I thought this paper was interesting, and it was (as part of a Twitter exchange) sent to me by request (thanks to Both Richard Tol and Bjørn Lomborg). I found figure 8 (shown below as part of the preview on Science Direct) to be interesting because it shows a positive impact of warming up to 2.0C and a negative impact afterwards, suggesting that some warming is beneficial, but a lot of warming is not. All things in moderation I suppose. – Anthony.
Abstract
A survey of the economic impact of climate change and the marginal damage costs shows that carbon dioxide emissions are a negative externality. The estimated Pigou tax and its growth rate are too low to justify the climate policy targets set by political leaders. A lower discount rate or greater concern for the global distribution of income would justify more stringent climate policy, but would imply an overhaul of other public policy. Catastrophic risk justifies more stringent climate policy, but only to a limited extent.
Introduction
Climate change is one of today’s defining problems. It is often described as the largest problem, or the largest environmental problem of the 21st century (Stern et al. 2006) – without much evidence. Climate change has been said to fundamentally challenge economics as a discipline (van den Bergh 2004). More sober people would recognize greenhouse gas emissions as an externality. It is an externality that is global, pervasive, long-term, and uncertain – but even though the scale and complexity of this externality is unprecedented, economic theory is well equipped for such problems – and advice based on rigorous economic analysis is anyway preferred to wishy-washy thinking. This paper surveys the literature on first-best climate policy.
The first benefit-cost analysis of greenhouse gas emission reduction was published in 1991 by William D. Nordhaus of Yale University (Nordhaus 1991). It was a static, aggregate analysis, but was soon followed by dynamic studies (Nordhaus 1992;Nordhaus 1993) and regionally disaggregated ones (Nordhaus and Yang 1996). Nordhaus’ research was influential and his findings controversial. Nordhaus concluded
- (i) that modest emission reduction is desirable now;
- (ii) that the ambition of climate policy should accelerate over time;
- but (iii) that the atmospheric concentration of greenhouse gases should not be stabilized.
Conclusion (ii) is qualitatively uncontroversial, but the rate of acceleration is disputed. Conclusions (i) and (iii) are controversial, within the economics profession but particularly outside.
…
Fig. 8. Estimates of the global economic impact of climate change (blue dots) and two fitted functions: I=4.33(1.49)T−1.92(0.56)T2 (red line) and I=0.348(0.166)T2−0.0109(0.0025)T6 (green line); the thin lines demarcate the 95% confidence interval based on the bootstrapped standard deviation.
Discussion and conclusions
I review optimal targets for international climate policy in the short and long run. Carbon dioxide emissions are probably a negative externality, and should therefore be taxed. Using a discount rate similar to the one typically used for public investments, the expected value of the carbon tax is $25/tC. That carbon tax corresponds to the initial carbon tax of a cost-effective emission reduction trajectory towards stabilization at 625 ppm CO2e – considerably higher than the implicit political aim to stabilize at 450 ppm CO2e. Furthermore, the efficient carbon tax would increase at some 2.3% per year whereas the cost-effective carbon tax would increase at some 5.5%. Efficient concentrations at the end of the 21st century would thus exceed 625 ppm CO2e.
Indeed, it is unlikely that a benefit-cost analysis would justify stabilization of the atmospheric concentration of greenhouse gases – as stipulated by international law – as that would require zero carbon dioxide emissions. Fossil fuel use may of course cease for reasons other than climate change. A lower discount rate and an aversion to inequity would justify more stringent climate policy, but would imply inconsistencies between climate policy and other areas of public policy.
Catastrophic risk is a more powerful argument for more stringent climate policy, but to a limited extent as emission reduction has downside risks too. The above analysis considers efficient climate policy in isolation. This is a useful yardstick for analysis, but not particularly realistic. Climate policy interacts with many other policies, but two
areas stand out. Climate policy is intimately intertwined with technological progress in the
energy sector and with the availability of energy resources. Recent break-throughs in the
exploitation of shale gas reduce greenhouse gas emissions in the short term (as gas replaces coal) but increase emission reduction costs in the long term (as solar now competes with cheap gas and cheap coal). Even so, optimal climate policy is unaffected provided that technology policy is first-best (Bosetti et al. 2011;Fischer 2008;Fischer and Newell 2008;Popp and Newell 2012) and that resources policy is first-best (Hoel 2012;van der Ploeg and Withagen 2012). Those are strong assumptions, yet it would not be wise to solve other problems through climate policy.
I assumed that adaptation is efficient. If so, it does not affect optimal mitigation policy (de Bruin et al. 2009). I also assumed that climate policy is implemented efficiently. In Section 3.1, I note that second- or higher-best policy implementation may be substantially more expensive. If emission abatement is more expensive, then climate policy should be less stringent.
I reasoned from the perspective of a global planner. Greenhouse gas emission reduction is, of course, a public good. A non-cooperative equilibrium has higher emissions (Babiker
2001;Barrett 1994;Carraro and Siniscalco 1992;Carraro and Siniscalco 1993;Carraro and
Siniscalco 1998;Nordhaus and Yang 1996;Yang 2003).
Although considerable progress has been in our understanding of optimal climate policy, much research remains to be done. Quantitatively, the estimates of the costs and benefits of climate policy can be improved. Incremental improvements on the current state of the art are always feasible. Both sets of estimates have primarily relied on simulation modeling, but data have steadily improved so that impacts of climate variations should be measurable (Mendelsohn et al.1994). Some countries now have two decades of experience with climate policy; the impacts and the model assumptions should be tested econometrically (Leahy and Tol 2012). Such research would add confidence to current estimates, or new insights. Qualitatively, besides carefully exploring the myriad second-best features of climate policy, research to date has been limited to a fairly narrow class of welfare functions. The assumption of exogenous population growth is
particularly troubling in the context of climate change. A convincing alternative to the intuitively incorrect conclusion that continued warming is optimum, is still elusive.
http://www.sciencedirect.com/science/article/pii/S0165188913000092
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A free pre-print is available here: http://ideas.repec.org/p/sus/susewp/3712.html
C/B analysis by a believer in AGW/GHG’s will never be correct. Rather like using a model to prove that GHG theory is correct rather than empirical evidence, like actually looking out of the window, using a radiosonde balloon, re-reading those basic physics text books that explain the laws of thermodynamics.
CO2 has no effect on climate. The GHG theory is bunk. CO2 levels are the lowest now than throughout the last 550Ma. Plants love CO2 and the more in the atmosphere the better plants grow. Crop plants are no different. Temperature is driven by the sun, the only energy source available.
Reblogged this on planetvoice and commented:
Interesting paper that shows a positive impact a positive impact of warming up to 2.0C and a negative impact afterwards, suggesting that some warming is beneficial, but a lot of warming is not. tnx to WUWT and Richard T. and Lomborg B.
“the efficient carbon tax vs the cost-effective carbon tax” is the new way to frame this sacking of civilization?
and tol is junior author to vermont senator tax-fiend leahy? is that how it is?
Given that by the author’s own admission, economic is not a science but a “discipline” (allied to bondage?), the paper is at least an attempt to quantify the cost/benefit argument.
It also supports my unevidenced gut feel that a +2K anomaly is not worth getting excited over, nor is it worth the trillion-dollar shenanigans performed by the high priests of the alarmist art.
And yet the paper is naive. Even in 1990 when the anomaly stood at zero, some regions of Earth were too hot and others too cold. I see no evidence in the abstract at sciencedirect.com that any kind of winners/losers study was performed.
Surely by now someone has taken Hansen’s 80-region grid, applied the local effect of increased global average temperatures, and calculated the costs and benefits?
“Climate change is one of today’s defining problems. It is often described as the largest problem, or the largest environmental problem of the 21st century (Stern et al. 2006) – without much evidence.”
//////////////////////////////////////////////////////////////////////////////////////
It is quite conceivably a non problem. It is too damn right that there is a lack of evidence (by which I mean fact based evidence as opposed to whimsical computer modelling) supporting that there is actually a problem, still less a significant problem, still less that it is due to manmade activity and/or man can in some way ameiliorate the problem.
Papers like this are an utter waste of time, and I find them particularly irritating (but that is just a personal bug bear).
Until one accurately knows climate sensitivity, one cannot even begin to evaluate the economic impact of climate change since the economic impact is to a significant extent dictated by climate sensitivity because that in turn will influence the extent of any significant climate change.
There is much debate on climate sensitivity. 33 years of satellite data would suggest that it is as near to zero as can presently be measured. Of course, that data source is but a snapshot and it is very dangerous to project linear trends from short time series. If climate sensitivity is low it is likely that there is no problem at all to maintaining or even increasing current CO2 emission levels.
The dishonesty of the AGW science is fourfold.
First, there is a lack of honesty with respect to the quality of the data. The data is not fit for purpose. Proxy data is far to uncertain to be anything more than at best a ball point indicator. The instrument data has been basterdised beyond recognition and suffers from obvious shortcomings, eg siting issues, the influence of UHI, station drop out. Most materially, (i) save for sea water temp data, it does not even measure the correct metric. It does not measure energy and cannot cast light on whether there is or is not some driven energy change, and (2) the period of data is far too short. It is like assessing Usain Bolt’s time over 100 mtres and working out his speed and then doing a check at 200 metres and from that data to be able to project how long it would take him to run a marathon and to assess the probable marathom world record time. Given that the climate has been developing over billions of years and there are obvious glacial/interglacial cycles, at the very least we would need data on several glacial/interglacial periods before we could take a realistic stab at assessing whether present late 20th/earliy 21st century experiences are in any way out of the natural order of events. Any honest scientist would always caveat his comments ‘we do not have sufficient quality of data to draw any reasonably certain conclusions’
Second, and this is very much related to the first issue, is that there is no honest expression of error bars and uncertainty. The fact is that when you take account of errors and uncertainty, we do not know whether it is warmer today than it was in the 1880s. We do not actually know whether the world has actually warmed since then (although it probably has). The uncertainties need to be properly expressed and again an honest scientist would make that clear.
Third, the system is complex and we have little understanding of the system Until we have better knowledge and a better understading (which will inevitanly difficult since it is a chaotic system), we can not make any sensible projection as to how things may pann out; what a change of variable x will do to the system as a whole. Fundamentally, we do not know whether it will be wetter or drier, more snow or less snow, more stromy or less stormy and this why one keeps on seeing the doomsayers changing their mantra. Small changes in the jet stream can have significant local effect. we do not know enough to make any sensible and worthwhile prediction as to what climatic conditions will be encountered in the future.
Third, there is no such thing as global climate (other than being in a glacial or intergalcisl) Climate is local and the impact of climate change is local (not global). This is a political mantra so that politicians can claim that we are all in it together and a global response is needed. The most signifcant global event would be seawater rise, but how any rise in sea water levels impact would depend very much upon local geography and topography as well as how a country has developed. For some countries climate change (whatever the driver) will be good, for other neutral and for some an inconvenience. Which countries will be winners and losers we cannot presently predict with any degree of accuracy. It is fundamentally dishonest and misleading to talk about global climate change.
Fourth, we do not know enough about past climate and conditions and problems that were then encountered. In particular, there appears to be a failure to properly assess how life on earth flourished in warm climatic periods. The development of civilisations and the onset of fundamental skills bears a close relationship with warm climatic conditions. One only has to look at the spread of the iron and bronze age accross the globe, or to look at the Egyptian, Minoan, Greek, Roman, British civilasations and the fact that there were no great civilasations from high Northern Climes to see that warm is good and cold is bad. It is no coincidence that whilst, in England, Stonehenge (which is quite a remarkable structure) was being built, in Egypt, they were building incredible pyramids and temples. The bedrock for the Great Pyramid at Giza was hewn from the solid rock of the Giza Plateau using copper chissels and yet even today, we would have problems in building the structure to a significantly better tolerance (the foundation base extents to over 220m and is level within 2.1 cm, that is 0.2mm per metre!). When you do not have to struggle to live, you have time to develop knowledge, understanding and skills. It is undoubtedly the case that the world is far too cold for man. If it were not for our ability to adapt ourselves (by clothes etc) and adapt our environment (housing, heaters etc) very little of the globe would be inhabitable. As a species, we are geared to a much warmer environment. It is no coincidence that the greatest abundance of life is found in warm tropical rain forests, and the least abundance of life in dry and cold deserts such as Antarctica. Climate change may well be a net positive, with food production going up and up, I firmly consider that to be the probable case.
There is always the law of unintended consequence and unknown reaction. man is deforesting at a significant rate and yet despite of this the world is greening. It was never foreseen that increase in CO2 levels would more than offset manmade deforestation. This is but just one example that we have no real idea as to how matters will pan out.
Bottom line is that presently, one cannot assess with any reasonable degree of certainty the science and what, if any, changes are occuring, at what rate and what to what extent and with what effect, still less what is driving those changes. Until all of that can be accurately assessed one cannot even begin to assess the economic impact. Politicians and economist have perverted this issue enough and should get out of the room and let the scientists get on with the science (hopefully real not pseudoscience) and our knowledge and undertanding may then increase to the benefit of all.
. A lower discount rate and an aversion to inequity would justify more stringent climate policy, but would imply inconsistencies between climate policy and other areas of public policy.
In the UK, politicians had similar ideas about inequity in education, with the same outcome. It’s always much easier to bring the top performers down than to raise the bottom performers up.
Greenhouse gas emission reduction is, of course, a public good.
Water vapor is the No.1 greenhouse gas. But clouds have a net negative feedback. Reducing water vapor in the atmosphere should lead to warming due to low albedo. Carbon dioxide is plant food and has been shown to green the planet. Any warming effect by carbon dioxide is swamped by natural variation. No catastrophic effect has been proven, so why should we accept as given that reducing greenhouse gas emissions is a public good?
Analysis of the effects of something immeasurable to date.
I disagree with his statement that stabilization of CO2 concentration in the atmosphere would require zero emissions. Currently, Nature is already absorbing 50% of our emissions. Which means that if we halved our emissions, CO2 concentration would not go up any more. And if we had zero emissions, it would start to go down at pretty much the same rate that it is going up today.
“Greenhouse gas emission reduction is, of course, a public good.“.
This is nonsense.
Earth’s biomass has increased significantly over the last couple of decades. http://www.impactlab.net/2008/06/09/scientists-surprised-to-find-earths-biosphere-booming/
That alone is enough to make one doubt that CO2 is detrimental.
Richard Verney – I enjoyed your perceptive comment. Perhaps the key sentence is: “When you do not have to struggle to live, you have time to develop knowledge, understanding and skills.“.
This is fundamentally true, yet I suspect it is not allowed for in the Tol paper. (Making energy more expensive increases the number of people having to struggle to live). I say “I suspect” because the body of the paper is paywalled and the link RichardTol provided in a comment didn’t work.
I was struck by many assumptions and unsubstantiated claims in the paper, but this one stood out for me: “Carbon dioxide emissions are probably a negative externality, and should therefore be taxed.”
First, the statement is unsupported as to rationale – that a negative externality should, without specific justification and simply because it is negative, be taxed.
Second, the statement connects a probability of a negative to a certainty of taxation without any data or analysis to quantify the probability.
Such a statement, especially coming from someone who has the credentials of a scientist, is exactly the kind that gives politicians cover and license to enact the most dangerous, coercive, and destructive laws.
As I’ve mentioned before…..
Finance is something we, as in mankind, have total and absolute control over. Climate is something that we not only do not have control over, but we lack a thorough understanding of.
Swaddled in equations of grandiose proportions and graphs of stunning color and visual complexity, I am yet a disbeliever in there being any wisdom or value in quantitative reports such as these.
Put simply, when our leaders can prove competency by running a financially sound government, then we can talk about climate. Until then, whenever I hear “public good”, I’ll know it’s a signal someone’s after my wallet, and my rights.
“All things in moderation I suppose. .”
All things?
I can understand some things.
Perhaps even most things.
But ALL things??
It just sounds like rather an extremist position to take….
😉
Mike Jonas I got the preview copy okay, reading it at the moment and “loving it.”
Doing an analysis based only on temperature is reasonable. We should be able to determine impacts without worrying about cause. To then discuss a carbon tax falls into the trap that the author knows the impacts of CO2 emissions. That is the same problem we’ve had for a long time. No one knows the actually effects. For all we know the CO2 is preventing us from slipping into an ice age. Why would we want to tax that?
Until such a time that we really understand the big picture this kind of guesswork is silly. Stick to the problems/benefits of temperature change alone and you’ll have a much better chance of adding to our knowledge.
“I reasoned from the perspective of a global planner.”
And I reason from the perspective of a commissioned salesperson who actually has to perform to get paid. Get you hands out of my wallet!
richard verney says: February 4, 2013 at 2:54 am “……………..”
I enjoyed very much your words of wisdom. Thank you.
OT: [snip . . indeed it is. Why not post your observation up in Tips & Notes rather than disrupt this thread, thanks . . mod]
So reminiscent of the physician’s dictum : first, do no harm. Don’t try to fix a system that may not be broke and that you know little about. Remember the fiasco of FDR’s two New Deals?
The march of technology clearly leads towards lower carbon emissions. Electric cars are coming, just as fast as we can get affordable batteries. They are actually not that far away, to judge by Tesla Motors recent guarantee to replace their largest battery pack for $8,000 10 years from now.
While that battery pack will make extended travel somewhat slow (average traveling velocity around 45 MPH) , for relatively short trips (500 miles or less) and around town, the car is competitive with gas powered vehicles. Electric cars are cheaper to operate and maintain, more reliable, and (with an affordable battery) cheaper to build as well.
Now if the greenie weenies could shake their 1950’s era fear of nuclear power, there would be a consensus in favor of that form of power generation, at least in Western countries. Elsewhere there is active movement in the nuclear construction arena. And with Gen 4 fast reactors coming on line in the near future , we have a means off burning “nuclear waste” as fuel, rendering it pretty impotent, easily stored, and returning to background radiation levels in less than 150 years. It has been pointed out that the usable energy remaining in our country’s nuclear wastes can provide all the electric power this country needs for the next 1000 years. What energy crisis?
@techgm
1. Pigou (1920) showed that negative externalities should be taxed.
2. You copied a sentence from the conclusion. This is substantiated in the discussion of Figure 2.
One thing I note from the excerpts here is the figure of 625 ppm for CO2 and the crossover between benefits to costs at a 2 C rise in temps. These two are based on the sensitivity of temp to CO2 – which estimates have been reduced significant;y in recent published work. Does anyone know what estimates of sensitivity were used in this paper? If only published now, i suspect it was written 12-18 months ago and could already be in need of re-calculation.
teI’d love to see the left half of that graph expanded. Effect of falling temperature on economic output?
Its all hand waving, but the thought exercise comparing 3C warmer to 3C colder would provide perspective.
“Climate policy” is a rather silly term, presupposes climate depends on policy.
Now, why don’t we have “redemption policy”?
1. stakes are high (ethernal life or something)
2. widespread consensus among experts (ask them!)
3. sin is surely a negative externality, is it not?
4. we could tax thingie, finally
or people standing in water
I don’t see any mention of the current quandry in which millions of earth’s inhabitants have lost their lives by the implementation of these “taxes” these authors propose–that of increasing the cost of food to where it is the cause of death at genocidal proportions. (And millions more will lose their lives because the trend is a continuation of the same facinorous policy.)
When they address this most critical of all issues, we’ll know they’re being honest. Until then, they are demonstrating the most dishonest and develish behavior known to mankind.
(Or is it just fine and dandy to sacrifice untold millions to somehow counter a fictitious destruction they only believe (yet do not know) will occur? Dr. Death would be proud of their conclusions.)