Research: The New Economics of Global Warming

Thu, 2007-12-13 21:14James Glave
James Glave's picture

Research: The New Economics of Global Warming

Economists no longer debate the realities of anthropomorphic climate change–that's so 1993!

Instead, they squabble over how much we should be spending today to lessen the sting of the much bigger invoices that will inevitably come due tomorrow, should we insist on carrying on with all this fossil-fuel nonsense.

To do their apocalyptic calculus, they attach hard–and rather large–numbers to phenomena such as rainforest loss, and plug them into cost-benefit analysis models. In the end, the bean counters determine a so-called social cost of carbon, and recommend a percentage of GDP for present-day investments in clean-energy research and the like.

Until now, the economic models have not included “unlikely but extreme events,” such as a global temperature rise of–gulp!–six degrees, mostly because Sir Nicholas Stern and friends have dismissed them as simply too remote a possibility to justify making significant present-day investments.

Not any more.

New Scientist magazine (article firewalled) reveals this month that Harvard University economics professor Martin Weitzman has developed the first thorough method for including such unlikely but extreme events in cost-benefit analyses.

His paper isn't even out yet, but word of his results is spreading like pine beetle through the economics community:

“When you take into account extreme temperature rises… [Weitzman] says, they dominate all other options and effectively demand that investment aimed at stopping them be made now”

Even Richard Tol is lining up behind Weitzman's findings.

The Irish economist, who had, in the opinion of many, long low-balled the amount that should be spent to prevent the release of one tonne of CO2, dramatically adjusted his math. Before reading Weitzman's paper, New Scientist reports, Tol had priced carbon at $5 a tonne. Now, he thinks it should be closer to $50. “This work shows we're simply doing it wrong,” the impressively-coiffed Dubliner tells the magazine.

No kidding.

Note: see our welcome to DeSmog's latest writer James Glave - this is his first post so be gentle!

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Comments

James,

You should not believe a one-sentence summary of a half hour interview.

The change in number is caused by a change in method, independent of Weitzman. See http://ideas.repec.org/p/sgc/wpaper/144.html

Weitzman’s paper has profound methodological implications, but the policy implications are hazy. See
http://ideas.repec.org/p/sgc/wpaper/145.html Richard

Welcome James! Hope you write many a post about the economic, financial, employment, health, social and technological BENEFITS associated with mitigation!

I’ve heard it said that when people were trying to abolish slavery, some resisted saying it would destroy the economy and drive people back to the stone age. Amazing, eh? Laughable now. Not only was it so obviously the morally right thing to do, but the economic and technological improvements we’ve made since eclipse any improvements that could have been made had we kept on using black skin to power the economy. Now we’re trying to get of black oil and coal and one can’t help but wonder how far the parallels go. Some still saying that it’s the black stuff or back to being cavemen. Some still totally ignoring anything even approaching a reasonable moral position. I don’t know how analogous the two situations are. But to the extent that the parallels are there, the move off black oil and coal, like the move off black skin, could well be to a far wealthier and far more equitable future.

So go James and DESMOG all this crap about joblessness and death knells to the economy!

While the economic issues are certainly nontrivial, and some quite challenging (like Peak Oil effects), it’s always interesting to se people saying “Worrying about energy efficiency and climate change will destroy the economy.”

My answer is “Sure, if a US state starts doing that, it will destroy its economy, and get really, really poor … like California.”

See:
http://www.energy.ca.gov/2007_energypolicy/index.html

The main web page, which has an executive summary. If you want the gory detail, see the Final Report (and then the ERRATA: the good news is that CA is no longer the 2nd biggest user of gasoline in the world (after US as a whole), the bad news is that it’s only because China overtook us.)
pp279- list the participants in this effort, which include a wide range folks.

CA has its share of screwups, but the report shows:
a) What sorts of plans people make when they are actually trying.
b) There is serious hard work ahead, with no magic silver bullets.

[x]
People's Climate March

More than 400,000 people took to the streets to have their voices heard at the People's Climate March yesterday in New York City. The record-breaking crowd took up 27 blocks in total, from West 86th street to Columbus Circle.

Photographer Zach Roberts was there to document the biggest climate change march in history for DeSmogBlog. Here are some of his best shots.

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