Inevitably those who resist tackling climate change point to the global nature of emissions as a reason not to act. Emissions limits in America won’t accomplish much, they argue, if China and others don’t match our effort. And they highlight China’s obduracy in the Copenhagen negotiations as evidence that other countries will not cooperate. Indeed, emerging economies feel that they have a right to emit freely without worrying about the consequences — that’s what today’s rich countries got to do for two centuries. It’s just not possible to get global cooperation on climate change, goes the argument, and that means there is no point in taking any action at all.
For those who think that taking action is essential, the right question is how to persuade China and other emerging nations to participate in emissions limits. Carrots, or positive inducements, are one answer. Imagine setting up cap-and-trade systems in China and the United States — but allow international trading in permits, so Chinese and American companies can trade emission rights. By setting overall caps at levels designed to ensure that China sells us a substantial number of permits, we would in effect be paying China to cut its emissions. Since the evidence suggests that the cost of cutting emissions would be lower in China than in the United States, this could be a good deal for everyone.
But what if the Chinese (or the Indians or the Brazilians, etc.) do not want to participate in such a system? Then you need sticks as well as carrots. In particular, you need carbon tariffs.
A carbon tariff would be a tax levied on imported goods proportional to the carbon emitted in the manufacture of those goods. Suppose that China refuses to reduce emissions, while the United States adopts policies that set a price of $100 per ton of carbon emissions. If the United States were to impose such a carbon tariff, any shipment to America of Chinese goods whose production involved emitting a ton of carbon would result in a $100 tax over and above any other duties. Such tariffs, if levied by major players — probably the United States and the European Union — would give noncooperating countries a strong incentive to reconsider their positions.
To the objection that such a policy would be protectionist, a violation of the principles of free trade, one reply is, So? Keeping world markets open is important, but avoiding planetary catastrophe is a lot more important. In any case, however, you can argue that carbon tariffs are well within the rules of normal trade relations. As long as the tariff imposed on the carbon content of imports is comparable to the cost of domestic carbon licenses, the effect is to charge your own consumers a price that reflects the carbon emitted in what they buy, no matter where it is produced. That should be legal under international-trading rules. In fact, even the World Trade Organization, which is charged with policing trade policies, has published a study suggesting that carbon tariffs would pass muster.
Needless to say, the actual business of getting cooperative, worldwide action on climate change would be much more complicated and tendentious than this discussion suggests. Yet the problem is not as intractable as you often hear. If the United States and Europe decide to move on climate policy, they almost certainly would be able to cajole and chivvy the rest of the world into joining the effort. We can do this.
The Costs of Inaction In public discussion, the climate-change skeptics have clearly been gaining ground over the past couple of years, even though the odds have been looking good lately that 2010 could be the warmest year on record. But climate modelers themselves have grown increasingly pessimistic. What were previously worst-case scenarios have become base-line projections, with a number of organizations doubling their predictions for temperature rise over the course of the 21st century. Underlying this new pessimism is increased concern about feedback effects — for example, the release of methane, a significant greenhouse gas, from seabeds and tundra as the planet warms.
At this point, the projections of climate change, assuming we continue business as usual, cluster around an estimate that average temperatures will be about 9 degrees Fahrenheit higher in 2100 than they were in 2000. That’s a lot — equivalent to the difference in average temperatures between New York and central Mississippi. Such a huge change would have to be highly disruptive. And the troubles would not stop there: temperatures would continue to rise.
Furthermore, changes in average temperature will by no means be the whole story. Precipitation patterns will change, with some regions getting much wetter and others much drier. Many modelers also predict more intense storms. Sea levels would rise, with the impact intensified by those storms: coastal flooding, already a major source of natural disasters, would become much more frequent and severe. And there might be drastic changes in the climate of some regions as ocean currents shift. It’s always worth bearing in mind that London is at the same latitude as Labrador; without the Gulf Stream, Western Europe would be barely habitable.
Paul Krugman is a Times columnist and winner of the 2008 Nobel Memorial Prize in Economic Science. His latest book is “The Return of Depression Economics and the Crisis of 2008.”
While there may be some benefits from a warmer climate, it seems almost certain that upheaval on this scale would make the United States, and the world as a whole, poorer than it would be otherwise. How much poorer? If ours were a preindustrial, primarily agricultural society, extreme climate change would be obviously catastrophic. But we have an advanced economy, the kind that has historically shown great ability to adapt to changed circumstances. If this sounds similar to my argument that the costs of emissions limits would be tolerable, it ought to: the same flexibility that should enable us to deal with a much higher carbon prices should also help us cope with a somewhat higher average temperature.
But there are at least two reasons to take sanguine assessments of the consequences of climate change with a grain of salt. One is that, as I have just pointed out, it’s not just a matter of having warmer weather — many of the costs of climate change are likely to result from droughts, flooding and severe storms. The other is that while modern economies may be highly adaptable, the same may not be true of ecosystems. The last time the earth experienced warming at anything like the pace we now expect was during the Paleocene-Eocene Thermal Maximum, about 55 million years ago, when temperatures rose by about 11 degrees Fahrenheit over the course of around 20,000 years (which is a much slower rate than the current pace of warming). That increase was associated with mass extinctions, which, to put it mildly, probably would not be good for living standards.
So how can we put a price tag on the effects of global warming? The most widely quoted estimates, like those in the Dynamic Integrated Model of Climate and the Economy, known as DICE, used by Yale’s William Nordhaus and colleagues, depend upon educated guesswork to place a value on the negative effects of global warming in a number of crucial areas, especially agriculture and coastal protection, then try to make some allowance for other possible repercussions. Nordhaus has argued that a global temperature rise of 4.5 degrees Fahrenheit — which used to be the consensus projection for 2100 — would reduce gross world product by a bit less than 2 percent. But what would happen if, as a growing number of models suggest, the actual temperature rise is twice as great? Nobody really knows how to make that extrapolation. For what it’s worth, Nordhaus’s model puts losses from a rise of 9 degrees at about 5 percent of gross world product. Many critics have argued, however, that the cost might be much higher.
Despite the uncertainty, it’s tempting to make a direct comparison between the estimated losses and the estimates of what the mitigation policies will cost: climate change will lower gross world product by 5 percent, stopping it will cost 2 percent, so let’s go ahead. Unfortunately the reckoning is not that simple for at least four reasons.
First, substantial global warming is already “baked in,” as a result of past emissions and because even with a strong climate-change policy the amount of carbon dioxide in the atmosphere is most likely to continue rising for many years. So even if the nations of the world do manage to take on climate change, we will still have to pay for earlier inaction. As a result, Nordhaus’s loss estimates may overstate the gains from action.
Second, the economic costs from emissions limits would start as soon as the policy went into effect and under most proposals would become substantial within around 20 years. If we don’t act, meanwhile, the big costs would probably come late this century (although some things, like the transformation of the American Southwest into a dust bowl, might come much sooner). So how you compare those costs depends on how much you value costs in the distant future relative to costs that materialize much sooner.
Third, and cutting in the opposite direction, if we don’t take action, global warming won’t stop in 2100: temperatures, and losses, will continue to rise. So if you place a significant weight on the really, really distant future, the case for action is stronger than even the 2100 estimates suggest.
Paul Krugman is a Times columnist and winner of the 2008 Nobel Memorial Prize in Economic Science. His latest book is “The Return of Depression Economics and the Crisis of 2008.”
Finally and most important is the matter of uncertainty. We’re uncertain about the magnitude of climate change, which is inevitable, because we’re talking about reaching levels of carbon dioxide in the atmosphere not seen in millions of years. The recent doubling of many modelers’ predictions for 2100 is itself an illustration of the scope of that uncertainty; who knows what revisions may occur in the years ahead. Beyond that, nobody really knows how much damage would result from temperature rises of the kind now considered likely.
You might think that this uncertainty weakens the case for action, but it actually strengthens it. As Harvard’s Martin Weitzman has argued in several influential papers, if there is a significant chance of utter catastrophe, that chance — rather than what is most likely to happen — should dominate cost-benefit calculations. And utter catastrophe does look like a realistic possibility, even if it is not the most likely outcome.
Weitzman argues — and I agree — that this risk of catastrophe, rather than the details of cost-benefit calculations, makes the most powerful case for strong climate policy. Current projections of global warming in the absence of action are just too close to the kinds of numbers associated with doomsday scenarios. It would be irresponsible — it’s tempting to say criminally irresponsible — not to step back from what could all too easily turn out to be the edge of a cliff.
Still that leaves a big debate about the pace of action.
The Ramp Versus the Big Bang Economists who analyze climate policies agree on some key issues. There is a broad consensus that we need to put a price on carbon emissions, that this price must eventually be very high but that the negative economic effects from this policy will be of manageable size. In other words, we can and should act to limit climate change. But there is a ferocious debate among knowledgeable analysts about timing, about how fast carbon prices should rise to significant levels.
On one side are economists who have been working for many years on so-called integrated-assessment models, which combine models of climate change with models of both the damage from global warming and the costs of cutting emissions. For the most part, the message from these economists is a sort of climate version of St. Augustine’s famous prayer, “Give me chastity and continence, but not just now.” Thus Nordhaus’s DICE model says that the price of carbon emissions should eventually rise to more than $200 a ton, effectively more than quadrupling the cost of coal, but that most of that increase should come late this century, with a much more modest initial fee of around $30 a ton. Nordhaus calls this recommendation for a policy that builds gradually over a long period the “climate-policy ramp.”
On the other side are some more recent entrants to the field, who work with similar models but come to different conclusions. Most famously, Nicholas Stern, an economist at the London School of Economics, argued in 2006 for quick, aggressive action to limit emissions, which would most likely imply much higher carbon prices. This alternative position doesn’t appear to have a standard name, so let me call it the “climate-policy big bang.”
I find it easiest to make sense of the arguments by thinking of policies to reduce carbon emissions as a sort of public investment project: you pay a price now and derive benefits in the form of a less-damaged planet later. And by later, I mean much later; today’s emissions will affect the amount of carbon in the atmosphere decades, and possibly centuries, into the future. So if you want to assess whether a given investment in emissions reduction is worth making, you have to estimate the damage that an additional ton of carbon in the atmosphere will do, not just this year but for a century or more to come; and you also have to decide how much weight to place on harm that will take a very long time to materialize.
The policy-ramp advocates argue that the damage done by an additional ton of carbon in the atmosphere is fairly low at current concentrations; the cost will not get really large until there is a lot more carbon dioxide in the air, and that won’t happen until late this century. And they argue that costs that far in the future should not have a large influence on policy today. They point to market rates of return, which indicate that investors place only a small weight on the gains or losses they expect in the distant future, and argue that public policies, including climate policies, should do the same.
Paul Krugman is a Times columnist and winner of the 2008 Nobel Memorial Prize in Economic Science. His latest book is “The Return of Depression Economics and the Crisis of 2008.”
The big-bang advocates argue that government should take a much longer view than private investors. Stern, in particular, argues that policy makers should give the same weight to future generations’ welfare as we give to those now living. Moreover, the proponents of fast action hold that the damage from emissions may be much larger than the policy-ramp analyses suggest, either because global temperatures are more sensitive to greenhouse-gas emissions than previously thought or because the economic damage from a large rise in temperatures is much greater than the guesstimates in the climate-ramp models.
As a professional economist, I find this debate painful. There are smart, well-intentioned people on both sides — some of them, as it happens, old friends and mentors of mine — and each side has scored some major points. Unfortunately, we can’t just declare it an honorable draw, because there’s a decision to be made.
Personally, I lean toward the big-bang view. Stern’s moral argument for loving unborn generations as we love ourselves may be too strong, but there’s a compelling case to be made that public policy should take a much longer view than private markets. Even more important, the policy-ramp prescriptions seem far too much like conducting a very risky experiment with the whole planet. Nordhaus’s preferred policy, for example, would stabilize the concentration of carbon dioxide in the atmosphere at a level about twice its preindustrial average. In his model, this would have only modest effects on global welfare; but how confident can we be of that? How sure are we that this kind of change in the environment would not lead to catastrophe? Not sure enough, I’d say, particularly because, as noted above, climate modelers have sharply raised their estimates of future warming in just the last couple of years.
So what I end up with is basically Martin Weitzman’s argument: it’s the nonnegligible probability of utter disaster that should dominate our policy analysis. And that argues for aggressive moves to curb emissions, soon.
The Political Atmosphere As I’ve mentioned, the House has already passed Waxman-Markey, a fairly strong bill aimed at reducing greenhouse-gas emissions. It’s not as strong as what the big-bang advocates propose, but it appears to move faster than the policy-ramp proposals. But the vote on Waxman-Markey, which was taken last June, revealed a starkly divided Congress. Only 8 Republicans voted in favor of it, while 44 Democrats voted against. And the odds are that it would not pass if it were brought up for a vote today.
Prospects in the Senate, where it takes 60 votes to get most legislation through, are even worse. A number of Democratic senators, representing energy-producing and agricultural states, have come out against cap and trade (modern American agriculture is strongly energy-intensive). In the past, some Republican senators have supported cap and trade. But with partisanship on the rise, most of them have been changing their tune. The most striking about-face has come from John McCain, who played a leading role in promoting cap and trade, introducing a bill broadly similar to Waxman-Markey in 2003. Today McCain lambastes the whole idea as “cap and tax,” to the dismay of former aides.
Oh, and a snowy winter on the East Coast of the U.S. has given climate skeptics a field day, even though globally this has been one of the warmest winters on record.
So the immediate prospects for climate action do not look promising, despite an ongoing effort by three senators — John Kerry, Joseph Lieberman and Lindsey Graham — to come up with a compromise proposal. (They plan to introduce legislation later this month.) Yet the issue isn’t going away. There’s a pretty good chance that the record temperatures the world outside Washington has seen so far this year will continue, depriving climate skeptics of one of their main talking points. And in a more general sense, given the twists and turns of American politics in recent years — since 2005 the conventional wisdom has gone from permanent Republican domination to permanent Democratic domination to God knows what — there has to be a real chance that political support for action on climate change will revive.
If it does, the economic analysis will be ready. We know how to limit greenhouse-gas emissions. We have a good sense of the costs — and they’re manageable. All we need now is the political will.
Paul Krugman is a Times columnist and winner of the 2008 Nobel Memorial Prize in Economic Science. His latest book is “The Return of Depression Economics and the Crisis of 2008.”
The Eco Interactive Vacation Experience is a blend of Travel, Education, Conservation and Reforestation. Through Eco Interactive you will engage in the natural world in unique and meaningful ways, providing fresh perspectives and a fulfilling experience not available through traditional vacation travel.
EPS is seeking Volunteers to assist in our Turtle Conservation Project at Costa Rica's Playa el Rey. Live, work and grow on one of Costa Rica's most secluded and lovely beaches.
Information
