Optimizing Climate Policy

The chart above appears in Bjørn Lomborg’s most recent Wall Street Journal op-ed about optimizing climate policy:

Politicians at the Glasgow climate conference seem to be competing to come up with the most outrageously dire forecast. British Prime Minister Boris Johnson called global warming “a doomsday device,” while United Nations Secretary-General António Guterres said that humans are “killing ourselves with carbon.” They both get points for alliteration, but neither of these statements is true. As this series has detailed, climate change is a real problem, but often vastly exaggerated. It’s more accurate to conceive of it as something that merely slows humanity’s progress. And there are intelligent ways to mitigate global warming once you understand the real scope of the problem.

The U.N. estimates that even if no country does anything to slow global warming, the annual damage by 2100 will be equivalent to a 2.6% cut in global gross domestic product. Given that the U.N. also expects the average person to be 450% as rich in 2100 as today, that figure falls only to 434% if the temperature rises unimpeded. This is a problem, but not the end of the world.

That means we don’t have to panic but instead can decide policy rationally. Economist William Nordhaus won the Nobel Prize in 2018 for his work on effective climate solutions, and the chart nearby shows the outcome of his model to find the optimal climate policy. His crucial point is that the damage global warming inflicts aren’t the only costly part of climate change; climate policies also create significant economic harm. Since we have to pay both costs, his model aims to minimize their sum.

My immediate reaction was that I doubt it will impress or convince a single climate activist which leads me to suspect that Mr. Lomborg is “preaching to the choir”. My second reaction was that I am deeply distrustful of artifacts like “the average person”. I’m more interested in the impact on the median person. We also might consider the differences in impact between the median human being and the median American. I’ll return to this subject in a bit.

If you don’t believe me use the worldwide governmental response to COVID-19 as a yardstick. Optimal policies based on cost-benefit analysis were rare; much more common were strategies intended to minimize cases of COVID-19. I think it’s arguable that those strategies have proven futilem some would say counter-productive.

Maybe I’m just an incurable optimist but I think it’s possible to persuade climate activists that policies other than those being pursued are more likely to achieve their stated goals. Let me provide several arguments along those lines.

First, as I have pointed out before carbon emissions increase with income. Elon Musk doesn’t just produce slightly more carbon emissions than the average human being he produces a lot more. That it’s not a linear relationship (it’s less than linear) is not particularly comforting—it’s still increasing. That means that measures like carbon taxes which are regressive in their impact won’t accomplish as much as you might think.

Second, as regressive measures are applied the status value of conspicuous displays of consumption like flying to climate conferences in private jets with huge entourages, gas-guzzling vehicles, inefficient homes, and so on actually increases. In other words the effects of those measures are likely to be perverse resulting in more emissions than might otherwise have been the case.

Third, don’t ignore Jevons paradox. As resources are used more efficiently, it may actually spur increased consumption of those resources.

Finally, preaching austerity will never be politically popular and convincing Western politicians to impose draconian restrictions on those least able to affect emissions is not only impractical—they just won’t do it and even if they do they won’t enforce them. Not if they want to keep their jobs. Producing more power from nuclear and reducing carbon in the atmosphere via CCS is much more politically practical.