Lord Stern: Models ‘grossly underestimate’ costs of global warming
Submitted by Eric Worrall
Lord Stern, the British Academic who prepared the “Stern Review” on global warming for Prime Minister Tony Blair, has just claimed a carbon price of up to $260 / ton is required to prevent dangerous global warming.
“The risks are in fact likely to be so large that a globally coordinated carbon price of $US32-$US103 ($34-$110) per tonne of emissions is needed as soon as 2015 to prevent the temperature increase from exceeding 2 degrees of pre-industrial age levels, said Lord Stern and co-author Simon Dietz, from the UK’s Grantham Research Institute.
Within two decades, the carbon price will need to almost triple in real terms to $US82-$US260 a tonne, the two researchers say in their paper to be published in The Economic Journal.”
Lord Stern’s “Stern Review”, prepared in 2006, has been heavily criticised since its release, for making some unjustifiable assumptions.
For example, according to “The Economist”, Lord Stern used a near zero discount rate when calculating the impact of future harm.
http://www.economist.com/node/14994731
The effect of using such a low discount rate is to make problems which occur in the distant future as important in terms of the calculation as problems which occur today – for example, if your report predicts mass starvation in 100 years, a near zero discount rate could be used to justify creating global hunger today, to ward off the predicted future risk, if the future casualty rate was greater.
Non-discount of future risks is wrong for all sorts of reasons, not least because we have no idea of what advances 100 years of technological progress will deliver.
Economic forecasts of the past, such as the Great Horse Manure Crisis of 1894, are often a source of hilarity in modern times, due to their rather outdated assumptions.
http://bytesdaily.blogspot.com.au/2011/07/great-horse-manure-crisis-of-1894.html
Chinese business still not playing the game:
17 June: BusinessSpectator: Reuters: Beijing emitters ‘ignoring carbon scheme’
More than a quarter of all companies covered by Beijing’s municipal carbon laws ignored a key reporting deadline, local media reported Friday, with some powerful companies questioning the local government trading body’s authority to regulate them….
Some of the firms implied that Beijing’s Development and Reform Commission (DRC), which operates the scheme, did not have the authority to issue orders.
“It ends up like this because they don’t follow our rules and the document shown to us does not fit the requirements,” Zhou Jiancheng, vice director of planning and statistics at the Beijing Railway Bureau, one of the firms that failed to submit the report, told newspaper Beijing Youth Daily.
He said the company would have to see a “red-header document” before they would submit the emissions report.
In China, a “red-header document” normally refers to orders issued by the highest levels of government, whose name would be printed in red on the letterhead…
A new law mandates all companies to follow environmental regulations regardless of the authority level, but that does not enter into force until next year and it remains to be seen how successful it will be…
Beijing, where companies must hand over permits to the government to cover for their 2013 emissions by June 15, is only the latest of several local governments struggling to enforce its carbon scheme.
Guangdong province and the cities of Shenzhen and Tianjin have also found it difficult to convince local firms to follow the rules…
http://www.businessspectator.com.au/news/2014/6/17/policy-politics/beijing-emitters-ignoring-carbon-scheme
GREAT NEWS. Voice of Russia is basically the Reuters report below, but the headline is sharper:
16 June: Voice of Russia: UN climate talks on Sunday fail to predict future of carbon markets
The use of carbon markets to curb rising greenhouse gas emissions was dealt a blow on Sunday after two weeks of United Nations talks on designing and reforming the mechanisms ended in deadlock.
The negotiations, held as part of UN climate negotiations in Bonn, Germany, made scant progress as envoys representing almost 200 nations tied reforms to progress under the wider discussions and remained entrenched in diverse positions.
The deadlock gives investors little sign that there will be a pickup in demand under the Clean Development Mechanism (CDM), the UN ‘s current main carbon market which has seen activity dry up after assignment over $400 billion into emission-cutting projects in developing countries over the past decade.
It also offers no guidance on how the growing patchwork of national and regional carbon markets worldwide will fit into a future international framework to tackle climate change.
“We believe there is a future for markets … (but) to agree on something that wouldn’t be robust enough for us to engage on later on would just not make any sense,” Elina Bardram told journalists at a briefing after the talks ended on Sunday…
Poorer nations have been more wary, particularly as most CDM investment went to wealthier emerging economies such as Brazil and China and to industrial gas destruction projects, which generated healthy profits for companies but led to little sustainable development and had their environmental integrity questioned…
Framework fails
In a separate strand of the talks, governments failed to make much progress on efforts to launch a platform to help set common standards and accounting rules for reducing emissions and tie together national and regional emissions trading schemes…
Separate text listing elements of such a platform, referred to as a “Framework for Various Approaches”, was promoted by a group of richer nations including United States and Japan, which are both designing their own programs to use foreign carbon credits.
But this was removed after meeting resistance from developing nations, which first want rich governments to take on deeper emission reduction targets at home…
The EU, whose preparations towards a new global climate deal have not included additional demand for foreign carbon credits to 2030, has been criticized by investor groups for undermining its leadership role in new carbon market development…
The UN talks are scheduled to resume at the next negotiating round in December in Lima, Peru.
http://voiceofrussia.com/news/2014_06_16/UN-climate-talks-on-Sunday-fail-to-predict-future-of-carbon-markets-9810/
16 June: Reuters: Ben Garside: U.N. climate talks fracture over future of carbon markets
http://in.reuters.com/article/2014/06/15/us-un-carbon-idINKBN0EQ1BR20140615
read the Green SPIN:
16 June: BusinessGreen: Will Nichols: UN hails progress at latest Bonn climate talks
http://www.businessgreen.com/bg/analysis/2350218/un-hails-progress-at-latest-bonn-climate-talks
I believe the honorable Lord was mistaken: there is a zero missing in his calculation:
The proper price should be 2600$ / ton.
Or maybe I am wrong and it should be 26000$ / ton ?
Gosh, physics is sooo difficult 😛
/Sarc
Davidmhoffer.
In Australia we have a tax on fuel already that amounts in my calculation to about $280 per tonne CO2 equivalent, our tax amounts to about 42 cents per litre, so maybe $1.80 per gallon or so for our American friends.
Of course that’s if the tax is on CO2 if it’s actually on carbon which comprises 12/44 ths of carbon dioxide by mass then it’s about 3.5 times that 🙂
Gloom, gloom and more gloom. If only the GHE theory were correct there might be some good come from all that tax but it is a MASSIVE FRAUD.
2006
Stern review trashed
A member of the UK parliament, MP Peter Lilley, has written a scathing rebuttal study to the 2006 Stern Review of the Economics of Climate Change which has been used a basis for UK government to move forward with climate policy. The number of errors and distortions he has uncovered is quite extraordinary and brings the validity of the Stern report into serious question, if not outright falsifying it.
http://webarchive.nationalarchives.gov.uk/+/http:/www.hmtreasury.gov.uk/sternreview_index.htm
As the cost of government measures to combat climate change hit households and businesses, a new study published by the Global Warming Policy Foundation casts grave doubts on the validity of the Stern Review of the Economics of Climate Change which the government relies on to justify its policies.
The substantial study, by Peter Lilley MP, is the most thorough analysis of the Stern Review so far undertaken. It takes the IPCC’s view of the science of global warming as given, but points out that Stern’s economic conclusions contradict the views of most of the world’s leading environmental economists and even the economic conclusions of the IPCC itself. The study also catalogues a series of errors and distortions in the Stern Review “any one of which would have caused it to fail peer review.”
Because Stern’s conclusions endorsed policies adopted by both government and opposition and its highly tendentious assumptions were not explicit, it was initially accepted without public scrutiny. The new study shows the Stern Review to depend critically on “selective choice of facts, unusual economic assumptions and a propagandist narrative which would never have passed peer review.”
Describing it as “policy based evidence,” Peter Lilley argues the government can no longer rely on it to justify expenditure of many billions of pounds and calls for a return instead to “evidence based policies.”
Stern’s central conclusion 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” whereas “the costs of action — reducing greenhouse gas emissions to avoid the worst impacts of climate change — can be limited to around 1% of GDP each year” is found to be entirely fallacious.
Lilley’s study demonstrates that the benefits of curbing emissions now and henceforth will not be five times the cost of action, as Stern claims. “It is achieved by verbal virtuosity combined with statistical sophistry. In fact, even on Stern’s figures, the cumulative costs of reducing greenhouse gases will exceed the benefits until beyond 2100,” Lilley points out. “If we continue to follow Stern’s advice, the principal losers, apart from British taxpayers and businesses, would be developing countries who cannot raise living standards without massively increasing their use of fossil fuels and will therefore be responsible for most of the growth of carbon emissions,” Lilley argues.
Lilley asks: “why should this comparatively poor generation make the sacrifices Stern demands to improve living standards of people in 2200 who, if we take no action to prevent global warming — even on the worst scenario depicted by Stern — will be 7-times better off than us?
Lilley calls on the government to cease basing its climate change policy on the flawed Stern Review and commission a new independent cost-benefit study of alternative strategies.
I still don’t know if they are talking about CO2 when they say “carbon” or they talk about the element itself.
If we are talking about tetrahedrally bonded carbon atoms with sp3 hybridation in a covalent network lattice that crystallizes in the octahedral habit (diamond) then, wow, $260 per ton is super cheap.
In the horse manure fiasco from 120 years ago they weren’t using vague terms. Nowadays you find ambiguous terms in every branch of political science, I think they do it intentionally, to misdirect a discussion: Ozone hole, carbon, climate change, greenhouse effect, organic food…
Hear the fat cat sternly preaching that hunger is good for you…
spdrdr says:
June 16, 2014 at 3:11 pm
davidmhoffer – each litre of petrol produces 2.31 kilograms of CO2, so 432.9 litres will produce a tonne. At a price of US $260 per tonne, we are looking at US $0.60 per litre, or $2.25 per US gallon.
However, that does not include the cost of carbon dioxide input in the production process – this calculation is purely the rate of tax on CO2 produced by combustion only.
——
seen figures like this before
so
tell me someone
how does vaporising something that might weigh a kilo(ie a litre) by the act of going through an engine which utilises it, output 2.31 kg after use?
sorry but to me its a ridiculous claim and id love to know how the hell they get and keep quoting such
OZ,
can’t speak for the accuracy of the calculation, but the combusted products of the gasoline include oxygen from the air, which presumably gives the extra weight.
Shh about the oxygen though, they might start charging us for that as well!
Cheers
Roger
http://www.thedemiseofchristchurch.com
Big Oil Advocacy : )
Top ten reasons why business should love a carbon price
http://blogs.shell.com/climatechange/2014/06/toptencarbon/
The importance of discount rates for pricing future costs cannot be overstated. Even a modest discount rate can have a large cumulative effect over 100 years. Businesses often use quite large discount rates to decide if they should invest – certainly at least the return on equity that their business generates.
Using a near zero discount rate is so totally and absurdly wrong that I am amazed that Sterns report hasn’t been junked. The fact that the Stern report is so often held up as the last word on this subject is beyond parody.
Anyone tired of the “well-funded denial machine” meme should do the math on this boondoggle. Here’s what real money looks like. The US, I believe, emits about 5×10^9 tons of carbon dioxide every year. At $30/ton the price of those emissions will exceed the total profits of the Big 5 private oil companies by about 50%. At the target price of $260 the total cost becomes astronomical.
And it’s so convenient! No wells, tankers, refineries or pipelines. No pesky employment issues and no roads or cars to build. Just sign the law and collect.
Money for nothing and your checks for free!
(Apologies to Dire Straits)
And payable by cash, check, or credit card to your local jet setter leaders and their friends and family
It is not vaporising, it is a chemical reaction. gasoline reacts with oxygen and produces CO2 and water (H2O). You have to take into account that you are combining 1 Kg of gasoline with some kilograms of O2.
Gasoline is a mixture of hydrocarbons, mainly octane and isomers with a general chemical formula of C8H18. The formula says that there are 8 carbon atoms and 18 hydrogen atoms in a molecule of octane (or gasoline). Translated into kilograms it means that in a kilogram of gasoline there are 0.842 kilograms of carbon atoms and the rest (0.158 Kg) are hydrogen atoms.
Now, In a combustion engine gasoline burns, meaning that it reacts with oxygen (O2) yielding CO2 and H2O (water) That is on ideal conditions, if the combustion is incomplete you can have some carbon monoxyde (CO) or some gasoline that fails to react.
So. all the carbon atoms end up combined with oxygen. Since an atom of oxygen weights 16 times more than an atom of hydrogen, CO2 has proportionally less weight due to the carbon atom than due to the oxygen atoms. For every 44 grams of CO2, 12 grams are due to the carbon and 32 grams are due to the 2 oxygens. In other words, in 1 kilogram of CO2, only 0.272 kilograms are carbon atoms and the rest, 0.728 kg. are oxygen atoms.
To sum up, 1 kilogram of gasoline, has 0.842 kilograms of carbon, and when combined with oxygen render 0.842/0.272 = 3.095 Kg. of CO2.
That is on ideal conditions. If the yield of the reaction was 100 %, burning 1 Kg of gasoline will give you 3.095 Kg of CO2. In a combustion engine the yield may be less than 100% and the production of CO2 is less than that.
Send your carbon indulgence payments to the high priests.
Just in case the previous post looks complicated:
1 Kg of gasoline reacts with 3,508 Kg. of Oxygen (O2) and renders 3,087 Kg. of CO2 and 1,421 Kg. of H2O (water)
This publication isn’t worth the electricity my computer uses to read it. If only we could put a price on stupidity, Stern would be out of business…or whatever it is he does.
Let’s translate this to the cost of electricity. It would cost about 22 cents (US) for 1 KW hour just for the carbon tax from coal. That’s about 11 cents per KW for power from combined cycle natural gas plants. So, for most of us, that results in our power bills being roughly double to triple what it is now. Good luck with that.
Chris Hope, creator of the PAGE model underpinning the Stern Review’s climate impact assessments, co-authored an article last year estimating that the social cost of carbon is $266/ton. The authors got that figure by assuming a 1% discount rate. They joyfully concluded that replacing fossil energy with renewables would make the economy more “efficient.” SCC is computer-aided sophistry. It is designed to make uneconomic renewables look like a bargain at any price and competitive fossil energy look unaffordable now matter how cheap. For a detailed critique of these parlor tricks, see the link in this post (http://www.globalwarming.org/2014/02/27/menace-to-society-commentary-on-the-social-cost-of-carbon/) to free market groups’ joint letter on the administration’s SCC estimates.
When they say “price of carbon” they actually mean per ton of CO2. So you have to triple those to get the price for fossil fuels.
So we get: $32-103 -> $100-300 and $82-260 -> $250-750
That first recommendation for 2015 would price coal-electric out of the market, and maybe double gas-electric. For comparison, crude oil is approaching $800 a tonne.
If they legislated minimum base prices instead of emission taxes, then only coal would increase for the first case, and crude would not be affected by the second case.
So isn’t $240 per tonne expensive for coal ?
I apologize folks…. but I just can’t call Stern, this poseur, ‘Lord’.
Maybe ‘Lord Of The Flies’…a delirious vision of a rotting sows head that speaks of ‘no escape’???
No – That is profoundly insulting to flies …. and sows everywhere.
JohnH says:
June 17, 2014 at 5:54 am
And it’s so convenient! No wells, tankers, refineries or pipelines. No pesky employment issues and no roads or cars to build. Just sign the law and collect.
Money for nothing and your checks for free!
(Apologies to Dire Straits)
JohnH,
Very nice!
Mac
Or just stop giving our coal to China!