Category: Environment

Stern on the cost of climate stabilisation

John Quiggin49 Comments

As I said in the previous post, I plan to focus on the economics of responses to climate change from now on and the obvious place to start is the Stern report.

There’s a lot in the Stern report, and I’m going to assess it a part at a time, starting with the issue I’ve been most interested in, the cost of stabilizing atmospheric CO2 levels. I’ll focus on the case considered by Stern, and in my submission of stabilising levels at 550 parts per million, which implies a reduction in emissions of around 60 per cent, relative to business as usual, by 2050. This should be enough to avoid severe damage.
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The debate really is over now

John Quiggin115 Comments

The scientific debate over the reality of anthropogenic global warming has been over for some time, but as long as the opponents of science continued to dominate the political process, it was necessary to combat their claims.

But with the Howard government now supporting emissions trading, at least in principle, and with the overwhelming majority of the public convinced of the need for action, that necessity has now passed, at least in Australia. The main task now is to encourage the government to adopt the most efficient and effective strategies for mitigation and adaptation, in co-operation with other countries. That obviously includes signing Kyoto (with the latest change in position and with Bush a lame duck there’s no reason not to), but it could also include getting the (so-far merely decorative) AP6 process to do some work.

Of course, at least some of the denialists will keep on denying. But they’re in a hole and I’m happy to let them keep on digging. At this point, they’ll do less harm banging on about the hockey stick than they would if they accepted the reality of global warming and used what’s left of their credibility in an attempt to derail any positive response.

So from now on, I’m not going to bother refuting the absurdities of Bolt, the Lavoiser Group and other denialists. Rather than make all those who’ve enjoyed the stoush here go cold turkey, I may put up more open threads from time to time, but my future posts will be about the economics and politics of our response.

More amateur climatology from Andrew Bolt

John Quiggin109 Comments

Andrew Bolt cites NASA data from the troposphere and stratosphere to show that global warming isn’t happening. He starts with the troposphere and makes what’s now a standard denialist talking point, that global temperatures “peaked in 1998” (a year of an exceptionally strong El Nino). Of course, until the last few years, denialists were (correctly for once) making the point that you couldn’t attribute all of the exceptional temperatures of 1998 to long-term climate change.

But Bolt’s new ace is the stratosphere, which is actually cooling. The graph here looks pretty convincing. Has Bolt discovered something that all the scientists have missed? Should he be publishing his findings in Nature. Well, no.

As NASA explains here, stratospheric cooling is also the result of human activity. The most important effect is from the destruction of the ozone layer, but CO2 emissions also play a role. Remember that the effect of greenhouse gases is to trap heat. This warms up the atmosphere below (in the troposphere), but reduces it above (in the stratosphere). There’s disagreement over the magnitude of this effect, but the direction is clear.

It would have taken Bolt five minutes with Google to find this out. Does he not know, or not care? Either way, he ought not to have a job with any responsible media organisation.

Note on comments: If you want to disagree with NASA, complain about the hockey stick, or otherwise dispute mainstream climate science, please follow the course I’ve suggested for Bolt and write to Nature. Or, if you really must attack science here, ask me nicely and I’ll put up an open thread. But for the purposes of this post, I’m going to take the assessment of the scientific evidence as presented by NASA and the IPCC as definitive. Comments disputing the science will be deleted.

Parallel universe quiz

John Quiggin75 Comments

Which of these claims has not been put forward by prominent global warming denialists ?

A Cycle analysis by a well-known astrologer proves that global temperatures will soon decline
B Data supporting global warming was faked by NASA along with the bogus moon landings
C There is no such thing as global average temperature, and therefore the whole idea is meaningless
D A voyage through the Arctic Circle by the Chinese fleet in 1421 proves that temperatures were much higher then

Answer over fold
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The Stern Review on MER/PPP

John Quiggin34 Comments

One of the issues that’s been debated at length here is the choice of exchange rates to use in converting different currencies for projections of future economic growth and energy demand. The scenarios developed by the IPCC have used market exchange rates (MER) Ian Castles has argued, in very strong terms, that it’s crucial to use exchange rates adjusted so as to exhibit Purchasing Power Parity (PPP). In my submission, I made a couple of points. First, that there is no uniquely satisfactory method of obtaining PPP exchange rates. Second, and more importantly, the choice doesn’t make much difference to projections of energy use or CO2 emissions, as long as the same values are used consistently. A method like MER, which tends to overstate income differences between poor and rich countries relative to PPP will yield a lower income elasticity of demand for energy. And since MER data have been, until recently more readily available for more countries, there are some practical arguments in favour of using them.

That said, there are a couple of reasons to favour a move to PPP-based scenarios. First, since these are now becoming the norm, continued use of MER numbers is likely to cause confusion. Second, while the crucial numbers regarding emissions aren’t much affected (and any error may be either up or down) other variables, particularly those used in calculations of economic welfare, might be significantly affected.

In this context, it’s unfortunate that the debate has been seized upon by denialists as a basis for attacking the whole IPCC process. The energy that’s gone into pointless disputes could have better been used in a constructive attempt to improve things.

Where does the Stern report come out on all this? Pretty much right in my view. Key quote

efforts are under way to improve the provision of PPP data. The International Comparison Programme (ICP), launched by the World Bank when Nicholas Stern was Chief Economist, is the world’s largest statistical initiative, involving 107 countries and collaboration with the OECD, Eurostat and National Statistical Offices. It produces internationally comparable price levels, economic aggregates in real terms, and Purchasing Power Parity (PPP) estimates that inform users about the relative sizes of markets, the size and structure of economies, and the relative purchasing power of currencies.

In the IPCC SRES scenarios that use MER conversions, it is not clear that the use of MERs biases upwards the projected rates of emissions growth, as the SRES calibration of the past relationship between emissions per head and GDP per head also used GDPs converted at MERs as the metric for economic activity (Holtsmark and Alfsen (2003)). Hence the scenarios are based on a lower estimate of the elasticity of emissions growth per head with respect to (the incorrectly measured) GDP growth per head. As Nakicenovic et al (2003) have argued, the use of MERs in many of the IPCC SRES scenarios is unlikely to have distorted the emissions trajectories much.

I should point out that the World Bank ICP is a successor to the earlier ICP work of Heston and Summers who initiated the idea of systematic PPP comparisons and produced the well-known Penn World Tables. Still, as the quote makes clear, Stern can speak with authority on this topic.

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The Stern review -first impressions

John Quiggin26 Comments

The Stern review report is big, and I haven’t had time to digest more than a little bit so far. One point to make is that the apocalyptic numbers that have dominated early reporting represent the worst-case outcomes for 2100 under business-as-usual policies. But even looking at the less dramatic cases, the same basic messages emerge.

  • We can stabilise CO2 levels over the next fifty years at very low costs of around 1 per cent of GDP.
  • The costs of doing nothing are large and unpredictable
  • The costs of stabilisation will be greater the longer we delay
  • Poor countries will be worst affected

More on all these points soon.

Stern report previewed

John Quiggin65 Comments

With the major issues in the scientific debate over climate change having been resolved, attention has now turned to the economics of stabilising the climate and to the costs of doing nothing. Following the House of Lords economic committee inquiry last year, which spent most of its time promoting denialist attacks on climate science, and had little of value to say on the economic issues, the UK government commissioned Sir Nicholas Stern, former chief economist of the World Bank to look at the issue properly.

His report is about to be issued in the UK today, and previews have given the major conclusion – it’s much more costly to do nothing than to do something. According to the reports, the estimated cost of stabilising CO2 emissions is 1 per cent of GDP by 2050. This is at the low end of the range of estimates I’ve obtained from back-of-the-envelope exercises.

The striking feature of the reported findings relates to the potential costs of doing nothing, from 5 per cent to 20 per cent of GDP. I assume the latter estimate is based on worst-case scenarios, which have relatively low probability but are nonetheless important in working out an expected cost of doing nothing.

The credibility of the report has been enhanced by the first critical responses noted in the press. One is from Exxon shill Steven Milloy, who repeats the discredited attacks on climate science he’s been pushing for years, with a few new variations. He even drags out cosmic rays. The Guardian mentions his affiliation with the Cato Institute, apparently unaware that they dumped him a year ago over his unethical behavior.

Even more interesting is the reference to “a group of nine rightwing economists”, including the former chancellor Nigel Lawson, who criticised Stern’s discussion papers in January. What’s not noted here is that it was Lawson who launched the House of Lords exercise, rigged the process to ensure that most of the witnesses were denialists and drafted the carefully ambiguous discussion of the scientific issues which, on the one hand, correctly disclaimed any relevant expertise on the part of the committee, and on the other hand, dishonestly promoted the denialist view that the debate is still wide open. Now that this exercise has turned out to be a massive own goal for Lawson and his allies, they are naturally upset.

More tomorrow (or maybe later today) when the report is released. In the meantime, responses to Stern’s earlier discussion paper, including mine, are here