by Judith Curry
A June 22, 2010 article in the New Republic provides one of the most sensible analysis of global warming policy that I’ve seen (h/t Roger Caizza). It is particularly relevant in light of the current negotiations at Durban
The article is entitled “Why the decision to tackle global warming isn’t as simple as Al Gore says.” The entire article is well worth reading, some excerpts are provided here:
But of course, several percent of global GDP is a lot of dough, and avoiding such costs would justify extensive mitigation efforts. What would the conventional proposals, such as a global carbon tax or cap-and trade scheme, cost?
William Nordhaus, who heads the widely respected environmental-economics-modeling group at Yale, estimates (page 84) the total expected net benefit of an optimally designed, implemented, and enforced global program to be equal to the present value of about 0.2 percent of future global economic consumption (and this would not come close to limiting total accumulation to 450 ppm). In the real world of domestic politics and geostrategic competition, it is not realistic to expect that we would ever have an optimally designed, implemented, and enforced global system, and the side deals made to put in place even an imperfect system would likely have costs that would dwarf 0.2 percent of global economic consumption. Look at what was required to not pass the Waxman-Markey cap-and-trade program, in a wealthy and reasonably democratic country, to get some idea of the kind of deals that would have to be cut. And then you’d have to enforce it throughout developing economies for literally centuries.
The expected economic benefits of emissions mitigation do not cover its realistically expected costs.
The most consequential objection to this line of reasoning is that the risk of worse-than-expected damages is so severe that it justifies almost any cost. In this light, we would be buying an insurance policy (metaphorically speaking) by implementing the kind of emissions mitigation programs that Gore and others advocate. Gore, however, doesn’t get to this argument, because he has relied on listing bad things that he says will happen as a result of climate change, and claiming that it’s therefore obvious what we should do. But for the reasons I’ve tried to explain, I think this misses the most important aspect of the issue, which is the depth of our uncertainty.
Paul Krugman, in a very useful article in the New York Times Magazine in April, does put forward the problem of uncertainty in this context.
Krugman is correct, in my view, that: (i) a simple comparison of expected costs to expected benefits over the next century is an inadequate consideration of the economic trade-offs involved, (ii) uncertainty is central to the real decision logic, and (iii) increasing uncertainty in our forecasts strengthens the case for action.
The starting point for such a consideration is to recognize that we are not certain how much CO2 humanity will emit, how much warming a given amount of CO2 will cause, or how much damage a given amount of warming will cause. That is, we are concerned here with the inherently unquantifiable possibility that our probability distribution itself is wrong.
The stronger form of the argument based upon uncertainty is not only that it is possible that the true probability distribution of potential levels of warming is actually much worse than believed by the IPCC, but that a reasonable observer should accept it as likely that this is the case. As Krugman indicates, the sophisticated version of this argument has been presented by Weitzman. Weitzman’s reasoning on this topic is subtle and technically ingenious. In my view, it is the strongest existing argument for a global regime of emission mitigation. (You can see a slightly earlier version of his paper, and my lengthy response here, along with links to the underlying source documents.) In very short form, Weitzman’s central claim is that the probability distribution of potential losses from global warming is “fat-tailed,” or includes high enough odds of very large amounts of warming (20°C or more) to justify taking expensive action now to avoid these low probability/high severity risks.
The only real argument for rapid, aggressive emissions abatement, then, boils down to the weaker form of the uncertainty argument: that you can’t prove a negative. The problem with using this rationale to justify large economic costs can be illustrated by trying to find a non-arbitrary stopping condition for emissions limitations. You must make some decision about what level of risk is acceptable versus the costs of avoiding this risk. Once we leave the world of odds and handicapping and enter the world of the Precautionary Principle—the Pascal’s Wager-like argument that the downside risks of climate change are so severe that we should bear almost any cost to avoid this risk, no matter how small—there is really no principled stopping point derivable from our understanding of this threat.
So then, how should we confront this lack of certainty in our decision logic? At some intuitive level, it is clear that rational doubt about our probability distribution of forecasts for climate change over a century should be greater than our doubt our forecasts for whether we will get very close to 500 heads if we flip a fair quarter 1,000 times. This is true uncertainty, rather than mere risk, and ought to be incorporated into our decision somehow.
In the face of massive uncertainty, hedging your bets and keeping your options open is almost always the right strategy. Money and technology are our raw materials for options. A healthy society is constantly scanning the horizon for threats and developing contingency plans to meet them, but the loss of economic and technological development that would be required to eliminate all theorized climate change risk (or all risk from genetic technologies or, for that matter, all risk from killer asteroids) would cripple our ability to deal with virtually every other foreseeable and unforeseeable risk, not to mention our ability to lead productive and interesting lives in the meantime.
So what should we do about the real danger of global warming? In my view, we should be funding investments in technology that would provide us with response options in the event that we are currently radically underestimating the impacts of global warming. In the event that we discover at some point decades in the future that warming is far worse than currently anticipated, which would you rather have at that point: the marginal reduction in emissions that would have resulted up to that point from any realistic global mitigation program, or having available the product of a decades-long technology project to develop tools to ameliorate the problem as we then understand it?
The best course of action with regard to this specific problem is rationally debatable, but at the level of strategy, we can be confident that humanity will face many difficulties in the upcoming century, as it has in every century. We just don’t know which ones they will be. This implies that the correct grand strategy for meeting them is to maximize total technical capabilities in the context of a market-oriented economy that can integrate highly unstructured information, and, most important, to maintain a democratic political culture that can face facts and respond to threats as they develop.
Al Gore presents himself in this article as a bringer of incontrovertible scientific certainty that we must heed in order to save ourselves. He puts forward as an obvious implication of these scientific findings that we must radically reduce the use of fossil fuels right now, or face an inevitable calamity. He claims that all that stands in the way of this happening is nefarious oil companies manipulating a gullible American electorate into opposing a course of action that is clearly in the public interest.
In fact, it is the uncertainties in our understanding that are the most compelling driver of rational action. And a massive carbon tax or a cap-and-trade rationing system would likely cost more than the damages it would prevent. Either would be an impractical, panicky reaction that would be both more expensive and less effective than targeted technology development in the event that we ever have to confront the actual danger: the very small but real chance of much worse than expected damages from greenhouse gases.
JC comments: +10