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12/07/2009 06:35 PM

An Incredibly Expensive Folly

Why Failure in Copenhagen Would Be a Success

An Essay By Bjørn Lomborg

Politicians have wasted nearly 20 years without making significant progress in our well-meaning but fanciful quest of cutting carbon emissions. We have no more time to waste on a critically flawed response to global warming.

The worst fears of many delegates to the Copenhagen climate negotiations have already come true: It has become clear that the official attempt to replace the Kyoto Protocol will fail to produce a concrete plan to reduce carbon emissions.

Frustrated environmental campaigners are already preparing to unfurl their protest banners, and politicians are scrambling for a face-saving way to declare the summit a success. Neither demonstrations nor a meaningless political agreement, however, will amount to a victory over global warming.

A successful outcome could still be salvaged from this meeting's failure, but only if decisionmakers acknowledge the reasons why agreement on drastic, short-term carbon cuts has proven elusive, and start to consider smarter options.

Over the past decade, a fierce argument has been waged between those who deny global warming's existence, and those who are deeply alarmed about its onset. The rhetoric from both sides has, at times, been overblown. Global warming is real and it is caused by humanity. That much has long been clear. But it is just as obvious that we have failed to embrace the policies that would best deal with this challenge.

It is often claimed that we could easily stop warming through carbon emission reductions, if only politicians had the willpower. In fact, political willpower is the least of our worries. This policy approach -- which we have followed for nearly 20 years -- is critically flawed. It is flawed economically, because short-term carbon taxes will cost a fortune and do little. It is flawed politically, because negotiations to reduce CO2 emissions will become ever more fraught and divisive for the actors in Europe, America and Asia. And it is flawed technologically, because it will not ensure that alternative energy is ready to end our reliance on carbon.

The first of these challenges is clear when we examine the plan by major industrialized nations -- the G-8 -- to use carbon emission cuts to limit global warming to no more than 2 degrees Celsius above pre-industrial levels. This would be the most costly public policy ever enacted. In a paper for the Copenhagen Consensus Center, prominent climate economist Professor Richard Tol -- who has been a contributing, lead, principal and convening author for the Intergovernmental Panel on Climate Change's working groups -- showed that achieving the target would require a high, global CO2 tax starting at around €45 per ton.

CO2 Emissions Cuts Will Cost More than Climate Change Itself

Based on conventional estimates, this ambitious program would avert much of the damage of global warming, expected to be worth somewhere around €2 trillion a year by 2100. However, Tol concludes that a tax at this level could reduce world GDP by a staggering 12.9% in 2100 -- the equivalent of €27 trillion a year.

Tol's figures are based on projections from all of the major economic models of the Stanford Energy Modeling Forum. Around half of the models actually found it impossible to achieve the target of keeping temperature rises lower than 2 degrees Celsius with carbon cuts; the €27 trillion price-tag comes from those models that could do so.

It is, in fact, an optimistic cost estimate. It assumes that politicians everywhere in the world would, at all times, make the most effective, efficient choices possible to reduce carbon emissions, wasting no money whatsoever. Dump that far-fetched assumption, and the cost could easily be 10 or 100 times higher.

To put this in the starkest of terms: Drastic carbon cuts would hurt much more than climate change itself. Cutting carbon is extremely expensive, especially in the short-term, because the alternatives to fossil fuels are few and costly. Without feasible alternatives to carbon use, we will just hurt growth.

Secondly, we can also see that the approach is politically flawed, because of the simple fact that different countries have very different goals and all nations will find it hard to cut emissions at great cost domestically, to help the rest of the world a little in a hundred years.

This is particularly obvious for countries like China and India which have been dependent on carbon to drive growth that is lifting millions of people out of poverty.

The gulf between developed nations and developing countries over this issue forms the political roadblock to negotiating a successful replacement to the Kyoto Protocol. China and India will be the main greenhouse gas emitters of the 21st century, but were exempt from the Kyoto Protocol because they emitted so little during the West's industrialization period.

There are few arguments for China and India to commit to carbon caps -- and compelling reasons for them to resist pressure to do so.

Climate models show that for at least the rest of this century, China will actually experience a net benefit from global warming. While there will also be problems from climate change, warmer temperatures will boost agricultural production and improve health. The number of lives lost in heat waves will increase, but the number of deaths prevented in winter will grow much more rapidly: Warming will have a more dramatic effect on minimum temperatures in winter than on maximum temperatures in summer.

Some in Europe have suggested that rich countries pay off developing nations to ensure their participation in a carbon reduction agreement. Putting aside the point that this money could be much better spent, it is not clear that taxpayers in most developed countries are willing to transfer tens or even hundreds of billions of euros to the developing world, to projects of limited good.

Thirdly, the current approach is technologically flawed. We lack adequate replacements for the carbon that we burn today. Use of fossil fuels -- although much maligned -- remains absolutely vital for our development, prosperity and survival. Trying to tax carbon emissions without developing alternative energy replacements will simply leave the planet worse-off.

Fanciful Promises With Little or No Chance of Being Fulfilled

Global energy demand will double by 2050. Alternative sources of energy are far from ready for widespread use. In a paper for the Copenhagen Consensus Center in July 2009, Isabel Galiana and Professor Chris Green of McGill University demonstrated the extent of the technological challenge. They pointed out that reducing carbon emissions by three-quarters by 2100 while maintaining reasonable growth -- a slightly less ambitious goal than the G-8's -- requires non-fossil fuel-based sources of energy to be an astonishing two and a half times greater in 2100 than the level of total, global energy consumption was in 2000. If we continue on our current path, technological development will not be anywhere near significant enough to make non-carbon-based energy sources competitive with fossil fuels in terms of price or effectiveness.

Green and Galiana examined the state of non-carbon based energy today --including nuclear, wind, solar, and geothermal energy -- and found that, taken together, alternative energy sources would get us less than halfway toward a path of stable carbon emissions by 2050, and only a tiny fraction of the way towards stabilization by 2100. The technology will simply not be ready in terms of scalability or stability. In many cases, there is still a need for the most basic research and development. We are not even close to getting the needed technological revolution started. And we should not forget that future generations will not judge us on the scale of our ambitions, but rather on what we actually delivered.

Right now, politicians are increasingly engaging in fanciful promises that have little or no chance of being fulfilled. Consider Japan. In June, it committed to cutting greenhouse gas levels by 8 percent from 1990 levels by 2020. As Professor Roger Pielke Jr. of the Center for Science and Technology Policy Research noted in a peer-reviewed paper, fulfilling this promise would require building nine new nuclear power plants and increasing their use by one-third, constructing more than 1 million new wind-turbines, installing solar panels on nearly 3 million homes, doubling the percentage of new homes that meet rigorous insulation standards, and increasing sales of "green" vehicles from 4 to 50 percent of auto purchases.

This would be a Herculean effort, especially for a nation that has already led the world in energy efficiency. Yet it was roundly criticized when first presented. When Japan's new prime minister recently promised a much stronger reduction, 25 percent, without any obvious way to deliver, it was roundly applauded. Beautiful words are valued over realistic goals.

€53 Billion in Solar Power Will Prevent only an Hour of Climate Change

Our current approach to solving global warming -- focusing primarily on how much carbon to try to cut through taxes, rather than on how to achieve this technologically -- puts the cart before the horse.

The most effective policy response would be to dramatically increase public funds on research and development into non-CO2 based energy. Rather than making fossil fuels more expensive, we need to make alternative energy cheaper.

Research and development investments of around €66 billion a year will be needed. That is fifty-fold more than is spent by governments now, but a fraction of the cost of proposed carbon cuts. Green and Galiana, the academics from McGill University, found that in economic terms, every dollar spent could avoid €11 worth of climate damage.

We cannot rely on private enterprise. As with medical research, many of the required early, innovative breakthroughs will not reap significant financial rewards, so there is no strong incentive for private investment today.

Dramatically increasing public funding would resolve many of the political challenges with the Kyoto approach. Developing nations like India and China would be much more likely to embrace a cheaper, smarter and more beneficial path of innovation.

Carbon taxes could play an important secondary role in supporting research and development. Green and Galiana propose carbon pricing be limited initially to a low tax (say $5 a ton) to finance energy research and development. Over time, they propose, the tax should be allowed to rise to send a price signal to promote the deployment of effective, affordable technology alternatives.

It is important that research and development spending is devoted to developing new, alternative technologies instead of simply propping up today's inefficient technology. We can find a case of the latter in Germany, which pays a huge amount to cut tiny amounts of carbon through supporting solar power. This support costs €0.43 per kWh, which is equivalent to spending €716 to cut every ton of CO2. Yet the expected climate damage of each ton is about €4.

The price-tag is phenomenal -- estimated at €53 billion for the solar panels installed between 2000-2010 -- yet the maximum effect will be to postpone global warming by just one hour, at the end of this century. This incredibly expensive folly is an example of a policy that feels good but does nothing.

Policymakers should abandon fraught carbon reduction negotiations, and instead make agreements to invest in research and development to get alternative technology to the level it needs to be.

Since politicians first promised to cut carbon in Rio de Janeiro in 1992, we have wasted nearly 20 years without making any meaningful progress in our well-meaning but ultimately fanciful quest of cutting carbon emissions. We have no more time to waste on a critically flawed response to global warming.

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