Last week’s Channel 4 documentary The Great Global Warming Swindle (if you missed it, you can still see it here or here) illustrated among others how biased the prevailing climate dogma is: if you want to get a research grant to study squirrels, you won’t get funds, but if the request were to study the impact of global warming on squirrels, then there is plenty of money available.
It is no surprise that climate studies come to the alarming conclusion that climate change will cost us a fortune (and only these tend to be reported in the main stream media, because the others are too boring to be reported) and that any estimates of the cost of measures to combat climate change is at best vague, at worst inexistent.
Let’s take estimates of the cost of climate change (and all that is assuming that this planet will heat up by a couple of degrees, as the IPCC forecasts, something which seems a biased forecast anyway).
The most prominent forecast was a couple of months ago in the Stern Review, commissioned by the British Government. At the time, the review was hailed in the mainstream media as a milestone, translating climate change science into economics. The review, well over 700 pages long, arrived at truly astronomical cost estimates for the cost of “inaction” (“inaction” means not doing what the green lobby wants you to do to). At least 700 pages can also be written about all the inconsistencies and biases in this report, one of the biggest ones being the discount rate used to discount from the future to today the cost of climate change if nothing is done about it. This discount factor probably has a greater impact than almost any other, yet, unbelievably, it is skirted around in the report (see for instance this annex which manages not even to mention the figure). However, the discount rate used in the review is approximately 0.1% per annum. Any 2nd year economics student would fail his/her exam if he/she argued that you justify incurring an expense today to avoid a future one and you used a discount rate of a mere 0.1% to compare both. Any economics student would also know that you discount future costs or revenues at a discount rate which takes into account real future growth, inflation and, often, a risk discount.
Instead Stern assumes significant future economic growth and CO2 pollution (the review assumes a temperature increase of 5 degrees C by the end of the 21st century, a temperature which is above the 1.5 – 4.5 degrees range which the IPCC thinks likely), i.e. people in 100 or 200 years will be much richer than today. But he then discounts the cost of climate change in 100 years’ time back to today at only 0.1% per year, i.e. ignoring we are much poorer today than in 2100 or later. This allows him to take a problem which is either relatively small or improbable in 100 or 200 years at that time, but which is tremendously expensive when discounted back to today. Assume for example that the world economy will grow at 3% for the next century and that therefore the world production grows from - say GDP - $100 today to $1,921 in 100 years. Assume also that because of climate change there are costs of $22 in the year 2107, i.e. just over 1% of GDP in 100 years’ time. If one then discounts this back at a mere 0.1% per year as the Stern review does (because the reports studiously avoids going into specific details on this key issue, arguing that the rate should be a “social discount rate”), then the cost in today’s terms is a staggering $20 or 20% of the 2007 GDP (20% by the way is the figure the Stern report comes up with for the net present value of future damage from climate changes). If however Stern had compared apples with apples and merely used the growth rate – forgetting the risk discount – as discount rate, then the net present value today of the 2107 cost of $22 would have been a mere 1% of today’s GDP. Alas, a mere 1% would have been nowhere near spectacular enough to make the news headlines.
However, the media (see e.g. the ever reliable BBC) saw the number 20% in the review, and that is what we were told was the cost of climate change, to the delight of politicians who saw a good excuse to raise taxes which would be used for other purposes than doing something about climate change of course. The best critique I have seen of this voodoo economics is by William Nordhaus.
Another climate cost scare story can be found reported here this week, in Der Spiegel, another reliable source of eco-doom stories. Note that the headline states an amount which is to be incurred in the future and, when properly discounted to today, would be much, much smaller. Never mind that they only look at the downsides, such as less skiing but conveniently forget the upsides, such as that perhaps more people would spend summer holidays in Germany if the climate became warmer. And they assume that more Germans would die as a result of warmer weather: this would make Germany unique in the developed world (see below).
All this pseudo-science makes me suspicious, so I started reading a bit more about the costs of global warming. To my surprise I found that it seems there may be significant benefits to global warming, unless it gets out of hand, which it truly doesn’t look like when you dig a bit deeper in the IPCC reports (in fact, the more you dig in the IPCC or similar reports, the more relaxed one becomes: it is so obvious that the conclusions had been decided in advance).
For starters, people live longer and healthier lives when it is warm. I will only mention in passing that more CO2 seems also to be better for the biosphere, i.e. increased plant growth to better sustain animals and humans. We are bombarded with alarming media articles each summer about high death rates during then hottest periods. But many more people die of cold than of heat exhaustion in much of the world. Now ecologist might retort that this argument doesn’t apply to regions where it is always warm. Fine, but if one were to take the moralistic high ground – which I approve of – then people in warmer and poorer parts of the world do not need a temperature reduction of a couple of degrees in 100 years but have far more important and immediate priorities, which would save far more lives (and in my book, saving human lives is still more important than ecological pet projects), such as investing more to combat AIDS, malnutrition or to provide better sanitation. All these measures would be cheap compared to what the eco-lobby wants us to spend on its projects. On AIDS alone, the Copenhagen Consensus estimates that spending a mere US$ 27 billion by 2010 could prevent 28 million cases of AIDS and hence millions and millions of deaths. This begs the question : how much will all these green measures to combat the emission of greenhouse gases cost compared to US$ 27 billion?
The EU, or rather, a small group of politicians, last week adopted draconian commitments to reduce the output of greenhouse gasses by 20% by 2020. This is of course pure grandstanding. Only a few EU countries have met their Kyoto commitments so far and if so, partly by buying permits from countries like Russia, which is a true zero game sum in environmental terms (but a monumental waste of money). Despite all criticism of the US, at least the US doesn’t sign treaties it then doesn’t live up to - and actually recorded an increase in greenhouse gas emissions which was below that of many Kyoto signatories.
The new EU commitments are even less likely to ever be achieved than the Kyoto ones, but the madness of the whole process is best illustrated by the fact that politicians have adopted these commitments without seeming to have a clue as to what the cost will be. Only Dirk Kurbjuweit in Der Spiegel has reported the embarrassing moment, when an intrepid reporter had dared to ask German finance minister Steinbrück at a press conference of his boss and acting EU president, Angela Merkel, what the total cost would be of these new greenhouse measures:
Steinbrück -- whose own personal climate runs the gamut from ice age to overheated -- first turned ashen before being unable to suppress a grin. Steinbrück's body language seemed to be saying: It's going to cost us a heap of money, but don't believe for a minute that I would be stupid enough to say as much. Merkel jumped to his support by offering an evasive answer to the question: Don't worry, it'll all work out.