of wealth creation for the world as a whole (although a lot of people would be displaced).  David Friedman gave a brief analysis of the economic impact of global warming in a posting entitled What is Wrong with Global Warming Anyway?, which was posted on 5 September 2011 and was available in April 2014 at http://daviddfriedman.blogspot.co.uk/2011/09/what-is-wrong-with-global-warming.html.

[5] Nigel Lawson, in An Appeal to Reason, p. 39, considered adaptation as a policy:

“Perhaps the single most serious flaw in the IPCC's analysis of the likely impact of global warming is its grudging and inadequate treatment of adaptation, which leads to a systematic exaggeration of the putative cost of global warming – if, indeed, over the next hundred years there is any net cost at all.

… the capacity to adapt is arguably the most fundamental characteristic of mankind.”

[6] It is usual, when performing a cost-benefit analysis, to discount benefits in future years compared to costs incurred at the present time.  This is a way of making some allowance for the fact that the money could be put to other short-term uses.  Nigel Lawson, in An Appeal to Reason, p. 83, points out that Stern did not state what rate he had used, but estimates it at 2%.  He cites a number of other writers who have criticised the rate. 

A Copenhagen Consensus report, Global Warming: Executive Summary, using a normal discount rate of 5% at the start of the 21st century, dropping to 4% by its end, showed that an $800bn investment in cutting carbon emissions per se would only yield returns of $685bn (p. 5).  The report was available in April 2014 at http://issuu.com/copenhagenconsensus/docs/summaryglobalwarming.

[7]  Lawson, Ibid., pp. 35-37.  He calculates that, using the IPCC's own figures, the growth in living standards would more than offset the 5% loss of GDP estimated by Stern.  He recapitulates this point on p. 95:

“the question of how great a sacrifice the present generation and their children should make, in terms of unnecessary poverty, malnutrition, disease and premature death, in the hope of benefiting substantially better off generations a hundred or two hundred years hence, is not a difficult one, either in ethical or indeed in political terms.”

Robert P. Murphy wrote a summary, The Economics of Climate Change, which further underlines the point that today’s decisions should be based on a proper investment appraisal using realistic discount rates:

“The justification for using actual market interest rates is simple: We can help future generations either by "investing" in fighting climate change or by investing in traditional assets and bequeathing more wealth (of a conventional form). It would be silly to forfeit potential consumption today, in the form of tighter emissions cutbacks, if our descendants would perceive a greater benefit from our channeling those savings into more traditional investments that would make them wealthier."

This article was downloadable in April 2014 from http://www.econlib.org/library/Columns/y2009/Murphyclimate.html

[8] On 7 October 2004, The Economist published an article on the patchy responses to climate change, entitled Welcome to Kyoto-land, which was available in May 2014 at http://www.economist.com/node/3271647.