Rx for Earth: Sooner Not Later
The U.S. and other nations should take immediate, large-scale action to stop climate change. Pro or con?
Pro: It’s Now or Never
Scientists recently issued a stark warning that the earth’s average temperature could increase by as much as 6.4 degrees Celsius by the end of this century. Such findings underscore the urgency of coming to grips with the economics of climate change. Last year, I was asked to review the evidence and advise the British government on this issue (www.sternreview.org.uk). I concluded that the costs of action to reduce climate-change risks, while significant, will be much smaller than the economic and human costs of the damage if we do nothing.
My analysis indicates global average temperature increases of 4 degrees Celsius and above will bring substantial risks to every nation. Warming on this scale can bring extreme weather disasters and effects on food production and water availability. Indeed, it carries risks of sudden changes to monsoon rains, reductions in water flow in the Nile River valley, and faster rates of sea-level rise—events that could trigger social instability, migration, and even conflict.
Still, some people disregard future consequences simply because there is a time delay. Contrary to recent reports, my analysis places much lower weight on a future dollar than a dollar now, because future generations may have higher consumption.
Reducing dependence on fossil fuels, using cleaner technologies, increasing efficiency, and protecting forests together will reduce the risks of climate change and bring numerous other benefits including energy security and improved health. The costs are likely to add up to in the neighborhood of 1% of global gross domestic product.
Lower-emission technologies will provide new economic opportunities for many businesses. Lowering greenhouse gas emissions will not damage economic growth, but in the long run, climate change itself could undermine growth. So action to reduce emissions is a pro-growth strategy.
Thankfully, this realization is spreading rapidly. The European Union has strengthened its trading scheme for emissions and is looking for cuts in carbon of up to 30% by 2020. Chinese leaders have set a domestic goal to cut energy intensity 20% by 2010.
I believe the next steps should include deeper carbon trading. Trading in CO2 reductions means that action is taken wherever it is cheapest, and that reduces the costs of action around the world.
If the U.S. can marshal its major partners around the world and create an effective global response to this challenge, we can avoid the worst risks of climate change. But time is running short. If we do not act now, the opportunity may not return.
Con: Haste Makes Waste
As concern over global climate change builds, the urge to act now and think later is great. The magnitude of this issue requires that policymakers be deliberate and adhere to the following principles.
First, climate change policies must preserve U.S. jobs and competitiveness. Excessive restrictions on greenhouse gas emissions would encourage U.S. companies to shift jobs overseas, where goods can be produced more cheaply and where emissions controls are not as strict, or are nonexistent.
Second, climate change is a global challenge that requires a global response. Fast-growing developing nations such as China and India are just beginning to address this issue, and until they do there is no hope for an overall reduction of CO2. Even if the U.S. were to shut down its entire economy, growth in emissions from emerging countries would replace U.S. emissions within the next quarter of a century.
Third, the U.S. must continue to lead the world in energy efficiency and conservation. Since 1980 the amount of energy required to expand the U.S. economy has decreased by more than 50%. According to one U.S. government official, U.S. greenhouse gas emissions per unit of gross domestic product declined 7.5% over a five-year period ending in 2004.
Fourth, investment in technology is critical, including that which reduces, prevents, or sequesters greenhouse gas emissions. Although some of these technologies currently exist, they are not cost-effective. We must also encourage investment in clean energy by reducing barriers to the research and development of clean coal, nuclear energy, wind, hydropower, biofuels, and other alternative fuels.
Let’s understand, however, that current supplies of alternative energy are not yet adequate to fuel our growing economy and rising population. More than 85% of the energy consumed in the U.S. is produced from fossil fuels such as coal, oil, and natural gas, and that will likely continue to be the case for many years.
Finally, we need a long-term strategy that includes maximum flexibility and continued scientific inquiry, sustained over many years. The Kyoto Protocol serves as evidence that short-term greenhouse gas emissions reduction mandates are a recipe for failure. Just about every nation that signed onto the Kyoto Protocol is falling far short of its overly ambitious and prohibitively costly emissions targets.
Albert Einstein once said that the definition of insanity is doing the same thing over and over again and expecting different results. The experiences of other nations show that an inflexible, command-and-control, carbon reduction strategy with mandatory caps and taxes is a proven failure. It’s time to look to a long-term, pragmatic, global, market- and technology-driven approach.