Friday, 25 October 2013

Oops, I did it again; Tol 'Lomborged' by Ridley?

I am not going to criticise Matt Ridley's article on the net benefits of climate change. Others have already done this, and he has replied/rebutted in turn. Instead (and my apologies to all authors concerned for slightly extended quotations), I am going to present three pieces of material and ask two or three (hopefully) pertinent questions. Please don't read this as an attack on Ridley - I want to understand where his point of view on climate change is coming from, that is all.

Because there is a substantial amount of material on this post, I am asking that you consider the questions first, then go through the material afterwards.

First up is Ridley's opening salvo from the Spectator article, available in full here. In this, he cites Richard Tol's most recent work, and his 2009 review of CC economic studies. 

Next up are cherry-picked extracts from the 2009 paper in question, 'The Economic Effects of Climate Change', (whole text here). These are lifted wholesale from Tol and are extended so the reader can understand some of the context of Tol's comments.

Finally, I have extracted Gary Yohe's letter to the Guardian in 2008 (entire). Yohe was Tol's co-author of the 2008 paper used as the cornerstone climate analysis of the 'Copenhaged Convention'. Yohe complains that Lomborg has failed to accurately represent the findings in his eagerness to argue that carbon tax was a waste of money.

My questions are reasonably straightforward:

1. Are Ridley's assertions or implicit conclusions in his article compatible with Tol's research (at least, from 2009)?

2. If Ridley is using Tol as a justification for his view of the effects of climate change, is it reasonable to also expect him to support Tol's view that a Carbon Tax of $50-100 per unit is advisable, and that immediate action to mitigate admissions is indicated? Furthermore, will we see this proposal championed by the Global Policy Research Institute?

3. Given that there is a precedent, is it reasonable to believe that Ridley has 'gone Lomborg' on Tol once again, and if so, is this a genuine misunderstanding, or a deliberate manipulation on Ridley's part?

This is Ridley on 'The net benefits of climate change:

Few people know that warming is doing more good than harm
Climate change has done more good than harm so far and is likely to continue doing so for most of this century. This is not some barmy, right-wing fantasy; it is the consensus of expert opinion. Yet almost nobody seems to know this. Whenever I make the point in public, I am told by those who are paid to insult anybody who departs from climate alarm that I have got it embarrassingly wrong, don’t know what I am talking about, must be referring to Britain only, rather than the world as a whole, and so forth.

At first, I thought this was just their usual bluster. But then I realised that they are genuinely unaware. Good news is no news, which is why the mainstream media largely ignores all studies showing net benefits of climate change. And academics have not exactly been keen to push such analysis forward. So here follows, for possibly the first time in history, an entire article in the national press on the net benefits of climate change.

There are many likely effects of climate change: positive and negative, economic and ecological, humanitarian and financial. And if you aggregate them all, the overall effect is positive today — and likely to stay positive until around 2080. That was the conclusion of Professor Richard Tol of Sussex University after he reviewed 14 different studies of the effects of future climate trends.

To be precise, Prof Tol calculated that climate change would be beneficial up to 2.2˚C of warming from 2009 (when he wrote his paper). This means approximately 3˚C from pre-industrial levels, since about 0.8˚C of warming has happened in the last 150 years. The latest estimates of climate sensitivity suggest that such temperatures may not be reached till the end of the century — if at all. The Intergovernmental Panel on Climate Change, whose reports define the consensis, is sticking to older assumptions, however, which would mean net benefits till about 2080. Either way, it’s a long way off.

This is Tol (cherry-picked), f
rom: The Economic Effects of Climate Change Richard S. J. Tol - Journal of Economic Perspectives—Volume 23, Number 2—Spring 2009—Pages 29–51. The Highlights are mine:

A first area of agreement between these studies is that the welfare effect of a
doubling of the atmospheric concentration of greenhouse gas emissions on the
current economy is relatively small—a few percentage points of GDP. This kind of
loss of output can look large or small, depending on context. From one perspective,
it’s roughly equivalent to a year’s growth in the global economy—which suggests
that over a century or so, the economic loss from climate change is not all that
large. On the other hand, the damage is not negligible. An environmental issue
that causes a permanent reduction of welfare, lasting into the indefinite future,
would certainly justify some steps to reduce such costs.

The horizontal axis of Figure 1 shows the increase in average global temperature.
The vertical index shows the central estimate of welfare impact. The central
line shows a best-fit parabolic line from an ordinary least squares regression. Of
course, it is something of a stretch to interpret the results of these different studies
as if they were a time series of how climate change will affect the economy over
time, and so this graph should be interpreted more as an interesting calculation
than as hard analysis.

However, this pattern should be interpreted with care. Even if, initially, economic
impacts may well be positive, it does not follow that greenhouse gas emissions
should be subsidized. The climate responds rather slowly to changes in greenhouse gas emissions. The initial warming can no longer be avoided; it should be viewed as a sunk benefit. The fitted line in Figure 1 suggests that the turning point in terms of economic benefits occurs at about 1.1°C warming (with a standard deviation of 0.7°C). Policy steps to reduce emissions of greenhouse gases in the near future would begin to have a noticeable affect on climate sometime around mid-century—which is to say, at just about the time that any medium-run economic benefits of climate change begin to decline (Hitz and Smith, 2004; Tol, 2002b; Tol, Fankhauser, Richels, and Smith, 2000).

In short, even though total economic effects of 1–2°C warming may be positive, incremental impacts beyond that level are likely to be negative. Moreover, if one looks further into the future, the incremental effects look even more negative.

Given that forecasts are imperfect, agents are constrained in many ways, and markets are often distorted—particularly in the areas that matter most for the effects of climate change such as water, food, energy, and health—recent studies of the economic effects of climate change may be too optimistic about the possibilities of adaptation and thus tend to underestimate the economic effects of climate change.
Although the evidence on uncertainty here is modest and inconsistent, and I suspect less than thoroughly reliable, it seems that negative surprises should be more likely than positive surprises. While it is relatively easy to imagine a disaster scenario for climate change—for example, involving massive sea level rise or monsoon failure that could even lead to mass migration and violent conflict—it is not at all easy to argue that climate change will be a huge boost to economic growth.
In short, the level of uncertainty here is large, and probably understated—
especially in terms of failing to capture downside risks. The policy implication
is that reduction of greenhouse gas emissions should err on the ambitious side.

Although Table 2 reveals a large estimated uncertainty about the social cost of
carbon, the actual uncertainty may well be larger still.

To place these estimated costs of carbon in context, a carbon tax in the range
of $50–$100 per metric ton of carbon would mean that new electricity generation
capacity would be carbon-free, be it wind or solar power or coal with carbon capture
and storage (Weyant et al., 2006). In contrast, it would take a much higher carbon
tax to de-carbonize transport, as biofuels, batteries, and fuel cells remain very
expensive (Schaefer and Jacoby, 2005, 2006). Substantial reduction of carbon
emissions thus requires a carbon tax of at least $50/tC—which is just barely
justifiable at the mean estimate for a pure rate of time preference of 3 percent.

In contrast, Dell, Jones, and Olken (2008) find that climate change would slow the annual growth rate of poor countries by 0.6 to 2.9 percentage points. Accumulated over a century, this effect would dominate all earlier estimates of the economic effects of climate change. However, Dell et al. have only a few explanatory variables in their regression, so their estimate may suffer from specification or missing variable bias; they may also have confused weather variability with climate change. One can also imagine a scenario in which climate change affects health, particularly the prevalence of malaria and diarrhea, in a way that affects long-term economic growth (for example, via a mechanism as in Galor and Weil, 1999); or in which climate-change-induced resource scarcity intensifies violent conflict (Zhang, Zhang, Lee, and He, 2007; Tol and Wagner, 2008) and affect long-term growth rates through that mechanism (Butkiewicz and Yanikkaya, 2005). These potential channels have not been modeled in a useful way. But the key point here is that if climate change affects annual rates of growth for a sustained period of time, such effects may dominate what was calculated in the total effects studies shown earlier in Table 1.

The missing effects further emphasize that climate change may spring nasty surprises. Such risks justify greenhouse gas emission reduction beyond that recommended by a cost–benefit analysis under quantified risk. The size of the appropriate “uncertainty premium” is in some sense a political decision.

There is a strong case for near-term action on climate change, although prudence may dictate phasing in a higher cost of carbon over time, both to ease the transition and to give analysts the ongoing ability to evaluate costs, benefits, and policy mechanisms.

And, finally, here is Yohe on Lomborg:
Climate change is real, compelling and urgent

Björn Lomborg has been a persistent global warming naysayer and his claims misrepresent my findings
In late 2009, the world's top climate scientists, environmental officials and business and NGO leaders will converge on Copenhagen to negotiate a solution to climate change. It will be a meeting with global repercussions, and its participants will be united by a common belief in the need for a comprehensive solution to this common threat.

The need for such a solution is supported by the best science available, including the report of the Intergovernmental Panel on Climate Change(IPCC), which was awarded the Nobel peace prize in 2007 and of which I was a member. The IPCC's message is clear: climate change is real, compelling and urgent - and we need a concerted, comprehensive and immediate effort to confront it.

But in the midst of this momentum and clarity, one voice has stood out as a persistent naysayer.

Bjorn Lomborg, author of The Sceptical Environmentalist, makes headlines around the world by arguing that capping carbon dioxide emissions is a waste of resources. He recently published a piece in the Guardian in which he dismissed efforts to craft a global carbon cap as "constant outbidding by frantic campaigners" to "get the public to accept their civilisation-changing proposals".

To support his argument, Lomborg often cites the Copenhagen Consensus project, a 2008 effort intended to inform climate negotiators. But there's just one problem: as one of the authors of the Copenhagen Consensus Project's principal climate paper, I can say with certainty that Lomborg is misrepresenting our findings thanks to a highly selective memory.

Lomborg claims that our "bottom line is that benefits from global warming right now outweigh the costs" and that "[g]lobal warming will continue to be a net benefit until about 2070." This is a deliberate distortion of our conclusions.

We did find that climate change will result in some benefits for developed countries, but only for modest climate change (up to global temperature increases of 2C - not the 4 degrees that Lomborg is discussing in his piece). But developed countries are relatively prepared to handle climate change's effects - they tend to be in colder areas, and they have the infrastructure to mitigate severe depletion of resources like fresh water and arable land.

That is precisely why our analysis concluded - and Lomborg ignores - that climate change will cause immediate losses for developing countries and the planet's most vulnerable, millions of whom are already facing challenges that climate change will exacerbate.

Downplaying the threat of climate change allows Lomborg to focus on his claim that "unlike even moderate CO2 cuts, which cost more than they do good, we should focus on investing in finding cheaper low-carbon energy." He attributes this finding to our analysis as well, but again he overlooks a key element of our work.

Of course the world needs to make significant investments in cheaper, low-carbon energy. But making those investments without also implementing a constraint on emissions would fail to address the problem.

Our analysis assumed that over the next century, $800bn will be spent confronting climate change - $50bn spent on R&D in the next 5-10 years, and the remaining $750bn spent on adaptation and mitigation. This allocation of resources will reduce the cost of "clean" technology andincrease the effectiveness of policies - like capping emissions - that are designed to reduce global CO2.

In short, we never advocated research into new technologies as a stand-alone way to fight climate change, nor did we accept Lomborg's dismissive attitude toward the threat climate change poses.

The negotiators in Copenhagen will need credible, accurately reported analyses upon which to base their discussions. This is not the time to deny the scope of the problem or belittle efforts to implement solutions. We need all options on the table. This was the message of the Copenhagen Consensus Challenge paper, and even a sceptical environmentalist should understand that.

Am I mistaken in imagining that Ridley's argument appears to be undermined by the very material on which it is founded?