Op-Ed by Max Gulker
It’s not every day that the New York Times says that averting a severe crisis “requires transforming the world economy at a speed and scale that has ‘no documented historic precedent.’” But there it was on October 7, right at the top of a story in the wake of a report by the Intergovernmental Panel on Climate Change, a group convened by the United Nations.
The report has since emboldened advocates of a Green New Deal, which promises massive government spending on jobs and infrastructure in the name of averting an environmental disaster. The author of one report on the proposal called the threat we face “existential.” A recent Huffington Post op-ed said, “We can’t allow temperatures to rise by more than 1.5 degrees Celsius,” and “The urgency of the situation can’t be overstated.” In November, Congresswoman-elect Alexandria Ocasio-Cortez and an activist group staged a protest at speaker Nancy Pelosi’s office, demanding a Green New Deal.
Nowhere has our public discourse failed us more egregiously than on the environment and climate change. As I browsed the articles and reports I just quoted, it struck me that I had no idea exactly what this grave threat entailed or what it would take to avert it. The debate has devolved into tribalism, vague intimations of human extinction, and scientific debates that should be way over most of our heads.
The scientific reports in question are dense, and the news articles about them full of spin. But after doing some reading, one finds a clearer picture of a threat that is not existential but nonetheless severe, to the tune of tens of trillions of dollars and the lives and well-being of millions. But this is not a doomsday scenario, and we can approach it with clear economic thinking about the trade-offs involved.
Such clear thinking demonstrates that a Green New Deal is unfeasible and that unleashing our power to innovate is the truly urgent directive.
Preliminaries
The debate on climate change is both highly complex and highly fraught, so a couple of preliminary points are in order. First, this article represents the attempts of an economist who is not an expert on environmental issues to make sense of the situation we face. Any errors or misunderstandings are mine alone.
Second, let’s leave the “Is global warming real?” debate at the door. The fact that our opinions about climate science correlate almost one-to-one with our political and economic views speaks volumes about the failure of our political system and our addiction to ideas that conform to our existing worldviews. Those who rattle on about the tyranny of experts would do well to go review Adam Smith on the division of labor. My analysis takes the information in multiple U.N. reports at face value.
The Real Consequences
The October 2018 U.N. report currently at the center of the debate on climate, titled “Global Warming of 1.5 Degrees Celsius,” is not exactly beach reading. The main report is almost 800 pages long, and even the 32-page “Summary for Policymakers” is dense, technical, and assumes a fair amount of background knowledge.
The consensus estimate is that the world temperature has risen by 1 degree Celsius since the mid-nineteenth century. The report’s authors project the consequences of total increases of either 1.5 or 2 degrees by the end of this century. An additional half degree beyond the current amount, bringing the total to 1.5 degrees, appears to be the absolute best we could do starting today. The 2-degree benchmark is what was agreed to in the Paris climate accord.
The report briefly discusses the possibility of “tipping points,” scientific parlance for the existential-type threats people often emphasize. But these aren’t what the authors choose to emphasize. The most likely consequences are increases in the severity and frequency of weather events and environmental hazards we already face.
The New York Times has a good summary of the some of the projected consequences. I provide some highlights from that and other sources in the table below.
Our discussions of climate change center around what we should be scrambling to prevent, but perhaps even more important is what we should already be preparing for. Recall that 1.5 degrees is the best-case scenario from where we sit today. While total cost estimates are surely uncertain and imperfect, they are useful approximations showing figures in the tens of trillions of dollars, an order of magnitude above anything policy makers are used to dealing with.
Moving to a 2-degree increase has consequences that are far from trivial. Exposing over a billion more people to killer heat waves is alarming, and nobody wants to roll the dice on wiping out the planet’s coral reefs. But the headline-grabbing media spin obscures a point whose importance cannot be overstated: these costs are incremental.
Incremental does not mean small. But it means we are dealing with a continuum of costs and benefits, as with most issues. This isn’t a mad dash to prevent the Earth from disastrously crossing some threshold. The claim made by the authors of the Huffington Post piece that “we can’t allow temperatures to rise by more than 1.5 degrees Celsius” is flat-out wrong. The difference between 1.5 and 2 degrees of total warming carries significant consequences, but these are consequences that we can weigh against the additional investment required to hold the increase to 1.5 degrees.
A Green New Deal?
The amount of additional investment needed to keep the planet at the 1.5-degree scenario turns out to be huge. Pinning down specific cost estimates is difficult, but the level of societal changes deemed necessary by experts is eye-opening. The 1.5-degree benchmark could only be attained with efforts even the authors concede are not politically feasible, let alone economically rational.
The world’s population would have to cut global emissions in half in the next 12 years, and to 0 by 2050. This is where the Times’ “no documented historical precedent” comes in.
Enter the Green New Deal.
Advocates at the think tank Data for Progress call it “an ambitious package of new policies and investments in communities, infrastructure, and technology” to meet threats that are “unsustainable and existential.” It was a centerpiece of 2016 Green Party presidential candidate Jill Stein’s campaign.
Nobody has worked out the specifics of a Green New Deal, beyond a huge government program investing in clean-energy jobs and infrastructure. We don’t know what those investments would be, and we don’t know how close they would get us to halving emissions in the next 12 years. The stated goal of Ocasio-Cortez, et al. when storming the speaker-elect’s office was establishing a select committee to think about those things.
Only Stein has attempted a cost estimate: a gigantic $700 billion to $1 trillion per year. The U.N. scientists estimate the incremental global cost of a 2-degree temperature increase over a 1.5-degree increase to be $15 trillion. Stein’s plan would spend the United States’ share of that cost (weighted by GDP) in at most six years.
Frankly, the probability that the United States could design, pass, and fully implement legislation with a real impact by the target date of 2030 is almost zero. That isn’t a statement about whether the idea is good or bad, or whether the forces that would align against the program are nefarious. It is governmental reality, and it means that any effort put toward advocating such a program is wasted in terms of environmental impact.
Fortunately for everyone, this issue is about the kind of economic trade-offs we face all the time. Deadlines and thresholds are misleading at best. But climate change remains one of the largest threats humans have ever faced (just look at those cost estimates again). Ignoring it would be economically insane and morally bankrupt.
How do we move the public discourse on climate change beyond hysterical, apocalyptic predictions on one side and all-too-convenient global-warming conspiracy theories on the other?
Information and Innovation
The first step toward a rational response to global climate change is to help people clearly understand the stakes. This does not mean proclamations like “The importance of acting now cannot be overstated.” It means asking: What are the likely resulting weather events and environmental threats, what is the likely damage in cost and human suffering, and how much uncertainty do we believe there to be in these estimates? Then, if we take a given set of actions, how much damage will we likely mitigate, and how much will those measures cost?
The U.N. report shows such a discussion is possible even if it remains elusive. Most media outlets, including more academic publications like YaleEnvironment360, spin the report as a dire warning that we must act now to prevent global catastrophe. What the report actually says is that if we don’t act now, the problems in the coming century will be worse, by specific measures and quantifiable amounts.
We don’t need families discussing incidence of global heat waves and 95 percent confidence intervals around the dinner table, but we do need enough of a public understanding of the real stakes to compel experts to act transparently and accountably on that information. This issue is too important to gloss over the data in an attempt to rally the masses to any side.
The elephant in the room is that we need to think more rigorously about outcomes involving a total global temperature increase greater than 2 degrees Celsius. According to the U.N.’s annual Emissions Gap Report, released in November, only six of the G20 nations are on track with their Paris-accord commitments to contain warming to this level.
The authors of the October UN report could clearly run the numbers on global increases of 2.5 or 3 degrees, but if they have, they haven’t chosen to show those results. This might be a strategic decision to present those as outcomes too horrible to consider, but this does no service to environmentalism or the people it tries to protect.
Finally, the conversation needs to shift from regulation to innovation. As even the U.N. report’s authors concede, the regulatory action needed to put a lid on damage from climate change now is politically infeasible. No matter one’s prior views on government regulation, it is time to accept that the only game-changer we have left is the innovative potential of the market.
The Green Party wants the United States to spend a trillion dollars per year on top-down government measures to address climate change. What if we spent a fraction of that, through both public and private contributions, to harness the power of bottom-up innovation? Venture capital funding of clean-energy companies currently hovers around $5 billion per year, and total venture capital investment in the United States last year was just over $70 billion.
Such dedicated VC funds could be invested in projects that are both financially sustainable and show promise to either mitigate the impacts of climate change ex ante or deal with the impacts ex post. If predictions about future heat waves are true, for example, technology to help people victimized by those events will be highly profitable in the coming decades. Dedicated investment now could help entrepreneurs get a head start on such innovation and sustain them until the market is ready.
Speaking vaguely of future innovation to address climate change will not cut it, but neither will focusing exclusively on government as our deliverance. The climate-change debate has always been opaque. The collision of environmentalists and denialists, both spouting like religious zealots, has resulted mostly in paralysis. But like any issue, it involves measurable consequences and costs we can weigh against benefits. Our seeming inability to have rigorous and good-faith conversations about those trade-offs remains an inconvenient truth.
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Max Gulker is an economist and writer who joined AIER in 2015. His research often focuses on free markets and technology, including blockchain and cryptocurrencies, the sharing economy, and internet commerce. He is a frequent speaker at industry conferences, especially on blockchain technology. Max’s research and writing also touch on other economic topics, including governance, competition, and small businesses.
Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.
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