Costly climate

The Freakonomists weigh in on the effects of warming 14

Manzian (as in Jim Manzi) climate policy skepticism stems in part from a fairly simple idea: The cost of legislation is unlikely to be justified given likely savings from averted warming effects. In other words, warming, in the short-term, just isn't going to cost that much.

But what does that mean?

Well, for one thing, it means that near-term bad effects from warming will be overwhelmingly concentrated in poor nations, and luckily for us, making the poor much worse-off doesn't impact global growth all that much. Score! Here's a paper on the subject, courtesy of the Freakonomists:

This paper uses annual variation in temperature and precipitation over the past 50 years to examine the impact of climatic changes on economic activity throughout the world. We find three primary results. First, higher temperatures substantially reduce economic growth in poor countries but have little effect in rich countries. Second, higher temperatures appear to reduce growth rates in poor countries, rather than just the level of output. Third, higher temperatures have wide-ranging effects in poor nations, reducing agricultural output, industrial output, and aggregate investment, and increasing political instability. Analysis of decade or longer climate shifts also shows substantial negative effects on growth in poor countries. Should future impacts of climate change mirror these historical effects, the negative impact on poor countries may be substantial.

A couple of side notes: The authors basically assume warming in the near future will look like warming in the near past, which might not be the case. Also, they don't take into account stuff like sea-level rise. But Stephen Dubner makes a key point:

What does this mean? Among other things, it may mean that many Americans -- who are by definition rich -- are worried about the wrong thing. Instead of thinking about weather apocalypses, they should instead be thinking about border invasions: the huddled masses from the poorest countries who will be seeking refuge as their own economies collapse. This would be Darwinism on the most epic scale imaginable -- but instead of the finch with the shorter beak becoming extinct, it'll be the poorest millions, or perhaps billions.

Dubner goes on to add a few other morsels of food for thought, such as, "The economists Edward Miguel, Shanker Satyanath, and Ernest Sergenti discovered that one of the most reliable predictors of civil war is lack of rain."

There are several things to think about here. One is that our models, helpful as they are, do not capture a lot of important variables like, "potential economic loss from violence related to climate refugee crises," and similar. Another is that uncertainty on climate change is not our friend. Another is that backstop proposals, like spending billions on a contraption to suck carbon out of the atmosphere, might possibly be able to undo some climate damage, but will have a much more difficult time undoing political damage. And finally, conservatives will say that the best thing we can do for these poor nations is to make them rich. Okay, maybe. Please explain how to get the world's most destitute nations on a rapid development path, such that they can handle negative climate effects in the next half century while simultaneously facing "[reduced] agricultural output, industrial output, and aggregate investment, and increas[ed] political instability."

It's just very difficult for me to see how we can afford not to purchase a global insurance policy, in the form of emission reduction measures.

Ryan Avent is a freelance economics writer living in Washington, D.C. He blogs at ryanavent.com, and at The Economist’s Free Exchange.

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  1. RayRay Posted 6:26 am
    09 Jul 2008

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  2. sindark's avatar

    sindark Posted 6:59 am
    09 Jul 2008

    Relative wealth, and responsibilityAnother significant issue is the marginal utility of wealth. Impose $1 in absolute financial costs on every Canadian or Brit and they won't notice. Do the same in Africa or Asia and many will.
    Furthermore, choosing not to curtail a behaviour that harms others more than yourself is selfish and immoral.

    a sibilant intake of breath

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  3. GreyFlcn Posted 11:32 am
    09 Jul 2008

    Good articleI recently (listened) to Dubner's Freakanomics book.

    Good stuff.
    _
    Now if only they could be less glib about Nuclear power, and focus it's the flimsy Economics it has in an open market.
    Bad Return Rate, Bad Investment Increment, Bad Default Risk.
    _
    That and also consider the "risk" involved with Nuclear power cannot completely be divorced from the risks associated with Nuclear weapons.
    Iran for instance just launched a dud long range missile just to show that it has the range to hit.
    And even if two other nations besides us get into a shooting war, the rest of the world is gonna have to deal with the nuclear winter.
    Consider the United States is still on Mutually Assured Destruction hairtrigger alert, I certainly wouldn't expect any self respecting economist to value that risk at 0.
    Unless of course they were being intentionally misleading.

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  4. Paleocon Posted 11:59 am
    09 Jul 2008

    Nuclear winter?My boyhood hero, Carl Sagan, and all of the non-deniers of his day (there was scientific consensus on the topic and no room for whacky debate) explained to us that we would experience a nuclear winter if Sadaam were to set fire to the Kuwaiti oil fields. At a minimum, we would experience a "year without summer" and massive crop failures. The real concern, however, was his prediction that the oxygen producing layer of phytoplankton in the world's oceans would die off and end our species. The folks who refused to deny were wrong and went about the business of AGW as though the whole "nuclear winter thing" never happened.
    Nuclear power can provide safe, affordable, green electricity that will advance the standards of living of those who leverage it.  Known uranium reserves could only provide 20 to 25 years of worldwide energy based upon a 100 percent conversion to nuclear fission (if that were possible) and the current worldwide consumption of 10 TW. So, obviously, it isn't THE answer...but it needs to be part of the answer.
    In the US, we need wind, solar, NG, nuclear and domestic oil. We don't need to sit in cold dark rooms wearing itchy hemp shirts.

    Often misunderestimated

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  5. rsmith02 Posted 6:13 am
    10 Jul 2008

    paleocon?What does nuclear winter (or power) have to do with the article?

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  6. Wolverine Posted 6:24 am
    10 Jul 2008

    Global Warming Is NOT About EconomicsHow global warming will effect economics is a minor side issue.  The real issue is how it will affect ecosystems and the species that live there.  This is yet another of the far too many idiotic diatribes about money when Grist is supposed to be about environmental issues.  If humans don't change their selfish, materialistic priorities from money to the natural world, there is no hope of ever solving and serious environmental issue.

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  7. sindark's avatar

    sindark Posted 7:27 am
    10 Jul 2008

    Economics"If humans don't change their selfish, materialistic priorities from money to the natural world, there is no hope of ever solving and [sic] serious environmental issue."
    If environmentalists don't take economics seriously, they have no hope of helping to solve major environmental problems. Economics obviously doesn't eliminate the need to think about things like law or ethics. What it does do is provide empirical data for ethical debates, as well as effective tools for achieving whatever outcomes you desire.

    a sibilant intake of breath

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  8. Paleocon Posted 10:13 am
    10 Jul 2008

    Is that a serious question?Freakanomics talks about nuclear power. A poster stated that he doesn't agree with the authors' POV and cited nuclear winter as an issue.
    I replied.

    Often misunderestimated

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  9. Paleocon Posted 10:23 am
    10 Jul 2008

    They both start with an "E", thoughEconomics is the study of the allocation of scarce resources. It is a human behavioral science to a large degree.
    What is money? It is an artificial store of value.
    The founder of Patagonia Inc. can use his to buy up land in South America to be preserved forever in pristine condition. What is wrong with money?
    A hungry man will kill the last white rhino to feed his children if he values it more as food than as a symbol.
    Money is donated to make sure this doesn't happen.
    What is wrong with money?

    Often misunderestimated

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  10. eheath1000 Posted 1:59 am
    11 Jul 2008

    One E you can ignore, one you can'tThe flip side of clmate change is the rising cost of oil, which happens to be running short just as we are reaching (yet another) a tipping point on climate change. We need to extend the model out a few more decades. If things won't be unbearable in the US in ten years, but they will be miserable in Mexico and Nigeria, we need to think about what will come ten years after that; a world population where the poor are demanding (and invading) the rich take action just as the rich are starting to get pounded by the climate. I'm probably off on my dates, but the issue must be presented as helping the poorer nations ultimately helps us too. Now the rising cost of oil and our concern with pollution will help the US take steps that can also address climate change (electric cars, increased use of solar and wind, etc). But we need to make sure our citizens know it is in there long term self interest (or their kids interest) to help the poorer nations as well.

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  11. Paleocon Posted 3:32 am
    11 Jul 2008

    "Another" tipping point?Now THAT is funny.
    A tipping point, by definition, is a singular event.
    I support ignorance when it comes to economics on the part of AGW Fundamentalists as long as they don't have the power to tax.
    Check the job listings on this site. The Church of Latter Day AGW Fundamentalists is a growth industry that would make L. Ron Hubbard blush.
    If you really cared about Earth, you would get in front of the mass migrations and buy up the land where humanity will flee to as the climate changes. You could then use this wealth to actually do some good.
    I see Fundie's getting out in front of legislation and regulation to get rich, but they don't seem to bet any of their own money on the climate actually changing significantly.

    Often misunderestimated

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  12. Wolverine Posted 9:39 am
    11 Jul 2008

    "Cost"OK Sindark, let's look at it this way:  The true cost of climate change goes way beyond money and economics.  The costs will be devastated ecosystems, extinction of species, and deaths of many humans.  I stand by what I said: we need to change the evil dominant paradigm from one of looking at everything through economics to one of looking first through nature and natural systems.  Your pragmatism will only buy a little time, at best.  I'm not saying that environmentalists should totally ignore economics, but it's both sad and infuriating that Grist, of all places, has become infected and dominated by economic discussions.

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  13. GreyFlcn Posted 3:19 pm
    13 Jul 2008

    WolverineIf you want then, you can look at it as "opportunity costs".

    http://en.wikipedia.org/wiki/Opportunity_cost
    Given a finite amount of resources appropriated for dealing with climate change, what way can we do the most good with it.
    For instance, I find it a bit sad that Corn Ethanol gets 20x more subsidies annually than Solar.

    -David Ahlport

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  14. Black Wallaby Posted 7:43 pm
    13 Jul 2008

    Paleocon, you wrote in part:If you really cared about Earth, you would get in front of the mass migrations and buy up the land where humanity will flee to as the climate changes. You could then use this wealth to actually do some good.
    I see Fundie's getting out in front of legislation and regulation to get rich, but they don't seem to bet any of their own money on the climate actually changing significantly.
    BRILLIANT!

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