Climate Change

[drplokta]

We keep seeing scary-looking estimates of the cost of climate change -- most recently an estimate here that it could be costing the UK £42 billion per year by 2080. What all these estimates have in common is that, while they look scary, they are in fact extremely small numbers, and indicate that we should do nothing about climate change.

Let's take that £42 billion per year by 2080 as an example. The UK's GDP is currently a little over £1 trillion per year. But if we assume 2% real growth in the economy per year over the next 74 years, then in 2080 it will be over 4.3 billion, and that £42 billion per year will be less than 1% of the economy, or equivalent to delaying economic growth by less than six months. Put another way, the effect of climate change will be to reduce average growth over the period from 2.00% to 1.99%, so it doesn't seem worth spending more than .02% of current GDP, or £200 million per year, to do anything about it.

Comments

[rdmaughan.livejournal.com]

Except that some countries not going to be able to cope with the cost of Global warming's effects on them. Bangladesh is going to disappear underwater if we get any significant rise in sea level.

The cost to us is only part of the problem. The effect, our not doing something about our contribution to the problem, has on other peole is rather more significant.

[armb.livejournal.com]

And if some small fraction of Bangladeshis decide that having their country destroyed is essentially the fault of The West, that's potentially a lot of recruitable suicide bombers etc. among the refugees.

[the-gardener.livejournal.com]

Put another way, the effect of climate change will be to reduce average growth over the period from 2.00% to 1.99%, so it doesn't seem worth spending more than .02% of current GDP, or £200 million per year, to do anything about it.

The calculation is superficially attractive, but the conclusion is nonsensical.

By focusing solely on monetary costs as a proportion of GDP, the calculation ignores the actual effects of continued GHG emissions on the biosphere -- their impact on atmospheric and ocean circulation patterns, air temperatures and regional humidities, rainfall, supplies of fresh water, soil structure and fertility and thus agricultural production, forestation (and deforetsation), the ice caps, biodiversity in general....

The point being that once these start to change, we begin to lose the biological support structures on which the human species relies to maintain itself, and which in turn underpins our society and ecnomic activity. Ergo, the kind of continued economic growth you're assuming here becomes not only unlikely; what we will get instead will be economic contraction -- perhaps, by 2080, very rapid contraction indeed, if current statements about our closeness to the tipping point at which change becomes irreversible are at all true.

It thus makes perfect sense to spend lots of money now on changing our behaviour and combatting climate change. Spend only small amounts, and by the time the world wakes up to what it needs to do the economy will be imploding and there'll be no money for anything.

[drplokta]

You're simply complaining that the £42 billion per year estimate of the costs of global warming in 2080 is wrong, and that's really my point. To make it worthwhile to do much about global warming now, we need to see projections from reputable sources of annual climate-change costs of many hundreds of billions of pounds for the UK and tens of trillions worldwide -- and no one is making projections like that, to the best of my knowledge.

[the-gardener.livejournal.com]

You're simply complaining that the £42 billion per year estimate of the costs of global warming in 2080 is wrong, and that's really my point.

-- a point which is rather obscured by the rest of your comment. Besides, that wasn't my complaint; my argument is that to attempt to view the costs of climate change (or of dealing with climate change) solely in monetary or economic terms, whether they are measured now or in 2080-equivalents, is narrow and misleading because actual GHG impacts on the biosphere simply cannot be measured in pounds sterling (or euros, or yen, or whatever). Exactly what price do you put on maintaining the North Atlantic Drift and the associated thermohaline circulation, for example? (Weaken or terminate that, and UK temperatures would fall to those more appropriate to its Labradorean latitude, with mass emigration the probable result.) What price do you put on maintaining the soil's current loading of bacteria and invertebrates, the invisible ecological services without which agriculture would be almost impossible? What price do you put on maintaining global biodiversity -- the biodiversity necesary for the existence of large, complex species such as ourselves? (As any study of the evolutionary record shows, simple ecosystems have simple species, and complex ones go extinct when biodiversity disappears.) To try to view these factors in terms of whether or not it's "worthwhile to do much about global warming now" is to wildly miss the real issues.

no one is making projections like that, to the best of my knowledge

-- perhaps because (just to accept your monetary frame of reference for the moment) it's a moving calculation: do the sum once, and then start to make a change, and you have to do the sum all over again because the assumptions on which the first result was predicated have changed. Not to mention the fact that -- see previous paragraph -- some things are just incalculable anyway.

[drplokta]

Besides, that wasn't my complaint; my argument is that to attempt to view the costs of climate change (or of dealing with climate change) solely in monetary or economic terms

Deciding how to allocate resources is what money is for, and we have no quantifiable metric other than money to use for resource allocation. If money is sufficiently broken that it can no longer be used for that purpose, we have bigger problems than climate change.

[the-gardener.livejournal.com]

If money is sufficiently broken that it can no longer be used for that purpose, we have bigger problems than climate change.

In my view, to place problems of monetary valorisation ahead of climate change is not to grasp climate change's potential impact on human civilisation. But if you want to allocate resources in this fashion, then what value(s) do you place on the North Atlantic Drift, thermohaline circulation, the invisible ecological services of soil bacteria, etc.? How do you (propose to) calculate their benefits to us (to the human species), and the costs of losing them? What units will you use, across what time horizon? How will your calculations be validated, and by whom? Und so weiter -- because if these factors can't be allocated a monetary value (as I contend they can't), then from your perspective money is broken.

[drplokta]

What values do you place on the North Atlantic Drift, etc., and how do you compare them against non-ecological resource sinks such as public health, art, culture, etc.? At least the use of a financial metric gives you a framework within which you can have the discussion (one could, for example, attempt to quantify additional costs of heating, agriculture, and so on consequent upon the failure of the North Atlantic Drift, and assign a probability to its failure). If you have an alternative framework that makes all possible uses of resources commensurable, I'd like to hear about, but without such a framework you can't make any decisions at all.

[the-gardener.livejournal.com]

As I've said throughout this exchange, I don't think the North Atlantic Drift, etc. are amenable to monetary valorisation, and in my view to attempt to quantify the additional costs of heating people's homes as a consequence of its failure is simply to fiddle about in the econometric undergrowth and leave the real issue unaddressed -- i.e., the effects of climate change on the Earth's biosphere. For that reason, I think environmentalists such as Matt Prescott, in the BBC article you referenced in your original post are wasting their time as well -- their intention is clearly to try to demonstrate to business, in a language that business will most readily understand, what effect climate change will have on their balance sheets and thus their stock market valuation, but who, really, will care about any of that thirty, fifty or a hundred years from now?

[drplokta]

Let me repeat the question: if you don't accept the validity of a monetary analysis, what metric do you propose to use to do a quantitative comparison of the benefits arising from resources allocated to ecological projects and to non-ecological projects, so that you can determine the optimum allocation of resources overall? If you have no such metric, then you can't call for any resources to be allocated to anything, as you have no way of justifying that allocation.

[the-gardener.livejournal.com]

I can only repeat my basic point: the effects of climate change can't be quantified in this fashion, because the net result of climate change will be to make the biosphere less suitable for the continuation of contemporary human civilisation.

How less suitable is unquantifiable, because we can't predict with certainty the exact state of the new climatic regime which will predominate (how many degrees warmer, how much windier, and so forth). To try to calculate what resources should be allocated to dealing with climate change, in the fashion you suggest, would require the creation of an almost infinite series of tables in which one attempted to assess the relative value of dealing with a one degree rise in temperature, a two degree rise, etc., cross-matched for each state with various states of cessation of global ocean currents, each in turn cross-matched with potential new hurricane indices, etc cetera, et cetera....and then attempted to match each of those against a whole series of other issues to which resources could be allocated. Assuming this is even possible, it would be pointless in the long run because by the time the numbers had been crunched through the climate would have changed and the results of the calculations would be entirely academic. (See also the comment from johncoxon way below.)

The point about climate change is that it will change everything. In my view, to discuss relative resource allocations in the face of that uncomfortable fact is a serious waste of time and effort.

[purplecthulhu.livejournal.com]

If the UK (and Ireland) climate changes to that of Labrador, one could attempt to assess this by comparing the value of land prices for all real estate in the UK (a lot!) with that of Labrador or Greenland (hardly anything at all). As you can see I don't have the detailed figures :-) but this is a much larger monetary effect than just 42 billion a year.

[purplecthulhu.livejournal.com]

I would be interested to see the details of that 42 billion calculation, and what error bars they place on it (the usual absence of error bars, or at least some quantification of uncertainty, in such gnomic declarations from government or QUANGO usually leaves me frustrated).

My guess is that there are large uncertainties on that value, with a significant probability of much much higher costs even if you believe the initial estimate. The presence of such large but uncertain costs has been the basis of substantial precautionary spending in the past. The London Barrage was constructed to prevent an unlikely event - the flooding of London through the conincidence of a spring tide and an easterly gale - causing a lot of expensive damage. I'd argue that substatial spending to reduce global warming is justified in just the same way, even if you believe these figures.

[palatinate.livejournal.com]

You have also assumed that the £42bn is expressed in current terms, enabling you to deflate its impact. I'd expect that impact assessments would normally be given in today's terms, so that the £42bn is in 2006 pounds.

I also think that the figure of itself is of limited value (as Dave says, typically gnomic). Single figures are always too reductionist. For instance, an income tax increase which takes £42bn a year out of the economy is not going to have the same impact on people as a major hurricane occurring every year (think 1987) which does £42bn of damage. I think this kind of clarity applies even if you don't invoke the more radical downsides referred to by the_gardener.

I also think climate change impact estimates are particularly likely to come up short when a purely financial approach is adopted - at least for any scenario short of major flooding / massive drought. For instance, assume a scenario where we get more temperature variation and suspect weather - an extension of the behaviour of the last decade - but without these extreme outcomes. For instance, the UK is heavily industrialised and industrial output won't be heavily affected unless the weather is actually bad enough to prevent transport or close factories. The agricultural sector is relatively modest. I would guess that the scenario the analysts have run involves a cost for additional flood defences and insurance claims from more storms, combined with some marginal loss of output.

[the-gardener.livejournal.com]

The agricultural sector is relatively modest.

In terms of its contribution to GDP -- but bear in mind that food plants only grow within a relatively narrow temperature band, and that without food nothing else will get done.

[johncoxon.livejournal.com]

But that only looks at the money. New Scientist published an editorial on the same subject and closed it with something like, "If conventional economics say that we shouldn't act on climate change, conventional economics is wrong".

[drplokta]

It only looks at the money because we have no other quantitative tools to use in order to judge the effectiveness of allocating resources to a particular course of action now in order to gain a benefit in the future. So the money is the only thing you can look at. You can only stop looking at the money when it gets to the point that a particular project is so overwhelmingly imperative that you need to allocate 100% of your resources to it, and climate change remediation is very far from reaching that point.

[the-gardener.livejournal.com]

climate change remediation is very far from reaching that point

On a purely technical point, climate change can't be remediated; its effects can only be mitigated. Even if (for instance) all GHG emissions ceased tomorrow, there'd still be another thirty years' worth of global warming to endure, because that's the time lag between the emission of the gases and their effect on the atmosphere. So whatever we do, there will still be (some) climate change.

In addition, many might disagree with you over your assertion that we're "very far" from having to devote all our resources to this mitigation -- an increasing number of climate scientists suggest that the tipping point, at which the climate "flips" into a new (but just as stable) state is perhaps only another few decades away. Certainly, many climate scientists seem to be converging on the argument that we'll be lucky to keep average global temperature increases to no more than two degrees by 2030.

[strangedave.livejournal.com]

FWIW, previews of the Stern report (http://www.abc.net.au/news/newsitems/200610/s1776304.htm) indicate the cost of dealing with climate change at about 1% of GDP, the cost of doing nothing at 5-20% of GDP.

Perhaps the answer is we just needed better economists to look at all the costs, many of which (such as ongoing costs from dislocated refugees) are hard to directly correlate to climate change, but very real.

Stern is a pretty credible economic figure, and as John Quiggin (http://johnquiggin.com/index.php/archives/2006/10/30/stern-report-previewed/) notes, the sources of the few (so far) critical responses on the report (such as the standard Exxon funded shills) are such as to enhance its credibility. As far as arguments from pure economics goes, the ball in the climate change denialist court, and I doubt they will be able to hit it back over the net.

So I'd say you are probably wrong, not because your argument is wrong, but because better economists came up with better numbers.