I will therefore conclude:
Even if one chooses to accept the Copenhagen Consensus mindframe, that is to accept comparison of projects with very different time scales, and to disregard the enormous uncertainties on the alleged costs and benefits (e.g. concerning changes in winter mortality), even then, the unequal discount rates of the climate issue versus other issues disqualifies the conclusions of the Coepnhagen Consensus. The ranking results are obtained by a flawed procedure, and to communicate the results widely is to mislead the public.

Fine to hear that explanation.
I understand that you would have had to perform a lot of tedious recalibration if you should have applied the discount rates of 3 % and 6 %. Instead, you used your rate of 5 % declining to 4 %, which was already built into your models.
And I assume that Chris Green used his rate of 4 % for a similar reason.
Now, the great problem is: Why did the panel of top economists that evaluated and compared the projects not react to the problem that different benefit/cost ratios were not comparable because they had been calculated with different discount rates? The 8 distinguished persons, 3 of which were nobel laureates, what did they do? Were they all so superficial in their judgments that they did not detect the different discount rates?
By the way, in comment # 20 you wrote: “Chris Green’s “R&D only” solution to climate change is just bad economics, and I cannot understand that a panel of top economists fell for that.” This once again leads to the question: What actually did the 8 panel top economists do? How critically did they evaluate the projects?
Next: Lomborg must certainly be well aware of the importance of the discount rate. He, at least, must have known that the climate projects had not been discounted at the same rates as the other projects. He must have known that the benefit/cost ratios were not comparable, and that the ranking procedure was therefore seriously flawed. Or did he really not notice that?
In any case, the heavily and widely communicated ranking result of the Copenhagen Consensus is not fully valid.
I wonder if Bjørn Lomborg can give an explanation, or if he has any relevant comments to this.

Concerning discount rates: I got the impression that the organisers of the Copenhagen Consensus conference instructed experts to make calculations with 6 % and with 3 %. Is that correct ? You may then have felt that 6 % would be too much for the climate issue which has a very long time perspective, and chosen instead to use 5 %, declining gradually to 4 %. However, the result of that is that other issues have been treated with other discount rates, which means that the calculated benefit/cost ratios are not comparable. That is certainly a problem for the whole ranking procedure. Furthermore, it is confusing that the other issues were treated with two discount rates, but that, in the end, the ranking was made according to the results obtained with 3 %. This leads to the absurd situation that in the end, at the final ranking, your projects, and the project formulated by Chris Green, have been treated with discount rates HIGHER than the other projects, which means that the ranking procedure has become greatly flawed. And, as you state, there is no easy method to convert results obtained with one discount rate to a situation with another discount rate, because the models would require extensive recalibration.

I think we have reached a point where Bjørn Lomborg should comment on this.

On the discount rate: I do not know what the other papers used. We used a consistent discount rate — all calculations, and all reporting was done with the same discount rate. The models that we use would require extensive recalibration for a different discount rate.

As far as I know, the experts preparing background papers for the Copenhagen Consensus conference 2008 were instructed to calculate the benefit/cost ratios for two different discount rates, namely 3 % and 6 %. In the other projects, this has indeed been done. In the final rating, ONLY the benefit/cost ratios calculated with 3 % have been applied, as far as I can see.

It is not very obvious why only the climate projects should be discounted with rates different from all other projects. This makes the end result of the conference much more subjective. For instance, the project taken from Chris Green´s paper (an “incentive technology race” financed by a carbon tax), allegedly obtains a benefit/cost ratio of 16:1 when using 4 % as the discount rate, but 28.5 :1 when using 3 % as the discount rate. It seems that the result obtained with 4 % was used for the ranking process, whereby the technology race got a lower rank than other projects where the benefit/cost ratio was calculated with 3 %, such as projects dealing with malaria (benefit/cost 20:1), child diseases (benefit/cost 20:1), and heart diseases (benefit/cost 25:1). If the result obtained with 3 % had been used, Green´s technology race should have been ranked higher than these. Instead it was ranked lower, and thereby fell out of the list of projects prioritized within the funding limit.

It would be nice to have somebody explain how come that climate issues were treated with discount rates different from other issues. The choice of discount rate is more or less subjective and depends on the conditions set, e.g. the time scales. So it could be different for different projects. But the whole idea of the Copenhagen Consensus conference was to compare widely different projects. This requires that the same discount rate be used for all projects. For unexplained reasons, this was not done. Why not ?

Nobody denies that these estimates are very uncertain.

The discount rate used is the standard one used for public policy in the OECD, and actually slightly below the discount rate recommended in the instructions for authors by the Copenhagen Consensus.

However, up to now, nobody has touched on the question of whether Figure 4.1 is reliable. For instance, how great are the uncertainties involved?

I have tried to find out which are the alleged benefits that outweigh the costs up to about the year 2070. As far as I can see, by consulting the references, and the references in the references, the estimates of the benefits are taken mainly from a series of papers authored or co-authored by Richard Tol. These papers are in some cases rather imprecise or unclear concerning the relative weight of various contributions to the overall estimate, but it seems that the item that counts with by far the heaviest weight is the number of deaths in rich countries. The price of a life lost in a rich country is high, and especially much higher than the price of a life lost in a poor country. Now, it is assumed that because of milder winters, there will be fewer deaths in the rich countries in the temperate zone, and this effect is so overwhelming that it practically dominates the whole calculation.

But do we know that there will be fewer deaths? Richard Tol and co-authors say yes, with evidence going back mainly to a paper by Martens (1998). However, a careful scrutiny of that paper casts much doubt on that conclusion, and the fact is that nobody knows if the present overmortality during the winter months will still be there when the winters have become milder. There is considerable evidence to suggest that the winter overmortality will persist. If that happens, there will be no decrease in mortality in the rich conutries, and the main part of the alleged benefit from global warming will evaporate like dew under the morning sun. Nobody knows for sure what will happen – the winter mortality may or may not decline – which means that nobody knows for sure if the alleged benefits will actually occur.

Next, I will point out that these alleged benefits (and the costs) have been discounted with a rate of 5 to 4 %. Yohe, Tol et al. write (page 24): “This choice is consistent with observed and anticipated market rates of return. . . ” The efforts sketched by Chris Green have been discounted with a rate of 4 %. ALL OTHER projects in Copenhagen Consensus have been discounted with a rate of 3 % in the final ranking. Why this difference ? Climate issues span over a wider time interval than most other issues and thus should be discounted with a rate lower than in other projects, not higher than in other projects.

So, why have the efforts to mitigate global warming been discounted with 4 to 5 % ? This means an increase by approximately a factor 100 over a time interval of 100 years. Is it true that this corresponds to the market rates of return? What private company can grow incessantly over 100 years with a rate of return of 4 to 5 %? If any company can do that with any degree of certainty, why do we not all invest our money in bonds in that firm instead of buying a life insurance which will give us maximally 2 to 3 % over periods longer than 20 years? And which nation, if any, has increased its national assets by a factor of 100 over 100 years? I guess that an increase of 3 % growth per year has been sustained over long periods of time in some nations, but 4 to 5 % – ?

So, if the alleged benefits of global warming were discounted with 3 % annually like all other projects in Copenhagen Consensus, what would the result be? Would the net benefits still last until 2070, or maybe only to 2060 or 2050 ?

Altogether, the uncertainties associated with Figure 4.1 are enormous. So enormous that we cannot actually tell if there will be net benefits or net costs during the main part of the present century.

Another point is: Assume that the observed market rates of return are indeed 4 to 5 %. Then, any private company making private investments in low carbon energy source technologies will demand rates of return at least as high as this (depending on tax rates etc.). This may be possible if the time horizon of the R & D is, say, twenty years – but what if the time horizon is, say, forty years, which may well be the case with such technology? Could we still imagine such research to be funded by private companies? Would it not be that meaningful research over so long time horizons have to be made by public funding ? Would it be sensible that this funding could come from the revenue of a carbon tax?

Thanks for your comment, but you obviously don`t understand my position, and your views on how governments and markets work are clearly flawed.

As for my position, it`s because I understand that markets do not work well for unowned/common resources and for resources which there are no clear or defendable property rights (i.e., “tragedies of the common”, pollution, over-fishing, tropical deforestation, etc.) AND because of my concern about the risks of climate change posed by human economic activity that I FAVOR government actions that will have the effect of pricing the activities that generate climate risk and steer private investment towards cleaner energy technologies.

On the other hand, because it`s clear to anyone who has their eyes open that governments work extremely poorly as well, and tend to waste money on boondoggles that benefit insiders but otherwise are frequently counterproductive. It`s for that reason that I oppose making the government solely or primarily responsible for how our economy responds to the climate challenge. There may be some areas where government investment is merited (like basic climate research and geo-engineering), but having the government lead the way via massive energy investment is bound to be profoundly unproductive and as well will leave private incentives to emit GHGs unchanged. (About the only good reason for the government to get involved in funding technology investments directly is simply to buy off the very effective political roadblock constructed by coal firms, coal states and states whose utilities are supplied mainly by coal.)

“Dogma blinds them to the reality.”

Well said; do you ever look in a mirror?

It`s for that reason that I agree with Yohe, Tol and many other economists that the single most efficacious step is for the government to tax carbon; see the summary here: http://mises.org/Community/blogs/tokyotom/archive/2008/06/27/top-demagogues-jim-hansen-florida-power-exxon-aei-margo-thoring-major-economists-george-will-prefer-rebated-carbon-taxes.aspx

I think mainstream economists would also point to the role of the US government and Fed in starting and feeding the bubbles that you decry, but that`s about my limits on economics for now.