William Nordhaus versus the United Nations on Climate Change Economics

By Robert P. Murphy

William Nordhaus was a co-recipient of the 2018 Nobel Prize in economics for his pioneering work on the economics of climate change. On the day of the Nobel announcement, the United Nations’ Intergovernmental Panel on Climate Change (UN IPCC) released a special report advising the governments of the world on various steps necessary to limit cumulative global warming to 1.5 degrees Celsius. The major media coverage treated the two events as complementary. In fact, they are incompatible. Although Nordhaus favors a carbon tax to slow climate change, his own model shows that the UN’s target would make humanity poorer than doing nothing at all about climate change.

Indeed, we can use Nordhaus’s and other standard models to show that the now-championed 1.5°C target is ludicrously expensive, far more costly than the public has been led to believe. This is presumably why the new IPCC special report does not even attempt to justify its policy goals in a cost/benefit framework. Rather, it takes the 1.5°C target as a politically “given” constraint and then discusses the pros and cons of various mechanisms to achieve it.

It is ironic that in the context of accusations that opponents of government intervention are “science deniers,” the latest UN report largely ignores the peer-reviewed publications in climate-change economics, including those of the man who just won the Nobel Prize in the field.3

Nordhaus’s “DICE” Model

Nordhaus is arguably the inventor of the modern economics of climate change, with contributions going back at least to his 1979 book.4 Then, in the 1990s, he, along with others, developed the Dynamic Integrated Model of Climate and the Economy (DICE). Nordhaus and co-author Joseph Boyer, in a 2000 book, outlined the DICE model as well as a regional version called RICE and in 2008, Nordhaus published a book summarizing the model as of 2007. He updated his model in 2016 and published technical papers in 2017 based on its latest findings.

Nordhaus subscribes to the standard view that greenhouse gas emissions from human activities constitute a negative externality and, therefore, recommends that the governments of the world implement a carbon tax. One of his major purposes in developing and refining his DICE model is to estimate the “social cost of carbon.” The social cost of carbon is the present value of the net future harms from an additional ton of emissions in a particular year. A related purpose of Nordhaus’s DICE model is to estimate the trajectory of the optimal carbon tax over time. (Note that the “social cost of carbon” trajectory depends on government policy. In the presence of an optimal carbon tax, the volume of future emissions will be lower than otherwise. Thus, on the margin, an additional ton of carbon dioxide emitted in, say, 2050 will be less damaging than it would have been in the laissez-faire baseline.)

I endorse neither Nordhaus’s diagnosis of “market failure” nor his prescription for a carbon tax. Indeed, I have critiqued Nordhaus’s model elsewhere,5 and I have co-authored a study with climate scientists in which we make the case against a generic U.S. carbon tax.6

For the purposes of the present article, however, I stipulate Nordhaus’s work as representative of the state of the art when it comes to the mainstream economics of climate change. That is all we need to show that the UN’s special report on climate change is utterly at odds with the literature.

Nordhaus’s 2007 Results Showed Current UN Target Much Worse Than “Doing Nothing”

As I explain in greater detail in my 2009 journal article, the exposition Nordhaus gave for his 2007 model runs was useful in showing the consequences of various climate policy goals. Below, I reproduce a table from my article, which I adapted from a table in Nordhaus’s 2008 book.

Table 1. Relative Benefits and Costs of Various Climate Policies According to DICE-2007 (Trillions of 2005 US$)

Source: Table 4 from Murphy (2009), p. 211.

The first row of the table shows what the DICE model—as of its 2007 calibration—estimated would happen if the governments of the world took no major action to arrest greenhouse gas emissions. There would be significant future environmental damages, which would have a present-discounted value of $22.55 trillion.

In contrast, the second row shows what would happen if the governments implemented an optimal carbon tax. Because emissions would drop, future environmental damages would fall as well; that’s why the PDV of such damage would be only $17.31 trillion. However, even though the gross benefits of the optimal carbon tax would be some $5 trillion as a result (because of the reduction in environmental harms), these gross benefits would have to be offset by the drag on conventional economic growth, or what is called “abatement costs.” Those come in at a hefty $2.20 trillion (in PDV terms), so that the net benefits of even the optimal carbon tax would be “only” $3.07 trillion.

Consider, now, the scenario “Limit temp. to 1.5°C.” Recall that this is the IPCC’s current policy goal and that various environmental analysts and pundits also embrace it. Because Nordhaus just won the Nobel Prize for his work on climate change, one might suppose that his model would provide support for the UN’s goal. It doesn’t.

As Table 1 indicates, Nordhaus’s model—at least as of its 2007 calibration—estimated that such a policy goal would make humanity $14 trillion poorer compared to doing nothing at all about climate change. Moreover, the $14 trillion magnitude of the net damages from the wrong policy—including what is now the UN’s goal—dwarfs the $3.07 trillion size of the net benefits from even the best theoretically possible policy.

Notice, also, that two of the other impoverishing policies considered by Nordhaus were not the product of his fanciful imagination but, instead, were proposals that either other economists (Nicholas Stern) or famous political figures (Al Gore) offered. The difference in the two Kyoto scenarios also showcases the sensitivity of the calculations to the participation of the world’s major emitters; the $3.07 trillion net benefits from a carbon tax accrue only if all of the governments enact the textbook carbon tax profile for more than a century.

In light of Nordhaus’s calculations shown above, the apparently urgent need for “climate action” is not so urgent. It now looks more analogous to economists discovering the theoretical possibility of an “optimal tariff” but still understanding that free trade is the safest rule of thumb.

Full essay here

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February 23, 2019 1:17 am

When you start with a flawed assumption, what follows is garbage. GIGO

Reply to  P2
February 23, 2019 5:13 am

Agreed P2.

My co-authors and I published the following in 2002:

“Climate science does not support the theory of catastrophic human-made global warming – the alleged warming crisis does not exist.”

“The ultimate agenda of pro-Kyoto advocates is to eliminate fossil fuels, but this would result in a catastrophic shortfall in global energy supply – the wasteful, inefficient energy solutions proposed by Kyoto advocates simply cannot replace fossil fuels.”

These statements are correct-to-date, based on all the evidence. Meanwhile, every very-scary prediction by the global warming alarmists has FAILED to materialize. They have a perfectly NEGATIVE predictive track record and nobody should believe them.

Their climate computer models run far too hot and weather is NOT becoming wilder or more chaotic.

Grid-connected green energy schemes are costly disasters, primarily because of intermittency, and are so ineffective that they produce little useful (dispatchable) energy and do not even significantly reduce CO2 emissions.

Trillions of dollars and millions of lives have been squandered on global warming alarmism and green energy nonsense.

In recent years, the Nobel Prize has become a bad joke:


“… the recipient (of the Nobel Peace Prize) is selected by the Norwegian Nobel Committee, a five-member committee appointed by the Parliament of Norway.

The awards given to Mikhail Gorbachev,[26] Yitzhak Rabin, Shimon Peres, Menachem Begin and Yasser Arafat,[27][28] Lê Đức Thọ, Henry Kissinger,[29] Jimmy Carter,[30] Al Gore,[31] the IPCC,[32] Liu Xiaobo,[33][34][35] Aung San Suu Kyi[36][37][38] Barack Obama,[39][40][41][42] and the European Union[43] have all been the subject of controversy.” (wiki)

My comment:
Look at the above list of award recipients. Arafat? Gore? The IPCC? Obama? The IPCC? The EU?
The Norwegian Nobel Committee, a five-member committee appointed by the Parliament of Norway, has demonstrated a high degree of political bias and extreme incompetence in its selections. To suggest that the members of the committee demonstrate less-than-average intelligence in recent years would be a kindness.

Reply to  P2
February 23, 2019 8:03 am

It’s interesting to know,
that as a group,
US economists have never
predicted a recession !

Not one !

Their estimates of the “cost”
of adding CO2 to the air,
are a pile of steaming
farm animal digestive
waste products.

Real science shows that adding
CO2 to the air benefits our planet,
by greening the planet and
accelerating C3 plant growth.

Nordhaus thinks there are costs
from adding CO2 to the atmosphere.

He starts out being wrong,
so no quantity of IQ points
will result in anything near
a correct answer.

Real air pollution
– think of soot particles,
fine dust, SOx and
NOx compounds, etc.
– is much easier to target,
and fight, and doing so
guarantees benefits.

My climate science blog:

Bill Parsons
Reply to  Richard Greene
February 23, 2019 10:05 pm

His conclusion echoes Bjorn Lomborg’s – that ANY tax on carbon would yield minimal economic value in reducing warming, and the bigger the tax (penalty), the more egregious the economic effects in the future. I agree with this. But how does Nordhaus deal with the science to set up his DICE runs? To repeat your point above, there’s a net benefit of CO2 being released, and contrary to the warmist narratives, it may be an exponential benefit. The greening of our planet is clearly shown in satellite photos, and it is certainly attributable in large part to CO2 emissions. Does Nordhaus deal with carbon sinks and better harvests? Certainly the Murphy summary does not get into the science. The science is messy. It’s complicated. But how can you arrive at dollar-value cost / benefit to the economy without real data on the benefits of a greening world?

Second, Nordhaus’s DICE runs must be logging some kind of assumptions about the NEGATIVE effects of CO2 on climate. These would depend on the highly-paid but iffy pseudo-science of
climate sensitivity. There is no reliable consensus about what those effects are, and it woulds seem to me research in this area would be better spent studying the sun’s effects. There are enough known connections between the El Ninos and dramatic weather events to keep scientists busy without them pointlessly meditating on the unknowns of climate, which are just chaotic enough that they may never be understood – let alone predictable. And finally, there’s a debatable net benefit to warming itself, which must be part of whatever algorithms he’s using. It’s nuts to try to ward off a proven good.

If one of your dice is missing a few dots, extra rolls – or computer runs -just amplifies erroneous conclusions.

Reply to  Bill Parsons
February 24, 2019 2:43 am

As far as I know, Nordhaus’ work is in the economics and how you should do the analysis, not what should be used in the analysis. I believe he recognises that there are benefits as well as costs to additional CO2.

He’s an economist, interested interested in showing how to work out what to do based in what makes us most wealthy.

Bill Parsons
Reply to  Phoenix44
February 24, 2019 10:35 am

You’re wrong. His misuse of science is explicit.

He starts with all the most negative predictions of climate scientists and goes from there. GIGO. See his Nobel prize lecture pdf. To arrive at a future damage estimate of 22 trillion dollars, he inputs the classic cassandrian assertions of the climate catastrophists: rising sea levels, reduced corn harvests, coastal flooding, ocean acidification, etc. None of these should be taken as a given. None can be attributed to CO2. There are no references to benefits.

Get real. Nordhaus is not above the fray by virtue of being an ivy league intellectual. He’s not an innocent tool of the catastrophists. He’s a promoter.

Reply to  P2
February 24, 2019 2:38 am

You are missing the point. If climate change is an externality with costs, which is the Alarmists claim, then the “remedy” is completely wrong. Thus using the models and assumptions used by Alarmists, they are making us much poorer than they should.

Eamon Butler
Reply to  P2
February 24, 2019 3:04 am

Look, I may never win a Nobel prize in my lifetime, (Not even after) but this is exactly what my thoughts were on this study. If the initial ”problem” doesn’t exist, it makes them look very foolish.

E J Zuiderwijk
February 23, 2019 1:30 am

Clearly, both Nordhaus and the IPCC are wrong.

Dave N
Reply to  E J Zuiderwijk
February 23, 2019 1:42 am

Whatever the case, Nordhaus will likely be lumped in with Lomborg as a “d*ni*r”… who won a Nobel Prize

Rich Davis
Reply to  Dave N
February 23, 2019 3:23 am

You can say denier you know

Reply to  E J Zuiderwijk
February 23, 2019 4:51 am

When I saw Algorebull’s name at the bottom of that list, I knew it was worth looking into this.

What Nordhaus says is “the cost is too high” or, if you can’t understand that “doing nothing – NO EXTREME MEASURES – is more cost effective” .

In light of Nordhaus’s calculations shown above, the apparently urgent need for “climate action” is not so urgent. It now looks more analogous to economists discovering the theoretical possibility of an “optimal tariff” but still understanding that free trade is the safest rule of thumb. – Article.

If you still don’t get it, he’s saying there is NO reason to come up with an excessive tax that will bankrupt every country on the planet and get no real results. It’s best to just continue to pick up and clean up after ourselves and come up with constructive ideas to provide clean water and fuel where they are needed.

Stop trying to rule the world!

Reply to  E J Zuiderwijk
February 24, 2019 2:46 am

No, Nordhaus is right. His model works for any externality, not just CO2.

Arguing against mainstream economics because you don’t think CO2 is causing climate change makes no sense.

Dave Fair
Reply to  Phoenix44
February 24, 2019 10:13 am

“Mainstream economics” that predicts the unpredictable. LOL.

And practicing “mainstream economics” gets one a Nobel? Nordhaus got one of those ‘political Nobels’ for they are becoming infamous.

Ron Long
February 23, 2019 2:02 am

Both Kyoto and Paris agreements gave exceptions/delays to “Developing Countries” such that there was not any clear pathway to either 1.5 deg C or 420 ppm CO2. Instead, payment of fines by rich countries to poor countries is the central idea. This idea that the United Nations, a bastion of incompetence, corruption, and inaction, can control the Earths Climate is laughable.

Patrick MJD
Reply to  Ron Long
February 23, 2019 2:26 am

Not the climate, but the flow of climate fines from rich to UN, bypassing the poor. Did I get that right?

Johann Wundersamer
Reply to  Patrick MJD
February 23, 2019 2:42 am

“Ron Long February 23, 2019 at 2:02 am
Both Kyoto and Paris agreements gave exceptions/delays to “Developing Countries” such that there was not any clear pathway to either 1.5 deg C or 420 ppm CO2. Instead, payment of fines by rich countries to poor countries is the central idea. This idea that the United Nations, a bastion of incompetence, corruption, and inaction, can control the Earths Climate is laughable.”

“Patrick MJD February 23, 2019 at 2:26 am

Not the climate, but the flow of climate fines from rich to UN, bypassing the poor. Did I get that right?”

Not the climate, but the flow of climate fines from poor of “the rich state’s” dispersed over “responsible, influential” UN staffers.

telling the rest 195 UN member states “no money coming over. Climate change is to blame!”

Reply to  Patrick MJD
February 23, 2019 8:34 am

The concept of climate damage reparations is dead but will be formally given the last rights at COP25. All that will really happen is current foreign aide already given by developed countries will simply be re-badged and the amount will still be at the discretion of the country.

Ron Long
Reply to  Patrick MJD
February 23, 2019 10:49 am

Right, Patrick. The United Nations is entitled to some “commission” after all. I once confronted a company President about corruption and he repeated the classic “one hand washes the other and they both get clean”. I actually was an official country representative to an important United Nations function, and you have to see for yourself what kind of activity we are supporting with our tax dollars to believe it.

February 23, 2019 3:16 am

So, even using IPCC fuigures for temperature rise, it’s cheaper to do nothing.
And even using ‘renewable industry’ figures for windmills and panels, it’s cheaper to build nukes.

Does anyone really believe that those orchestrating responses to ‘climate change’ and flying by private jet to climate conferences from their beach side residences actually believe it is a serious threat?

February 23, 2019 3:17 am

Retired CSIRO Chief Research Scientist
ASEG Gold Medal in July 2006, “For exceptional and highly significant distinguished contributions to the science and practice of geophysics…”
Principal scientists contractor to CSIRO in the geophysical Electromagnetic Modelling Group for exploration and environmental applications.



Clive Spashs work on Energy Economics and ecological aspects of Finite Resources and Thermodynamics etc
Is very interesting.

Clive does seem to buy the CO2 ( Mistake) yet he was sacked by the Australian Quango CSrio for speaking out about and criticising Carbon trading and Nordhaus and his neoclassical claptrap,



February 23, 2019 3:34 am

As William Nordhaus fails to even look at history. His idea that the UN-IPCC’s model of the world is in anyway correct is deeply flawed. Generally all through history, people have thrived during warm periods as food is often more abundant, during cold period there was strife, famine, pestilence, and massive social upheaval. A warmer climate this good, higher CO2 levels are good, together both ensure the greening of the planet.

Overall William Nordhaus appears to be pedaling the old ‘if the rich get richer then the poor get poorer’ socialist nonsense.
So William Nordhaus what would your advice be if (and there is a very real prospect of it happening) global cooling were to happen? Just more of the same — a UN tax on the ‘rich’ nations.

Rich Davis
Reply to  tom0mason
February 23, 2019 5:29 am

Logically it would be a tax on wealthy nations to subsidize fossil fuel burning by third world countries. Because global socialism.

*That’s what they would be PEDDLING (unless you meant they would be delivering their message pedaling a bicycle rather than trying to sell — peddle — their ideas).

Walt D.
Reply to  Rich Davis
February 23, 2019 7:26 am

Reminds me of another Bob Murphy article on the myth of green energy jobs. We could essentially employ people to generate electricity by peddling exercise bicyles at the gym. They would have to pedal all day just to keep the lights on in the gym!

Reply to  Walt D.
February 23, 2019 2:43 pm


Reply to  Rich Davis
February 23, 2019 2:42 pm


Doc Chuck
Reply to  tom0mason
February 23, 2019 2:17 pm

And before we all get lost among the trees, lets survey the forest we’re discussing here. As you point out, historically civilizations thrived during Minoan, Roman, and Medieval Warm Periods of recorded human history. The last and least warm of those balmy times we are only now approaching again after an intervening considerably colder period that among other things extinguished Viking settlement of Greenland as well as the productive British vineyards. So we are mercifully gradually lifting out of a threateningly chilly climate period.

And beyond that big picture perspective, we should realize that any recent elevation of global average temperatures has been largely confined to higher northern hemisphere latitudes (think Canada and Siberia) where they thus have cause to celebrate it. Add to that a remarkably similarly global average temperature rise near the end of the first half of the 20th century as during a similar period concluding it, with a 35 year slight decline separating the two (at least before scientifically embarrassing later revisions were made to mask them), as well as the overall nearly plateaued temperatures during this new century, the discordance lacking causative connection with the increasingly ascending atmospheric CO2 level over the same interval.

Then deconstructing those average temperatures to their component daily high and low temperatures (which of course were the original documented measurements) reveals that it was mostly some moderation in the depths of the nightly lows that accounts for the excursions of the averages and very little change of high end temperatures is at all in evidence.

So all the hysterics ultimately devolve from fanciful computer models whose alarming expectations continue to soar well above currently measured congenial temperatures, and ulterior social motives have twisted more than just this science beyond recognition en route to promoting a Green Bad Deal that truly threatens the hard-won freedoms our forebears bled to assure us.

Reply to  tom0mason
February 24, 2019 2:52 am

Total misunderstanding. He is looking at costs and benefits and the timing of those, and what happens if you use a tax to properly price things in a market. It is market economics, as far from socialism as you can get.

You, like so many on here, also misunderstand the carbon tax. Nordhaus says that a carbon tax should be revenue neutral for governments, so should be balanced by a reduction in tax elsewhere, preferably on income because income taxes are distortion.

Eamon Butler
Reply to  Phoenix44
February 24, 2019 3:18 am

If you rise the cost of ”Carbon” but reduce the ” tax elsewhere, preferably on income” -would imply the extra cost becomes more affordable.

Reply to  Eamon Butler
February 24, 2019 10:44 am

True, however those who reduce their energy use would reduce the impact of the carbon tax while still benefiting from the other “reductions”. That’s where the incentive comes from.

Dave Fair
Reply to  Phoenix44
February 24, 2019 11:41 am

Nobody, Phoenix44, including William Nordhaus, has any idea of the probable future “costs and benefits” of any particular level of CO2 concentrations in our atmosphere. It is all modelturbation.

If one trots out the results of UN IPCC computer modeling games to speculate about future damages, one looses the argument by default. When someone actually finds the missing tropical troposphere hot spot predicted by modelturbation, we might have a rational basis for a discussion of ECS.

Dave Fair
Reply to  Phoenix44
February 24, 2019 11:51 am

Oh, an afterthought: Phoenix44, I actually do understand taxation, including Nordhaus’ carbon (CO2) taxing scheme. No matter the purpose, all taxes are politically-driven market distortions. They remain market distortions, no matter the politically-driven uses the taxes are directed.

Why does all economic modeling seem to ultimately fail? I believe it is because one cannot model human nature. All the economists throughout time have not been able to solve that problem. I assume it would fundamentally change the world (for the worse) if they could.

February 23, 2019 3:35 am

There is no Nobel prize in economics. Take it from me I am from Sweden.

Reply to  AG
February 23, 2019 4:06 am

But there is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” (Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), which is awarded annually by the Royal Swedish Academy of Sciences to researchers in the field of economic sciences. It was not one of the fields that Alfred Nobel originally endowed, but recipients of the economics prize are treated equally as Nobel Prize laureates. Many of the recipients are mathematicians, who otherwise could not be recognized for their work in the field of mathematics, because there is no Nobel Prize for Mathematics.

Tractor Gent
Reply to  Johanus
February 23, 2019 5:22 am

Fields Medal. Not perhaps as prestigious as a Nobel in the eyes of the public, but certainly so for fellow mathematicians.

Reply to  Johanus
February 23, 2019 9:03 am

The Nobel family has a long history of concern with the Nobel-like prize in economics. https://en.m.wikipedia.org/wiki/Nobel_Prize_controversies
News media and economists dutifully speak of a Nobel Prize in Economics, scientists not so much. I was not aware that there is such a thing as an “economic science”. I am not sure that an activity that has demonstrated virtually zero predictive capacity meets any criteria for being considered scientific.

Reply to  BCBill
February 23, 2019 9:22 am
Larry in Texas
Reply to  BCBill
February 23, 2019 4:28 pm

“I am not sure that an activity that has demonstrated virtually zero predictive capacity meets any criteria for being considered scientific.”

Boy, is that ever the truth. Especially when after Trump’s election, Paul Krugman (called a “Nobel laureate” lol) said that the stock market would totally crash and not recover for a long time. What genius.

Bill Parsons
Reply to  BCBill
February 23, 2019 10:11 pm

I was not aware that there is such a thing as an “economic science”.

Somebody dubbed it “the dismal science”. I have no idea why.

Walter Sobchak
Reply to  Johanus
February 23, 2019 10:29 am

The Fields Medal is more limited than the Nobel Prizes being quadrennial rather than annual and limited to mathematicians under the age of 40. Also the monetary award is 15,000$CA (~11,500$US), as compared to ~1,100,000$US for the Nobels.

In 2003, the government of Norway established the Abel Prize in memory of Norwegian mathematician Niels Henrik Abel (1802-1829). The prize had been proposed by Norwegian mathematician Sophus Lie (1842-1899) in the 1890s to fill the gap in the Nobel Prize system but it took them a while to get a round tuit. The Able prize is awarded annually and carries an honorarium of ~850,000$US. http://www.abelprize.no/

The difference between the Fields and the Able prize is the age 40 limit. Andrew Wiles has been awarded the Abel for proving Fermat’s Last Theorem. But he was 41 when that work was completed.

Dave Fair
Reply to  Johanus
February 23, 2019 11:52 am

Snark first: Uttering ‘science’ and ‘economics’ in the same breath should lead to respiratory failure.

I’d like to see the model runs with the U.S. alone implementing the tax, then just with the Western world. In either case, would any model-calculated benefits be measurable, especially considering uncertainty over a 100-year period?

Using unvalidated econometric models should lead to the same type of errors as using unvalidated UN IPCC climate models because both involve making many uncertain judgmental assumptions by the people running the models and hyping model results. There is no way for Nordhaus to validate his models since there is no historical data to support his modeling assumptions. UN IPCC AR5 “damage” assumptions based on unvalidated UN IPCC climate models’ output, subsequently fed into Nordhaus’ model, is an extreme example of modelturbation.

In any case, Nordhaus’ relatively small calculated economic difference between doing nothing and imposing a worldwide CO2 tax is lost in the noise of future uncertainty. More importantly, free people always have the option of calling out “Wife, where did you put my yellow vest?” None of the prognosticator’s modelturbation can/will factor in human nature; it is best to leave the future to our wealthier, more technologically advanced children rather than guessing about things we cannot know.

Dave Fair
Reply to  Dave Fair
February 23, 2019 12:01 pm

Correction: I actually don’t know if Nordhaus’ models use AR5 damage assumptions. I assume he got them from the UN IPCC, though. Mea culpa.

Reply to  Dave Fair
February 24, 2019 2:56 am

Another missing the point. Nordhaus is not arguing that his assumptions are right – that’s not what he won the Nobel prize for.

He is showing how to work out the optimum level of a tax on externalities in order to maximise total wealth.

Dave Fair
Reply to  Phoenix44
February 24, 2019 11:32 am

Well, Phoenix44, according to The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018, “Prize motivation: “for integrating climate change into long-run macroeconomic analysis.”” I assume that the good Committee intended the meaning of climate change, as is the case for most all European political entities, the meaning promulgated by the UN IPCC: AGW.

Macroeconomic models are ubiquitous, including many proposing this or that “optimal tax.” His modeling was not unique; it was his jumping on the CAGW bandwagon that got him the award. Arm-waving can’t change my analysis of the situation.

Bruce Ploetz
February 23, 2019 3:48 am

Is the “No Controls Baseline” based on RCP8.5? If so it the cost estimate is probably pretty inflated.

It is impossible to predict the disruptive effects of new technology. Even if there are no “moon rocket” projects to create new forms of energy there is still a good chance that the problem will be solved by the free market long before emissions reach anything like the RCP8.5 fantasy scenario.

When energy starts to get expensive because of scarce resources, when and if that ever happens, prices will go up and the market will naturally move to less expensive resources that we can’t even imagine today. Supply and demand.

Adam Smith’s invisible hand is still working despite massive attempts to corrupt it by the Utopians.

Rich Davis
February 23, 2019 4:15 am

I have three points:

Nordhaus estimated damages tripled
Positive externality
Doing a little is not better than doing nothing

First, Nordhaus raised his estimate of the likely costs of climate change in 2016. This reflects apparently little more than the “insight” that it’s much worse than we thought. In 9 years, during which time it became apparent that ECS was likely to be no greater than the low end of IPCC estimates, supposedly new information caused him to TRIPLE the estimated damages of doing nothing. From the full article:

Imagine physicists inflating their estimates of the charge on an electron, or the mass of the moon, by such a large amount in such a short time span. Rather than justifying aggressive new government policies that would carry a huge price tag, such shifting “consensus science” might understandably make us pause because even the scientists in the area clearly don’t understand the field very well.

Second, the entire premise is false. CO2 is not a negative externality. Rather than imposing costs on third parties allegedly harmed when oil companies sell their products to consumers, the burning of fossil fuels is net beneficial to third parties. More CO2 in the air enhances agriculture and the modest warming effect, just as Arrhenius hoped, also improves agriculture. Since there is a net benefit, it is not worth spending a single cent on reducing emissions.

Third, some may argue that although it’s too expensive to shoot for a 1.5C limit on temperature rise, we should still “do something” because Nordhaus shows a net present value on such trivial pursuits as Kyoto with or without the US. But those calculations are flawed. They measure a net benefit to “somebody” despite costs to somebody else. It is not the case that if Western countries impose a carbon tax, westerners will enjoy a net benefit or net reduction in harm. It is primarily that third world countries will benefit from western countries’ largesse.

(Edited for Arrhenius) MOD

Rich Davis
Reply to  Rich Davis
February 23, 2019 4:55 am


Reply to  Rich Davis
February 23, 2019 5:43 am

Yup, loaded DICE.

Crispin in Waterloo
February 23, 2019 4:30 am

I’m as I understand it, a correct use of DICE shows that it is “cheaper” to do nothing about CO2 emission control by means of taxation. Do I have that correct?

Next, the UN uses different accounting and they conclude it will be expensive but beneficial and I suppose, net beneficial financially. Right? The methods don’t align and the conclusions are (financially) the same: emitting CO2 creates more damage than benefit while reducing CO2 creates more damage than benefit.

This seems far fetched, not that anyone is listening to me. If you were a government, which argument would you listen to? The one that says spend all that money and lose money, or spend all the money and lose a different amount of money?

Where are the benefits of emitting CO2 considered?

Every now and then we hear that it will only take 3% of the GDP of the planet to satiate the green monster and it will go away. Well, 3% of what? The economy that will exist because of CO2 emissions or the shrivelled one that will struggle along starved of heat, power and transport?

The key error is idea that we can, without atomic and nuclear power, without oil and coal, carry on with a growing economy that will bring wealth to everyone eventually.

Let’s examine that. Wealth meaning what? Some sort of wealth that includes almost no minerals (mining is bad), less food (agriculture is bad), ignorance about other cultures (travelling is bad), and an industrial economy powered by a wind and solar energy that mostly produces devices and materials to build wind and solar power plants.

Because the EROI is so poor, most people who work will produce power generating equipment to power the factories that produce powder generating equipment.

Only a breakthrough in power generation will solve this. Fossil fuels are finite. Natural gas might flow forever because it is abiotic, so that is some power in the long run, but not enough.

Now, run the same cost benefit analysis for investing in hot and cold fusion research and check the long term benefit. We are far better off investing trillions in that, than “avoidance”.

I do not agree with the anti-UN comments. The UN is reformable, fixable, necessary. They do all sorts of useful things but could do far better. The IPCC appears not to be fixable or reformable and they are not doing lots of useful things. They demonstrate that international cooperation on a global scale is possible, but the preconceived outputs and backstage manipulation of those outputs vitiate any usefulness. There is little point in scientific cooperation if the result is perverted to some or other ” cause”. Science is supposed to speak truth to power, not speak what power wants to hear.

Is DICE or RICE or the IPCC speaking the truth? How is it they conclude the benefit of burning carbon is lower than the costs? What value do they place on human happiness, comfort and life itself? Are these worth nothing to the materialist philosophers?

Apparently not. The social net benefit of having access to electricity, metals and medicines is large. Let”s solve the energy problem, not the CO2 “problem”.

Reply to  Crispin in Waterloo
February 23, 2019 5:07 am

The UN may have been a good idea but I don’t see any good from them anymore. Waterloo is welcome to be their home base. I would love for them to leave the U.S.

Rich Davis
Reply to  F.LEGHORN
February 23, 2019 5:57 am

The UN would make a fine stripmall for Turtle Bay, but Waterloo had better be a reference to the town in Belgium that stole its name from the city in Ontario.

Crispin’s Waterloo is way too close to the US for my taste.

Reply to  Crispin in Waterloo
February 23, 2019 5:30 am

Good comments Crispin – thank you.

I do not know if the UN is “savable” or not – the level of endemic corruption in most national governments is so deep and so widespread – that is the primary cause of global poverty and the reason for my pessimism.

Over half the countries in the world are military dictatorships of one form or another, ruled by an absolute monarch who is supported by armed thugs.

Even in the so-called “democracies”, the national agendas have been taken over by extremist agendas like global warming falsehoods and green energy nonsense, which will impoverish those countries that adopt them.

I agree that the IPCC is certainly not worth saving, due to extreme incompetence and probable corruption.

Rich Davis
Reply to  Crispin in Waterloo
February 23, 2019 5:46 am

Foghorn has a point. You should specify some concrete examples CiW, so that those of us open to the theoretical possibility of unicorns (or positive activities by the UN) could have our broadmindedness vindicated.

Joel O'Bryan
Reply to  Crispin in Waterloo
February 23, 2019 10:38 am

“cheaper” the incorrect descriptor. Doing nothing with regards to a carbon tax is the better policy option.

As far as the UN goes, climate is their wedge to increasing UN control and authority over sovereign nations. And China a nd Russian will only allow the UN to do whatever harms them the least while harming the West’s economic power to the maximum extent possible because military strength flows from a nation’s economic power.

February 23, 2019 4:38 am

The larger point to understand is that Nordhaus uses the IPCC climate sensitivities in his analysis. Almost all the recent studies since 2007 show much lower climate sensitivities — ie, Lewis and Curry, Lindzen, Spencer, etc. If you were to use those climate sensitivities on the order of 1.5 vs the IPCC 3.0 then then even under Nordhaus DICE you get impacts and SCC far far lower than currently discussed numbers.

Rich Davis
Reply to  MichaelS
February 23, 2019 6:19 am

While it certainly matters whether the equilibrium climate sensitivity (ECS) is 1.5 or 3, the real bigger question is how they arrive at damage calculations allegedly arising from a 3- or 4.5-degree rise in temperature.

Clearly there are assumptions with far less certainty than the value of ECS. Assumptions about melting in Antarctica, assumptions that other countries cannot replicate the Netherlands’ centuries-old technology to prevent inundation of coastal cities, assumptions that agriculture cannot make adjustments and will on net be harmed.

February 23, 2019 5:41 am

I don’t think he factored in the GND Green New Deal, in which case you could probably multiply that last column of numbers by a factor of + or – 10.

Mike Bryant
February 23, 2019 6:01 am

“We worry about the seemingly ever-increasing number of natural catastrophes. Yet this is mainly a consequence of CNN – we see many more, but the number is roughly constant, and we manage to deal much better with them over time. Globally, the death rate from catastrophes has dropped about fifty-fold over the past century.” ~ Bjorn Lomborg

February 23, 2019 6:13 am

It’s cage-match time! Climate Models vs. Economic Models! 🙂

Steve O
February 23, 2019 6:21 am

The UN has an army of people whose full time job is to think about climate issues and policy. Given that a rational discussion cannot come up with a recommendation of a 1.5C limit, the question is how and why is that the recommendation?

My theory is that such a goal guarantees failure, justifying wealth transfers which are the actual goal. That’s the ONLY goal.

ferd berple
February 23, 2019 6:38 am

“The ultimate agenda of pro-Kyoto advocates is to eliminate fossil fuels,
Yes. Global warming and climate change are not different names for the same thing.

Global warming says that co2 causes warming. Climate change says fossil fuels will destroy our very existence.

February 23, 2019 6:49 am

From https://wattsupwiththat.com/2019/01/23/the-co2-derangement-syndrome-a-historical-overview/
“Apocalyptic forecasts are used as the main drivers of demands for action and for enormous investments such as those in the new IPCC SR1.5 report and in the work of Nordhaus who advocates a carbon tax .Nordhaus is quoted in the NYT as saying “If we start moving very swiftly in the next 20 years, we might able to avoid 2 degrees, but if we don’t do that, we’re in for changes in the Earth’s system that we can’t begin to understand in depth. Warming of 4, 5, 6 degrees will bring changes we don’t understand because it’s outside the range of human experience in the last 100,000 to 200,000 years.”
Nordhaus’ science and economics basisis discussed in “Projections and Uncertainties about ClimateChange in anEra of Minimal Climate Policies” https://doi.org/10.1257/pol.20170046
which states:
“The climate module has been revised to reflect recent earth system models. The equilibrium climate sensitivity (ECS) is based on the analysis of Olsen et al. (2012).The reasons for using this approach are provided in Gillingham et al. (2018). The final estimate is a mean warming of 3.1°C for an equilibrium CO2 doubling. The transient climate sensitivity or TCS (sometimes called the transient climate response) is adjusted to correspond to models with an ECS of 3.1°C, which produces a TCS of 1.7°C”
IPCCSR1.5 says
“C2. Pathways limiting global warming to 1.5°C with no or limited overshoot would require rapid and far-reaching transitions in energy, land, urban and infrastructure (including
transport and buildings), and industrial systems (high confidence). These systems transitions
are unprecedented in terms of scale, but not necessarily in terms of speed, and imply deep emissions reductions in all sectors, a wide portfolio of mitigation options and a significant
upscaling of investments in those options (medium confidence)………..
C2.6 Total annual average energy-related mitigation investment for the period 2015 to 2050 in
pathways limiting warming to 1.5°C is estimated to be around 900 billion USD2015 (range of 180
billion to 1800 billion USD2015 across six models17). This corresponds to total annual average
energy supply investments of 1600 to 3800 billion USD2015 and total annual average energy demand investments of 700 to 1000 billion USD2015 for the period 2015 to 2050, and an increase
in total energy-related investments of about 12% (range of 3% to 23%) in 1.5°C pathways relative
to 2°C pathways. Average annual investment in low-carbon energy technologies and energy
efficiency are upscaled by roughly a factor of five (range of factor of 4 to 5) by 2050 compared to
2015 (medium confidence).”…………………………………….The 2017 paper proposed a simple heuristic approach to climate science which plausibly proposes that a Millennial Turning Point (MTP) and peak in solar activity was reached in 1991,that this turning point correlates with a temperature turning point in 2003/4, and that a general cooling trend will now follow until approximately 2650.
The establishment’s dangerous global warming meme, the associated IPCC series of reports ,the entire UNFCCC circus, the recent hysterical IPCC SR1.5 proposals and Nordhaus’ recent Nobel prize are founded on two basic errors in scientific judgement. First – the sample size is too small. Most IPCC model studies retrofit from the present back for only 100 – 150 years when the currently most important climate controlling, largest amplitude, solar activity cycle is millennial. This means that all climate model temperature outcomes are too hot and likely fall outside of the real future world. (See Kahneman -. Thinking Fast and Slow p 118) Second – the models make the fundamental scientific error of forecasting straight ahead beyond the Millennial Turning Point (MTP) and peak in solar activity which was reached in 1991.These errors are compounded by confirmation bias and academic consensus group think.

Dr Deanster
Reply to  Dr Norman Page
February 23, 2019 11:29 am

Dr Page ….. I’d like to add to your post.

The models make the fatal flaw of using a one compartment system, where energy in must necessarily equal energy out. Nowhere in the models do they account for the storage, movement, and subsequent release of energy. Because of our oceans and there ability to absorb and store energy away from the surface for hundreds, even thousands of years, it simply doesn’t work that way. They say the earth acts like a Black Body …. I say Beee Essss. The earths system acts like a capacitor, charging and discharging.

I’m not sure how to write the correct equation, but suffice it to say, the input portion has to be treated totally separate from the output portion. As I said, this is because the suns energy striking the ocean is NOT immediately radiated back to the atmosphere like all those goofy cartoon models would have everyone believe. It’s for this reason, you will never see any short term impacts of changes in clouds, solar input, CO2, or anything else on atmospheric temperature. While Solar and Clouds will have an impact on “charging” the ocean and charging the chemical storage of energy in biomass, … the release of that energy back into the atmosphere 1) will be chaotic, and 2) will occur in a fashion where energy absorbed in one place will be released in another and will be mostly unpredictable.

I’m not even sure that it is possible to model the earths climate. You can’t model chaos. And since you can’t model the release of energy from the ocean in any accurate or precise way, the entire exercise is pissing in the wind!

Reply to  Dr Deanster
February 23, 2019 10:20 pm

So true.. I see it as 1370W/m2 in will not equate to 240W/m2 out…..different sorts of energy. And not all energy is heat but vice versa always is.

Charles Taylor
February 23, 2019 7:34 am

Why does anyone give economists the time of day? They rarely predict anything correctly.

Dave Fair
Reply to  Charles Taylor
February 23, 2019 12:19 pm

The old “Lay all the world’s economists end-to-end and you still wouldn’t reach a conclusion.”

kent beuchert
February 23, 2019 8:13 am

Until you know the costs of future power generators, you can’t estimate the cost of any plans.
The future is molten salt nuclear reactors (Thorium or uranium) , of that I am certain, and also certain that these reactors can provide power at a cost equal to or less than any technology today – certainly they will cost far less than unreliable renewables with their massive side effect costs of duplicative backup capacity (almost always fossil fueled).

John F. Hultquist
Reply to  kent beuchert
February 23, 2019 11:53 am
Gordon Dressler
February 23, 2019 9:15 am

The IPCC, which has made consistently wrong predictions about future global temperature increases, for the last 25 or so years, is in a position to advise the governments of the world on various steps necessary to limit cumulative global warming???

Really? Throwing darts at a wall poster having random predictions and random actions to be taken would better serve those governments.

February 23, 2019 9:42 am

Well, at least now I know that Nordhaus was the idiot that originally brought up the term “social cost of carbon”.

Joel O'Bryan
February 23, 2019 10:32 am

The last several sentences of this essay says all that needs to be said about climate change mitigation carbon taxes:

“In an interview after Nordhaus accepted his prize, he diplomatically handled the situation by saying that the 1.5°C target is impossible to achieve at this point. Yet we can go further. Nordhaus’s work shows that such an aggressive goal would make humanity much worse off than if we simply adapted to climate change with no government measures.

The climate policy debate should be over a this point. And I will note that this conclusion by Dr. Nordhaus is identical to the argument that Dr Michael Crichton made about global warming policy over 16 years ago in 2003. Crichton’s conclusion was the precautionary principle in fact argues that nothing should be done other than let free markets work to ensure the best possible economic growth as the best way to mitigate environmental damages caused by ma’s activities. A richer society is a society that can afford to do the right things environmentally, responsible waste disposal, water treatment of effluents, adoption of better agriculture methods and control of run-offs, etc. A society making itself poor will be a society that rapidly degrades and destroys its environment and ecosystems through the lack of resources needed to ensure best practices.

Dave Fair
Reply to  Joel O'Bryan
February 23, 2019 12:25 pm

Joel, please note that “Nordhaus’s work shows that such an aggressive goal would make humanity much worse off than if we simply adapted to climate change with no government measures.” was not a Nordhaus quote; it was the opinion of the author about Nordhaus’ work conflicting with SR15.

I, however, agree with the statement.

Larry in Texas
Reply to  Joel O'Bryan
February 23, 2019 4:33 pm

“A society making itself poor will be a society that rapidly degrades and destroys its environment and ecosystems through the lack of resources needed to ensure best practices.”

The Soviet Union is one of the classic examples of this particular point by Joel. They were an environmental disaster in the 1980s, and not just because of Chernobyl, either.

February 23, 2019 3:28 pm

The Nordhaus calculations fails in several aspects of natural sciences that should be met in the underlying assumptions and have links to global policies and fights for markets. The hydrocarbon industry is now taking back and freeing large carbon resources (as CO2) for plant growth. That is carbon taken out of the ecological cycle and being locked in the far longer geological cycles as plants and animal remains are locked in mainly sediment layers. As the rates in the ecological cycles are much faster than geological ones, we got an imbalance, less CO2 with time and the plants responded to the deficiency stress by evolving from C1 to C4 photosynthesis pathways. When concentrations of CO2 now, at least for a period, are increased, we enjoy a great proliferation of life and boost of plant growth. At more atmospheric CO2 plants need less energy and loose less water to take up CO2. Also C4 plants loose less water per CO2 molecule taken up. The following greening of the planet is a great blessing for all kinds of life. One thing is food and biomass production. The other is preservation and by increased habitat extent and diversity also leads to increased genetic diversity of many forms of life on earth. The genetic diversity is by any measure the most valuable and precious feature on the very same earth. And how is that priced by these pesky economists and the kind of less CO2 in the atmosphere people? Deliberately not calling them scientists because they fail in data openness and transparency at conduct not to say the basic physical assumptions.
Then to the politics. Higher temperatures, more CO2 and maybe somewhat more precipitation, have led to far better harvests of grain products northwards and southwards from equator. This includes Canada, Russia, Kazakhstan, Argentina areas in China, India and drought and cold prone areas elsewhere. The use of food as a mainly western political weapon has thus become reduced. Curbing CO2 output may be a way to regain strength by the west this way. Nordhaus may be suspected to side with the west due to his underestimation of the improved food production at the forecasted CO2 and temperature outcomes. In other words, a political string leading to the wrong value setting. The military-industrial complex is a large actor with great influence who wants to promote nuclear reactors to replace hydrocarbons for energy use. The safety of nuclear reactors is still questionable. The cleaner and safer ones, as for example the thorium-based ones, are still not in place, and their potential for implementation is still too premature to allow for a presently useful value setting. Moreover, I have got pepper at this web-site before when I wrote that expanding the nuclear reactors for power generation would open for abuse of charging for and selling the same material several times when weapons are decommissioned. Critics claimed that the book accounting is good. Here I would just like to add that we live in Adjustocene when it comes to data and record management. Refer to posts on temperature data here at WUWT, and a critical look at what kind of countries that produce and sell nuclear materials nowadays. Both reliable data and proper value setting, especially when accounting for the risks related to terrorism and environmental damage, constitute quite a challenge – to put it mildly.

February 23, 2019 4:08 pm

Taking apart interventionist economics is straight forward.
It takes two steps.
Such economists assume that there is a discrete national economy.
There is no such thing. Imagine trying to “manage” Canada’s economy as if there is no influence from the US.
They assume that a central bank expansion of credit will force a business expansion.
Business and credit do expand together, but one does not drive the other. It’s correlation.
In logic it is called a primitive syllogism.

February 23, 2019 6:43 pm

“I believe that economists put decimal points in their forecasts to show they have a sense of humor.” – William Gilmore Simms

The problem with Pigouvian taxes is they don’t address the problem. They just enrich the government in the name of externalities. CO2 emissions allegedly hurt A. So we give money to the government. Which doesn’t do a damn thing for A.

February 23, 2019 6:49 pm

Total idiocy…all of it.

The Nobel Prize committee spent their last ounce of credibility with the Gore-Obama shams…so please stop backslapping Nobel Laureates.

The world will be at least $20 Trillion richer if we get MORE warming. Which sadly we may not get (AMO and PDO swinging negative – quiescent sun – climate cycles are indicating negative changes).

That + $20 Trillion is a sure bet.

Warmer and greener is better $$$ than colder and browner.

Not a single predicted AGW calamity will become a reality. It’s been warmer than now an awful lot the last 10,000 years and civilization benefitted greatly during those times. (And those warmer times were wetter…not drought stricken.)

Historians know this but have sold out to AGW just like most of the cowardly scientists. An economist that isn’t conversant with history is worthless. The Nordhaus economic scenarios will be off by AT LEAST 100% in magnitude AND WITH THE WRONG SIGN. About as wrong as possible.

What a nightmare…none of this has any credibility to anyone that knows anything about history, science or economics.

Thievery and power grabbing on a grand scale is afoot.

February 23, 2019 10:28 pm

The real social benefits of increasing fossil fuel energy use are much greater as set out in a recent WUWT article by Willis Eschenbach, calculating that for each additional tonne of CO2 from any energy source, the benefit was estimated to be $US4,380, plus increased crop yields and contributing to greening of the planet. See:

old construction worker
February 24, 2019 4:07 pm

Economics disclaimer: Past result does not explain future trends.

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