Don't Exaggerate the Costs of Global Warming

Pretend there’s a problem with your sink that prompts you to call a plumber and ask for his advice (you may even consult one plumber for information and then use another one to perform the repairs to avoid giving the first an incentive to exaggerate estimates of what’s wrong). If you don’t know anything about sinks or pipes, it’s very unlikely that you will argue with his conclusions about what to do. Yet this is exactly what happens in American politics all the time. Experts give their advice, and then completely unqualified people voice angry opinions about their own preferred solution to the problem. 

Global warming is a prime example. Whether you think it’s happening or not, it is amenable to scientific investigation. Therefore, what scientists say on the matter should carry a great amount of weight. But, curiously, when it comes to climate science, people think they can remain ignorant of scientific discourse but nonetheless have firm beliefs on the matter, as if one could ignore physics and then go around telling physicists which particles exist.

Luckily, my PolicyMic colleague Martin Hyman doesn’t take this road. Instead, he tries to engage with the best data that’s out there. I’m going to do the same thing, and conclude that global warming just isn’t that big of a deal. Let me be clear, global warming is happening. I defer to the scientists on that question and they tell me that it is so. However, just as we should defer to scientists on the science, we should defer to economists on the economics, and they seem to be fairly united in thinking that the costs of global warming are small.

Why do I say united? Well, economic researcher Richard Tol reviewed more than 75 studies on damage estimates of climate change (including a study by the same scientist, Nordhaus, that Hyman cites) and evaluated them on several indicators, including whether they were peer reviewed. Tol concludes that the best studies indicate that each ton of CO2 emitted has, at most, a marginal cost of $50. This means that if we took no action on global warming from now until 2055, we would cost ourselves, as a society, about 9 trillion dollars (assuming a common benchmark scenario where CO2 concentration in the air doubles from 7 billion to 14 billion tons). From now until 2055 though, the global economy will generate a total of about 3,000 trillion dollars (assuming it does not grow from its current annual GDP of about 60 trillion).

This means that inaction on global warming would, under very conservative parameters, cost us less than 1% of total economic gain during this time. Remember this number comes from assuming that the world economy does not grow each year and that the damage done by CO2 is estimated at the highest credible value.

Does this mean we should not try to stem the flow of CO2 into the air? Not at all. If CO2 has costs that are not reflected in the monetary cost of its production (because CO2 can go into the air for free), then we can enhance welfare by taxing it at a rate consummate with the harm it does. If we knew the harm it did to a high degree of certainty, then there would be no problem. But, there is a substantial risk that we could over tax it. And since it wouldn’t be that bad if we just ignored global warming, we should think twice before taxing it.

In short, it would be fine to take a stand against CO2 pollution if we knew how much to tax it and we could generate very targeted legislation. Unfortunately, we cannot do either. We don’t know how much harm CO2 does, and even if we did, we would have to pass extremely wasteful bills that essentially bribe interest groups into accepting lower emissions.

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