Foreseeable Risk

by Dave Schuler on May 21, 2014

My experience in life is that whenever you think you’ve imagined the worst possible outcome of a course of actions you learn that you’ve been unduly optimistic. The editors of the Wall Street Journal reacted to Secretary of State John Kerry’s pitch for the Obama Administration’s energy policy:

Secretaries of State may want to stop making statements in the form of questions, à la “Jeopardy.” First Hillary Clinton declared “what difference at this point does it make?” regarding the reasons that four Americans died in Benghazi. Then on Monday John Kerry told graduates of Boston College that even if he’s wrong about climate change, it won’t cost a thing.

“The solution is actually staring us in the face. It is energy policy. Make the right energy policy choices and America can lead a $6 trillion market with four billion users today and growing to nine billion users in the next 50 years,” Mr. Kerry said in his commencement address, referring to climate change. Then came the odd poser.

“If we make the necessary efforts to address this challenge—and supposing I’m wrong or scientists are wrong, 97% of them all wrong—supposing they are, what’s the worst that can happen?” Mr. Kerry said. “We put millions of people to work transitioning our energy, creating new and renewable and alternative; we make life healthier because we have less particulates in the air and cleaner air and more health; we give ourselves greater security through greater energy independence—that’s the downside.”

with their own scenario of downside risk:

The “worst that can happen” is that we spend trillions of dollars trying to solve a problem that we can’t do anything to stop; that we misallocate scarce resources in a way that slows economic growth; that slower growth leads to less economic opportunity for Boston College grads and especially the world’s poor, and that America and the world become much less wealthy and technologically advanced than we would otherwise. All of which would make the world less able to cope with the costs of climate change if Mr. Kerry is right.

Leave aside Mr. Kerry’s instantiation of the fallacy of the broken window. I think that even the WSJ editors are being unduly optimistic. An even worse scenario is that my speculation that carbon emissions increase faster than linearly with wealth and income is correct, that solar and wind power remain at most backup power for the foreseeable future, and that global demand for oil continues to grow, as you would expect if the Jevons paradox holds. In that case none of the neoliberal strategies that have been proposed for reducing carbon emissions, e.g. a carbon tax or “cap and trade”, will have anything but the smallest effect on emissions, we will encourage increased oil and coal consumption by the Chinese and Indians, we will have more carbon emissions and, presumably, a greater risk of climate volatility, with lower economic growth and fewer jobs than we would otherwise have had.

We can’t imagine the worst thing that could happen.

{ 4 comments… read them below or add one }

Guarneri May 21, 2014 at 9:47 am

All kidding aside, it is alarming to watch the impotent thrashing about of political and scientific leaders. Its on the order of the Keystone Cops. If the issue has a bit of merit this is a serious dereliction of duty.

There really is one and only one bottom line: we can’t stop it because we can’t stop the BRICKs. Period. Look at the US emissions record recently (good), and yet the claims of doom and calls for remedial action grow more frequent and strident right in the face of it. And why so?

One can only imagine the jig is up. The dirty little secret is a) that Americans have higher priorities and no tolerance for further financial burden given the poor employment and income profile of the country right now and b) Americans have grown weary of the incessant admonishments – never realized – that the sky-is-falling and unless we act by next Tuesday at noon we are all going to be swept into the sea by tornadoes, hurricanes and floods.

Even if Pigouvian taxes are the least worst option (and they are) they are still financial drains on consumer spending and manufacturing efficiency. If you are one of these people who worry about robots replacing all the jobs remember, energy is just another expense line item in a P&L. If the energy bill at the plant goes up managers will still seek to cut expenses even if not directly attributable to employment dynamics. Mr. Obama, meet Robby the Robot. Robby, meet your biggest friend.

I haven’t read the ginormous Annual National Energy Assessment in two years, but I can’t imagine the basic potential magnitude of wind and solar having changed much. At one point the report thought that a 5% overall contribution was possibly achievable by 2050. According to the climate wizards New York will have been re-named Atlantis by then and skin diving outfits will be in high demand. Stem cell research to grow gills anyone?

It would be much wiser for the politics to be shelved and a serious assessment of real threats – if they exist – and potential adaptations undertaken. That’s probably a 10 year task at least. Better get started. But that won’t happen. There are tax revenues to be had, and grant money to be awarded. Its about the money, man. The money.

steve May 21, 2014 at 6:44 pm

“that the sky-is-falling and unless we act by next Tuesday at noon we are all going to be swept into the sea by tornadoes, hurricanes and floods.”

These largely dont exist. (Yes I understand it is hyperbole.) There are some who think that smaller changes now will preclude more drastic changes later. There are a few fairly aggressive types who want more action now, but I think what you mostly see among the scientists (I largely ignore pundits and pols on this issue) is most of their effort going towards trying to convince people this is a real problem. I dont see that we can have any kind of rational discussion when half the country denies that it is a problem. Even when we agreed that there is a problem, like health care, we still couldnt have a rational discussion so maybe our divides are too deep for that.

Grant money? $2 billion total per year goes towards climate science. That is what is driving a world wide conspiracy by scientists?

Steve

... May 21, 2014 at 7:11 pm

People sell out their countries for less. People sell their children for less. People do all manner of nasty things for power. And those folks don’t (usually) get the glowing adulation of others who want to prove how superior they are to lesser folk.

Zachriel May 22, 2014 at 7:53 am

Guarneri: There really is one and only one bottom line: we can’t stop it because we can’t stop the BRICKs. Period. Look at the US emissions record recently (good), and yet the claims of doom and calls for remedial action grow more frequent and strident right in the face of it.

Most countries will come on board as the problem worsens. There will always be the problem of free-riders and cheaters, but international trade agreements can impose discipline. One day dumping carbon in the atmosphere will be as strange as smoking in the workplace.
http://www.youtube.com/watch?v=PtMfzasLbu8

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