Unblemished Risk Assessment on Climate Change Reduction.

Cornell economics Professor Robert Frank offers up a solid op-ed in today’s New York Times on the economics of climate change. (Calling it a big step up from this recent climate monstrosity in the Times is an understatement):

Organizers of the recent climate conference in Copenhagen sought, unsuccessfully, to forge agreements to limit global warming to 3.6 degrees Fahrenheit by the end of the century. But even an increase that small would cause deadly harm. And far greater damage is likely if we do nothing.

The numbers — and there are many to choose from — paint a grim picture. According to recent estimates from the Integrated Global Systems Model at [M.I.T.], the median forecast is for a climb of 9 degrees Fahrenheit by century’s end, in the absence of effective countermeasures.

The gist of the piece is that based upon non political, objective, logic based risk assessment, and basic economics, there really isn’t a decent case against immediate climate change redress. Summarizing, Frank notes:

In short, the cost of preventing catastrophic climate change is astonishingly small, and it involves just a few simple changes in behavior.

The real problem with the estimates is that the outcome may be worse than expected. And that’s the strongest possible argument for taking action. In a rational world, that should be an easy choice, but in this case we appear to be headed in the wrong direction.

(A few quick examples of how the market could be motivated to effect much of this change on its own, while preserving personal choice and promoting growth at the same time,  are here.) Ironically, the piece could have painted a stronger picture for action and been more objective and accurate at the same time.  For example, it concludes:

Most people would pay a substantial share of their wealth — much more, certainly, than the modest cost of a carbon tax — to avoid having someone pull the trigger on a gun pointed at their head with one bullet and nine empty chambers. Yet that’s the kind of risk that some people think we should take.

First, and more controversially, this follows the common and likely erroneous presumption that addressing climate change sensibly “costs” money rather than simply serves to shift what constitutes GDP.   But more pointedly, Frank’s assessment is based upon a probability of 10 percent of a rise of 12 degrees or more.  Yet the same M.I.T study Frank relies upon for this, as noted earlier in the piece, projects the median rise to be 9 degrees. (In other words, half of the projections come in above 9 degrees, half lower, if no remediation action is taken.)  Thus, to continue the analogy, the other chambers are not “empty.”

Frank notes this himself earlier:

Essentially, the risk is that if current estimates turn out to be wildly pessimistic, the money spent to curb greenhouse gases wouldn’t have been needed to save the planet. And yet that money would still have prevented substantial damage. (The M.I.T. model estimates a zero probability of the temperature rising by less than 3.6 degrees by 2100.)

Thus, NONE of the chambers are empty; and half of them are not that far off from the 12 degree “bullet.” But what was left out of this assessment is that if current estimates turn out to be wildly pessimistic, there are still other significant reasons why the expenditures would not have been a waste.

First off, as noted above, they won”t serve as “true” expenditures in the long run — but will shift what we do spend our GDP dollars on. So if they “do nothing,” we probably would have preferred having more flat screen TVs (metaphorically speaking) and instead we will have more historically stable CO2 levels.  But since in the long run happiness is not correlated with absolute levels of wealth, but rather an ongoing increase in growth and job opportunities, even this is fairly trivial, again, in the long run. (Implementing cleaner, less destructive fuels prompts jobs and GDP growth the same as building a few extra flat screen TVs does.)

But they won’t do nothing, even apart from the climate change issue.  Much of the climate change challenge stems from fossil fuel use.(The rest stems from deforestation, changing agricultural practices and grazing ruminant livestock, and other sundry causes.) We have to get off of these anyway. They are finite. Extremely so in the case of oil. We might as well get off of them now.

And in addition, fossil fuels also cause considerable harm in addition to being largely responsible for an increase in atmospheric carbon dioxide levels to levels that on a sustained basis may well be unprecedented in the past fifteen million years:

They are responsible for a large proportion of our atmospheric pollution, CO2 (which is not a “true” pollutant), aside.  In the case of coal, they are also responsible for a majority of the toxicological poison mercury that is bio-accumulating in our food chain. Also in the case of coal, they are responsible for a significant amount of degradation to the natural landscape and watersheds where coal is mined. (Sometimes even causing the irreversible destruction of entire mountain tops).  And in the case of oil, they are responsible for unnecessary national security vulnerabilities created by relying upon, and sending hundreds of billions of dollars to, foreign oil selling regimes overseas that we often view as hostile to our interests.

Another interesting aspect of the piece is when Frank notes that we may be “headed in the wrong direction.” Quoting Harvard psychologist Daniel Gilbert, Frank notes:

“Global warming is bad, but it doesn’t make us feel nauseated or angry or disgraced, and thus we don’t feel compelled to rail against it as we do against other momentous threats to our species, such as flag burning.”

But we’re also headed in the wrong direction for a few other reasons. Number one is an incessant parade of nonstop misinformation on the topic, along with poor media coverage of it.

Number two is that climate change is abstract. We can’t feel it, touch it, taste it, see it, or smell it. Sure, we see and feel the weather everyday, but climate change is a decades long process; the weather at any particular time is all but irrelevant, and of course, all over the board.

Number three is that, perhaps given a natural desire to believe such conclusions, people tend to confuse the lack of precision or absolute certainty on climate change with the certainty of the physics that underline the phenomenon; including the certainties that heat drives climate (ultimately through the oceans), heat trapping gases trap heat, and levels of heat trapping gases have ratcheted upward at geologically breakneck speed to extremely high levels — and are still climbing.

Number four may be the most infrequently mentioned, yet, after misinformation, perhaps the most important.  An increase in atmospheric trapped heat is ultimately going to warm or otherwise alter the planet, and produce some sort of radical change (likely warming) through the oceans.  It takes an extremely long time to heat up oceans. (And, as we would expect, oceans are slowly retaining more and more heat.) Decades, if not more.  For this reason, among others, there is a considerable lag in climate change between cause and effect.

That is, given natural variability, we won’t “know” the effects of climate change (as opposed to mere, bizarre, variability) for years. And even then we still won’t because there will be multiple decades of effect built up in the pipeline.

It’s abstract, it’s in the future, and there are considerable cause and effect, and potential variability lags on top of that.  Those things, however, do not make it any less real. We are, however, very counter productively, treating it as if they do.

If we purchase a stock at 100 dollars, and we knew it had an 80 percent probability of going to zero, and a 20 percent probability of going to 125, we would sell it in an instant. And at a steep discount from 100 dollars, also. We would never go “but we don’t know with certainty that it is going to go to zero” as a rationale for doing nothing.

But that is precisely what we are doing, with respect to climate change.  The precise number of the effect is all but irrelevant when it comes to future harm.  What matters is the range of likely outcomes, their expected probabilities, and likely, attendant harm for each.  Somehow — perhaps through natural confusion over the science, and the four reasons listed above along with the one posited by Gilbert and Frank — we are completely confusing this.

The suspicion here is that misinformation driven by ideology is in fact playing the leading role, with the other factors merely facilitating the process and allowing for easy and in many cases, perhaps even earnest, confusion and misinformation promulgation on the issue.

The Other Part of the Greenhouse Gas Emission Equation – Science, and the Illusion of Cost

The other part of the Greenhouse Gas Emission Equation is the existence of carbon sinks — naturally occurring earth processes that absorb carbon dioxide in a relatively moderately (and very slowly) fluctuating cyle, in the absence of mankind’s recent greenhouse gas emitting activies.

A new study seems to confirm for Europe what has long been postulated as part of the global problem – anthropomorphic effected reduction in effective carbon sinks at the same time that specific anthropomorphic activities are contributing enormous net amounts of carbon dioxide (and some other greenhouse gases) to the atmosphere.

According to the EU-Integrated Project CarboEurope:

The new bookkeeping effort confirmed the existence of a strong carbon sink of -305 Million tonnes of carbon per year in European forests and grasslands. A sink of this magnitude could offset 19% of the emission from fossil fuel burning. However, agricultural land and drained peat-land are emitting CO2, which cancels part of this sink. The resulting net CO2 sink of the European continent is 274 Million tonnes of carbon per year – only 15% of the emissions from fossil fuel burning. But this balance is still incomplete, because all European ecosystems are managed and as a by-product of land management other powerful greenhouse gases are released – for example nitrous oxide from fertilizers applied to grassland and crops, and methane from ruminants and from peat-lands. These previously neglected emissions of greenhouse gases from land-use cancel out almost the entire carbon sink, leaving the landscape offsetting only some 2% of the CO2 emissions from households, transport and industry.

All that ultimately matters is the atmospheric concentrations of greenhouse gases (with CO2 being by far the most important); what the levels are, and what direction they are headed in.  Sinks, after emissions themselves, are the next most important variable that ultimately goes into determing what these levels are.

We can’t solve the climate change challenge through sinks alone, but effective improvement in this area can help considerably.

Of course, over the shorter run, growing more trees (the simplest way to improve sinks on any scale, from apartment balcony to continental wildlands) will only effectively help the problem if the carbon is then stored in those trees and not re-released; this is why long standing forests are helpful; forests tilled over for mono agriculture (where most of the trapped carbon is then re-released into the atmosphere) are not. 

But the real answer must address the real root of the problem. That is, the burning of fossil fuels, and thereby in a geologic time sense the emission, almost instantaneously, into the atmosphere of carbon that was accumulated over millions of years.

Thus the real solution is simple.  Stop using fossil fuels.  Start using alternative fuels.

Is this easier said than done?  Not nearly so much as conventional wisdom holds.  We just need to start prompting the market to respond far more favorably to fossil fuel alternatives, and far less favorably to fossil fuels themselves, and people will be amazed how quickly we can transform over.

In fact, there will be headlines exclaiming surprise that so many people, are now using so much alternative energy, instead of fossil fuel based sources. (That is, if we take the sensible market based policy steps designed to promote this  – which do not include throwing billions of dollars toward “development grants” and “studies,” but only to user and producer decisions. This approach will at the same time more fully promote and reward the same research and development, and do so far far more efficiently, while at the same time shift behavior through the accumulation of various individual and producer responses to the appropriate incentives and disincentives.)

How can this pronouncement be made with such certainty? Easy. It is the nature of markets, and the nature of mankind’s perception, to always lag behind anticipating what market induced, rather than just governmentally mandated or “conscientiously motivating” behavior, can do. 

Necessity is the mother of invention. The more necessity that is created, the more invention, adaptation, and evolution and advancement will occur.

The necessity is there from a scientific perspective, but it is abstract. This necessity needs to be reflected in the marketplace, as well as in this current, abstract –and often ideologically challenged — form.  And dollars are the highest form of practical immediate motivation, and inspiration. (Note also that giving out grants to “study” or to “develop” as a substitute for changing market behavior, does not do this.  This is not to say that we should cease giving grants, but that increasing grants is not an effective response to what is ultimately a broad market based technological and behavioral challenge.) It may sound crass, but capitalism and free markets are based upon this.

Where those markets invariably fail — the classic example being the externality of environmental impact — policies that properly inspire market behavior can have the same effect as otherwise draconian regulation and prohibition. And do so far less onerously, and at the same time, far more efficiently. Indeed, usually in the transitioning over, more new industries and modes of production — all contributing to growth, and jobs — are created than are lost.

Right now we are essentially letting this problem both linger and spin increasingly out of control, for one reason.  The perception of “costs.”  And those that don’t want to sensibly address climate change due to “cost” fall into one of two camps.

The first camp involves those who are attached to industries which will have to change, and which may even fade.  This prompts the idea that adjusting — which is in those industries’ advantage both on a personal and industry level — is far more sensible and efficient than fighting, which is disadvantageous on a personal level, and wasteful of capital on an industry level. Of course, the more effective such fighting becomes — thus the more effect entrenched greenhouse gas emitting industries can have upon our policy makers, the more rational, from a short term industry perspective, fighting any such movement toward climate change remediation, becomes. 

The easiest way to render this calculus moot is for policy makers to ignore the necessarily self interested pronouncements of entrenched interests, thus making it far easier for industry to save wasteful sums on fighting, and focus on what business requires; namely, adjusting to changing needs. The only difference here being that the changing needs are external to the marketplace — the great biological and ecological harm that crescendoing climate change is likely to cause (and ongoing environmental and pollution harm that many of these same pratices otherwise cause) — and are being integrated into it through sensible policy. 

The second camp consists of groups which confuse “cost” to addess certain environmentally and climatologically harmful sectors and attendant product usages and habits with net overall economic cost to society. This, while being a widely held (and often even unquestioned) presumption, is, as a basic law of economic mathematics, incorrect. In the long run, net economic costs to society will not go down, but will merely by redefined by the newer less harmful (in this case energy) sectors, attendant product usages, and habits.  We will have the same amount of growth but with far less damaging environmental externalities.  

It is just that the growth is slightly diffferent than we have gotten used to; and this is what many, including the IPCC, confuse with “true cost” — because we can see and measure the net cost to the present way of doing business, but can not see and measure the net benefit conferred by better, more efficient ways of doing business, which addressing harmful energy practices by definition will promote.

In essence, GDP does not go down, but money is spent on different things, which we somehow confuse with “cost.” If we do not “want” some of those things (efficient energy sources and cheaper products that use them or less energy and more expensive products that use more, which will of course all iron out over time anyway), it has to be considered that what we “want” is still, on a societal level being increased each year (due to technology and accumulative production); and yet people’s happiness does not increase geometrically along with this increase.  Yet, curiously, economists, who tend to look at such things in “static” or two dimensional ways in a three dimensional word, speak of dollars being the ultimate measure of  ”utility” or happiness.  And yet with dollars increasing most years since the industrial age began happiness, or “utility” has remained relatively constant.  This does not mean that growth is bad, it just means that as an absolute it has value not in where we are at any one point in time, but in the fact that we do continue to grow. 

Thus how we grow, ultimately matters, not whether we stay with this or that product set or consumer or industry habit because of entrenchment,  simply because we can grasp the immediate “utility” or happiness benefit of what we have become used to rather than an alternative. (Turning up the heat in winter instead of putting on a sweater and saving money, which then just prevents our body from adjusting properly to the outside enviroment, and so we are less comfortable, is just one of literally millions of such examples where such choices are our right to make, but that we look at as complete benefits, which are completely arbitrary and in some cases counter productive).

Thus, it can be broken down like this. By increasing fossil fuel energy source prices (and decreasing, concomitantly, that of alternatives, thus inspiring the latter development, deployment, integration and usage far more rapidly) we now have to pay ”more” for things that traditionally came from cheap fossil fuel source, so we will start to substitute in other behaviors.  A long term look at economic trends and happiness shows us that this has no real meaning; it just “bothers” us because we think that it does. Thus the “harm” is that a gas powered lawn mower now costs more, and a lawn of wildflowers or even beans and tomatoes now less (and even less still, or more still, depending upon whether we consider the labor to put it in a joy and exercise, or a burden — and even then we might not really know). It’s all sort of random. Yet we “think” cheap energy is a “good” and if we desire cheap energy (as is very likely that we will) cleaner alternatives will thus be developed and deployed faster — all the while contributing to economic growth in the process, and yet not counterproductively beginning to slowly wreck havoc and destruction upon our biological and ecological world through radical atmospheric greenhouse gas increased climate change — which is, unfortunately, exactly what we are doing right now.

If we had no reason to not have cheap energy right now, one could argue that lacking any other information we might as well go with what we have chosen. But we do have reason.  Fossil fuels, which have artificially created cheap energy and dis-inspired the development of correspondingly inexpensive alternatives — by being subsidized in that their true costs are not reflected in their pricing — are causing a looming potential and highly counter productive ecological catastrophe. So now we have reason not to.  But we always want energy, and the process that has value — for creating true meaning and for creating economic growth — is in seeking it again, in far less destructive ways.

The bottom line is this, and it is fairly simple. There are a number of practical things that we can do, country by country;  independently, and to some degree, perhaps through some international “accords” or promises. But what is really required is the cessation of fossil fuel usage.  Since they are finite (let alone very polluting, otherwise) and this has to be done anyway, we might as well do it now.  The way to do this now is stop approving permits for new development, exploration, usage, employment, and saturation.

This sounds draconian, but it is not in the least.  Fossil fuel usage is the problem.  We are not going to simply destroy what is built in terms of energy production. But we have to shift over anyway.  So purposefully adding to the problem is extremely counterproductive.  Thus continuing in the acquisition and development of that which causes the problem is foolish. It increases supply, and in many cases (particularly in the development of new coal fired power plants, which under the current science is asinine yet we continue to do it anyway), our committment to it.  Increased supply only serves as market disincentive, rather than incentive, to move away and into cleaner alternatives. 

Remember, again, necessity is the mother of invention.  At the same time, use disincentivizing cost structures, and incentivizing cost structures, to prompt the increasingly rapid development (thus producing economic growth by so doing) of, and transitioning to, cleaner alternatives.

It’s not really that hard. We just need to do it and get rid of this archaic, misguided 20th century notion that simply expending “costs” to change over from something we are used to, over to something that we are not, is somehow a true “cost” and not simply a redefining of what constitutes GDP.