Yohe vs. Lomborg
August 24th, 2008Posted by: Roger Pielke, Jr.
There in an interesting debate over at the Guardian between Bjorn Lomborg and Gary Yohe, who is the lead author on the climate change analysis that is part of the Copenhagen Consensus exercise 2008. Yohe is also lead author for the IPCC 2007 assessment report on mitigation.
Yohe claims to have been grossly, and purposely, misrepresented by Lomborg (Lomborg’s Guardian piece is here, Yohe’s response is here):
Bjorn Lomborg, author of The Skeptical 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.
What is the nature of the misrepresentation? Yohe states:
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).
In the good guy-bad guy Manichean climate debate, making sense of such back-and-forths can be difficult, but here is my attempt. I will invite Lomborg, Yohe et al. to comment here on my interpretation.
First, lets take a look at Yohe et al. (here in PDF) and see what they actually said. On temperature change, Yohe et al. present this in their Figure 3.2, reproduced below.
I’ve annotated it to show that the temperature change associated with business as usual is just under 3.5 degrees in 2100. So it is indeed less than the 4 degrees suggested by Lomborg, but far above the 2 degrees suggested by Yohe. Neither Lomborg or Yohe gets good marks for precision here, but maybe Yohe is looking at 2075 and Lomborg 2100 and they are talking past each other (??).
Now on the issue of benefits of climate change, Yohe et al. present this in their Figure 4.1, reproduced below.
This figure clearly shows that the analysis of Yohe et al. concludes that “[g]lobal warming will continue to be a net benefit until about 2070.” The big red arrow that I’ve added shows where the impacts of global warming go from positive to negative, around 2070. Based on this graph, it is difficult for me to see the egregious misrepresentation that Yohe has claimed.
Perhaps what we are seeing here is a disagreement over values, not economic analyses. But in the climate debate, it is often a short journey from reasoned disagreement over analyses and their implications to allegations of willful misrepresentation and worse. A shame.
August 25th, 2008 at 12:16 am
You seem to be cherry-picking from what Yohe said, leaving out that his conclusions only apply to developed countries, and are only based on the assumption of a 2C change in temperature. If you click on the links in the Lomborg piece, you will find that the 4C scenario that Lomborg is reacting to is based on Bob Watson’s recommendation that the UK government plan for a 4C change, which has a 20% chance of occurring by the end of the century.
But beyond that, good to see another economist make the case that Lomborg’s arguments are crap. Thanks for bringing it to my attention. I wrote another post about it here and challenge more economists to chime in.
August 25th, 2008 at 12:50 am
The benefits in Figure 4.1 are by and large sunk benefits. We cannot avoid them, no matter how hard we try. Besides, you should look at the slope of the curve, and things start getting worse (or rather, less better) around 2025. The marginals matter for policy, not the totals.
Lomborg also argues for an “R&D only” policy, while the paper clearly argues for a “R&D plus carbon tax” paper. The reason is simple. A lot of the R&D needed, is corporate R&D — and that will only happen if companies take climate policy seriously and expect it to continue for decades. You need an institutionalised fiscal instrument (like VAT) to create those expectations. R&D subsidies will not do the trick.
August 25th, 2008 at 2:16 am
Sylvia says:
“Bob Watson’s recommendation that the UK government plan for a 4C change, which has a 20% chance of occurring by the end of the century.”
I don’t know the providence of the 20% number but I don’t think we can take it seriously if it comes from the same source that claims a 1% chance of a 20degC change – a temperature level which has likely never been seen over 4.5 billion years even when CO2 levels were 20 times what they are today (e.g. if a probability analysis produces a result that makes no physical sense then one should be extremely sceptical of the probability analysis).
I am frequently frustrated by economic analyses that accept GCMs outputs as gospel truth and then make recommendations accordingly. I would like to see an economic analysis that assigns a reasonable probability to possibility that the climate models are wrong and have grossly over estimated CO2 sensitivity. This analysis would then have to include the costs of any unnecessary anti-CO2 measures. If one did that I suspect the R&D only option would look much more attractive.
August 25th, 2008 at 2:16 am
I find it interesting that Yohe misrepresent Lomborg when he says:
“But in the midst of this momentum and clarity, one voice has stood out as a persistent naysayer.”
Lomborg isn’t a nay sayer of AGW, I believe that he accept the conclusion of the IPCC WG1. He is a nay sayer of unreasonable solution, meaning solution that cost a lot of money but don’t do a lot of good at the end.
Sylvia: Lomborg argue against the alarmist claims made by Oliver Tickell’s. Tickell’s claim are based on a 4C warming, hence the use of 4C warming by Lomborg.
Like Roger showed in the first graph by 2100 it shows a warming of 3.5C. The second graph that Roger showed demonstrate that even even with the business as usual scenario (3.5C by 2100) the benefit outweighs the cost until 2070. The graph is not limited to the 2C claimed by Yohe.
Richard: Lomborg’s does argue for R&D only although he doesn’t get into the detail of how to finance it. He usually agree with a carbon tax albeit much lower than some people wishes.
August 25th, 2008 at 6:40 am
Sylvia-
Thanks. But I think you are incorrect when you say that the benefits in Yohe et al.’s Figure 4.1 refer only to developing countries.
More generally, it is as dishearteningto see people arguing over economic projections 70 years into the future as it is to see them arguing about temperature trends. Good luck resolving that debate — post-normal, eh?
People are always selective in presenting information. Lomborg didn’t present Yohe’s full analysis, and Yohe didn’t even mention the critique by Chris Green. Why does this matter? Apparently in the hyper-politics of the climate debate it matters only for the purposes of attacking the motives of someone whose politics who don’t like. The analyses, it seems, are just a side show.
August 25th, 2008 at 6:48 am
Richard-
Thanks. The point on marginals is interesting, but not really relevant to the excerpt quoted by Lomborg.
Obviously he didn’t highlight the points you think are important, but your own paper ignored points others might think are important (e.g., adaptation-only).
Obviously, Yohe et al. and Lomborg disagree on policy priorities. No analysis compels only one response. Chris Green’s response to Yohe et al. suggests an even different approach.
August 25th, 2008 at 6:56 am
Figure 4.1 (in Yohe, Tol, Richels and Blanford) are GLOBAL impacts of climate change. In developing countries, impacts are largely negative for the entire century.
On motivation: Lomborg repeats one of the basic mistakes of Stern, that is, confusing the impacts of climate change with the benefits of emission reduction. Both Lomborg and Stern know enough mathematics to understand that these are very different things. As Lomborg is too young to suffer from dementia or something, I share Yohe’s interpretation that the “confusion” is deliberate.
August 25th, 2008 at 8:10 am
Richard-
Yes, Figure 4.1 is clearly labeled as representing global impacts. I see that Figure 5.2 disaggregates impacts by region.
But you have now confused me further. Isn’t the Copenhagen Exercise an effort to value the costs/benefits of particular actions? Thus in the context of climate change the point is specifically to compare the net benefits/costs of various possible actions.
Lomborg’s characterization of Yohe et al. is contained in only 2 paragraphs:
“Tickell’s claim that 4C will be the beginning of our extinction is again many times beyond wrong and misleading, and, of course, made with no data to back it up. Let us just take a look at the realistic impact of such a 4C temperature rise. For the Copenhagen Consensus, one of the lead economists of the IPCC, Professor Gary Yohe, did a survey of all the problems and all the benefits accruing from a temperature rise over this century of about approximately 4C. And yes, there will, of course, also be benefits: as temperatures rise, more people will die from heat, but fewer from cold; agricultural yields will decline in the tropics, but increase in the temperate zones, etc.
The model evaluates the impacts on agriculture, forestry, energy, water, unmanaged ecosystems, coastal zones, heat and cold deaths and disease. The bottom line is that benefits from global warming right now outweigh the costs (the benefit is about 0.25% of global GDP). Global warming will continue to be a net benefit until about 2070, when the damages will begin to outweigh the benefits, reaching a total damage cost equivalent to about 3.5% of GDP by 2300. This is simply not the end of humanity. If anything, global warming is a net benefit now; and even in three centuries, it will not be a challenge to our civilisation. Further, the IPCC expects the average person on earth to be 1,700% richer by the end of this century.”
Those two paragraphs did not reflect the full scope of the 52 pp. Yohe et al. paper to be sure, but at the same time, I have a hard time seeing any “misrepresentation” much less malfeasance.
Further, the argument that Yohe and Tol seem to have with Lomborg on R&D vs. “mitigation/R&D/adaptation” seems more appropriately targeted at the panel of distinguished economists that ranked the options than on Lomborg:
“Global Warming
The experts considered four solutions in this area: investing only in mitigation; investing in mitigation and research and development into low‐carbon energy technology; investing only in research and development into low‐carbon energy technology; investing in a combination of mitigation, research and development and adaptation. Mitigation only and a combination of mitigation and R&D were given the lowest two rankings by the expert panel, due to their very poor benefit/cost ratio. The option including adaptation was discarded, as the adaptation is essentially included in nearly every other option presented to the Copenhagen Consensus. An investment into research and development in low‐carbon energy technologies was ranked 14th by the expert panel.”
http://www.copenhagenconsensus.com/Admin/Public/DWSDownload.aspx?File=%2fFiles%2fFiler%2fCC08%2fPresse++result%2fCC08_results_FINAL.pdf
August 25th, 2008 at 8:13 am
Let’s just address the factual content of Yohe’s complaint.
He has one central grievance focused on a single paragraph of mine. Before quoting that paragraph he says that I am “misrepresenting our findings thanks to a highly selective memory” and just after the quote that “this is a deliberate distortion of our conclusions.”
So what did I say? I was engaged in a discussion with Oliver Tickell, who claimed that a 4oC temperature increase by the end of the century would be a “catastrophe” and the beginning of the “extinction” of the human race.
To counter this, I looked at the benefits and costs from the paper by Yohe and Tol, based on their figure 4.1, as Pielke shows above. This is my paragraph:
“The model [from Yohe, Tol, Richels and Blanford’s paper] evaluates the impacts on agriculture, forestry, energy, water, unmanaged ecosystems, coastal zones, heat and cold deaths and disease. The bottom line is that benefits from global warming right now outweigh the costs (the benefit is about 0.25% of global GDP). Global warming will continue to be a net benefit until about 2070, when the damages will begin to outweigh the benefits, reaching a total damage cost equivalent to about 3.5% of GDP by 2300. This is simply not the end of humanity. If anything, global warming is a net benefit now; and even in three centuries, it will not be a challenge to our civilisation.
Is this a deliberate distortion of the result depicted in figure 4.1? Is this a highly selective misrepresentation figure 4.1? No, it is not.
I actually give three specific data points from 2000 (benefit of 0.25%), from the cross-over (zero at 2070) and the damage from thereon, till 2300 at 3.5%.
There is simply no distortion or misrepresentation.
August 25th, 2008 at 8:28 am
There is apparently a further confusion. Yohe writes:
“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.”
The focus on “cheaper low-carbon energy” is that of the CC rankings, not Yohe et al. Yohe seems to think that Lomborg was attributing this particular policy option to Yohe et al., and so attacks Lomborg.
I suspect that the confusion originated with the following statement from Lomborg:
“we would do well to look at the best climate solution from the top economists from the Copenhagen Consensus”
It seems that in this case “best climate solution” and “top economists” are subject to different interpretations
August 25th, 2008 at 8:31 am
Dear Richard:
First, let me just say, that I for one think your work and your paper is an important contribution to the discussion and to the Copenhagen Consensus.
But on the concrete concerns, you deduce that I must be deliberately misleading, because I confuse climate impacts with benefits of emission reductions.
But in the crucial paragraphs, I only talk about climate impacts – as do you (“Figure 4.1 displays the potential for beneficial climate change, at least as measured by global aggregate economic activity, through the first half of this century.” p23).
I fail to see where this is misleading (see my post above) and I certainly fail to see how you can deduce that this means my intentions were malicious.
August 25th, 2008 at 8:37 am
Dear Roger.
With regards to the massive invest in energy research and development, you are absolutely right, I was referring to the solution that the Copenhagen Consensus panel ranked as number 14 (Professor Green’s solution), not Yohe et al’s solution that was ranked at number 29.
August 25th, 2008 at 9:40 am
Bjorn, you seem to hang on the idea that we do not talk about winners and lossers and the vulnerability of the poor in the context of your Fig 4.1 in the paper. In your words, though, you say that we considered “all of the benefits” without making reference to all of the diversity that aggregate numbers hide. Recall, however, that we wrote in Section 1 (without including the figures; readers can find them on the Copenhagen Consensus website, I am sure):
Many of the bars in Tables 1.3 and 1.4 highlight risks that will be born by the planet’s most vulnerable – those who face declining opportunities to sustain subsistence born of higher temperatures and increased water stress. Tables 1.5 and 1.6 translate these vulnerabilities into global and regional estimates along representative scenarios for the 2080’s; they replicate Tables 20.4 and 20.5 in IPCC (2007b). While the precise numbers depend on climate futures and assumptions about adaptation and carbon dioxide fertilization (not to mention the specific global circulation model employed to represent future climate change), it is clear that future impacts depend most critically upon future development choices.
And later in Section 1 we write:
As can be gleaned from Tables 1.3 through 1.6, vulnerability to climate risk is not uniform across the planet. Two explanations come to mind. On the one hand, as displayed in Figure 1.2, climate change itself is not uniformly distributed. In addition, vulnerability depends on socio-economic factors that determine exposure, sensitivity, and adaptive capacity on a site-by site basis. To explore the ramifications of this diversity, consider the impact of climate change on cereals. Parry, et al. (2005) superimposed these yield relationships onto geographically explicit representations of climate change to produce maps that display the relative changes in yield across the globe. Their findings for cereal yields in the 2080’s are reflected here in Figure 1.3 (Figure 5, Parry, et al., 2005). Unabated climate change produces significant yield reductions across Africa and much of southern Asia even though gains are anticipated elsewhere. It follows that measures of global aggregates might show modest changes in overall productivity and thereby mask significant geographic dispersion. This disparity can, as well, be amplified by local climate factors that are not adequately captured in climate model outputs.
Our focus on distributional impacts are not confined to the introduction. In the discussion of our results in Section 5, we write:
It is important to note that the impacts of climate change, and thus the benefits of any policy approach, are not evenly distributed across the globe. Figure 5.2 shows that market damages for four regional aggregates: the OECD, Eastern Europe and the Former Soviet Union, China, and the world’s Least Developed Countries. Notice that market damages are actually negative (i.e., modest climate change is beneficial) across much of the world early in this century for this level of regional disaggregation, at least. This does not mean that the market impacts of small increases in temperature are positive everywhere, of course. Moreover, if the country by country impacts within each region were aggregated using population-based equity weights, then the positive aggregates would shrink quickly and turn negative earlier.
Non-market damages displayed in Figure 5.3 for the same four regions show a decidedly different pattern. All begin with positive values (i.e., negative impacts). They continue higher almost immediately for China and the OECD, but they fall precipitously for Eastern Europe and the former Soviet Union and LDC’s. This is again because development can diminish many non-market impacts (e.g., health impacts) by improving adaptive capacity. Notice, as well, that the implications for non-market impacts of our five alternative policies deviate from one other much earlier than for market impacts.
Bjorn, you also write:
The model evaluates the impacts on agriculture, forestry, energy, water, unmanaged ecosystems, coastal zones, heat and cold deaths and disease. The bottom line is that benefits from global warming right now outweigh the costs (the benefit is about 0.25% of global GDP). Global warming will continue to be a net benefit until about 2070, when the damages will begin to outweigh the benefits, reaching a total damage cost equivalent to about 3.5% of GDP by 2300.
So what? The time trajectories are meaningless for climate and socio-economic systems with enormous inertia. The point of this exercise, to our understanding, was to conduct benefit cost analysis over time discounted back to the present. Discounted according to your rules, we still find immediate investment in R&D coupled with mitigation coupled with adaptation produces benefits that are more than twice the size of costs….. even with some near-term climate benefits.
In summary, we used Figure 4.1 to show that we were honest in our portrayal of the risks of climate change to the extent that it has been quantified. We wrote in the surrounding text that:
Figure 4.1 displays the underlying trajectories of climate damages, including the “Business as Usual” option, in terms of percentage of global GDP. Figure 4.2 converts these estimates into benefits (damages foregone) for the three intervention alternatives. Notice that Figure 4.1 displays the potential for beneficial climate change, at least as measured by global aggregate economic activity, through the first half of this century. This observation is one explanation for why the benefit-cost ratio reported in Table 4.1 for “Mitigation only” can be less than unity (though the ratio climbs above unity for “ATP cost-effective” case from Table 2.1; this point will be discussed in Section 5). Conversely, the fact that our modeling allows for the possibility that modest climate change could be beneficial early in this century adds credibility to benefit-cost ratios of the three other interventions, especially the two which involve R&D enhanced mitigation.
Note in passing reference to “when flexibility” for which even “Mitigation only” has a benefit-cost ratio above unity – see Section 5.
August 25th, 2008 at 10:48 am
Hi Bjorn,
You write, “I was engaged in a discussion with Oliver Tickell, who claimed that a 4oC temperature increase by the end of the century would be a “catastrophe” and the beginning of the “extinction” of the human race.”
What you need to do is to elicit from Mr. Tickell his prediction for the *end* of the extinction of the human race, rather than its “beginning.”
Seriously, the first stage in unraveling whether any claim has merit is to determine whether the claim can be falsified (shown to be wrong).
The “beginning of the extinction” of the human race is not a claim that can be falsified. (I personally think the beginning of the extinction of the human race was the invention of fire. Without that, we wouldn’t have this troublesome CO2 problem.)
Only the end of the human race (i.e., the last of the species dies) can be falsified.
Of course, Mr. Tickell will probably never offer his date for the end of the human race (from 4 deg Celsius of temperature rise!). But if he does, at least we’ve got some sort of reasonable start for discussion.
P.S. It’s very curious that Mr. Tickell would think that a 4 degrees Celsius temperature rise would cause the extinction of homo sapiens, since the species survived the last ice age…which involved a temperature FALL of greater than 4 degrees Celsius…and for 80,000 years, to boot. I guess Mr. Tickell thinks we’re somehow less resourceful or able to cope with change than our ancestors of 10,000+ years ago.
P.P.S. This reminds me of the (in)famous Nature paper, beloved by AGW alarmists everywhere, that predicts various percentages of species in the future being “committed to extinction.” Not that they will go extinct. But they’ll be “committed.” I envision the whole thing as being like when a high school athlete commits to going to a particular university. Except, in this instance, some chosen representative for a species will call a press conference and announce the species is now “committed to Extinction U.”
http://planet.botany.uwc.ac.za/nisl/Climate_change/Karen%20PDF’s/South%20Africa/Thomas%20et%20al.%202004.pdf
http://www.nature.com/nature/journal/v428/n6985/full/428799b.html
August 25th, 2008 at 10:48 am
Roger – (in response to comment #5):
Gary has already provided the nuances associated with the figure cited by Lomborg.
As for arguing over economic projections 70 years into the future, I agree with you, but deliberately didn’t go there in my comment, and only alluded to it at the end of my blog post. But the role of economics in framing the climate debate as one we don’t have to worry about now, is one that economists will need to answer for. To be fair, the caveats are usually in there somewhere, and I have no problem with economists who acknowledge the limits of the methods they use but they should speak louder on this point. As you well know, most change is not incremental but happens in conjunction with wars and extreme events, which is when people have an opportunity to learn and to consider or reconsider what their values even are (but are also vulnerable to manipulation, which is how we got into Iraq). Economics in general sticks to “normal” analyzable situations in increasingly Post-Normal Times.
As for selectivity – impossible not to be when information needs to fit into one screen chunks. But one can do it honestly or dishonestly. You would be better off taking a stand rather than dismissing them both as simply attacking motives of someone whose politics they don’t like. What are yours?
August 25th, 2008 at 10:57 am
[...] Pielke, Jr. has decided to fan the flames by having Lomborg and Yohe hash it out in the comments section of Prometheus, which will be a welcome change from the “me too” [...]
August 25th, 2008 at 11:03 am
Hi Sylvia-
You ask “What are your [motives]?”
A fair question. First, to open up some space for discussion of contested issues, and perhaps help move beyond the immediate recourse to questioning motives/honesty that seems to infect this area somewhat more than some other policy areas. My policy preferences on climate change are frequently presented here, so no mysteries there.
I replicate the CC exercise in one of my classes and find it to be a very useful teaching tool, especially for learning about the strengths and weaknesses of CBA. But what is most important is that it makes it impossible to avoid the reality that in a word of finite resources choices have to be made about priorities. It is thus good to argue about those choices and make our best case for them, but ultimately people will disagree about them — hence politics.
It seems pretty clear that Lomborg and Yohe differ in their policy preferences. Reducing those differences to matters of “honesty” does a great disservice not just to their collective work, but to the idea of reasoned debate more generally. How is that for a stand?
August 25th, 2008 at 11:46 am
Bjorn said:
“Global warming will continue to be a net benefit until about 2070, when the damages will begin to outweigh the benefits, reaching a total damage cost equivalent to about 3.5% of GDP by 2300.”
Gary asks:
“So what?”
Let me try to answer.
For most of the Guardian’s readership, this is surprising information. They have been led to believe that global warming will have a personal negative impact much sooner, and that the ultimate impact of global warming will be utterly catastrophic for Britain as well as the world as a whole.
If Britain is to proceed with a climate policy that introduces significant short term costs for voters, those voters will have to be convinced that the long term benefits of those policies justify their short term suffering.
I readily acknowledge that according to your projections there is a clear long term benefit. But voters in Britain and the rest of the developed world are reluctant to trust projections that go 50 or 300 years into the future. In my opinion, this distrust represents good common sense. Rarely have such long term projections proven accurate, and usually they have proven to overstate the case of whomever is making the projections.
In so far as the heterogeneity of climate impact is concerned, it is perfectly reasonable to draw attention to this potential inequity. But it is not reasonable to assume that everybody shares the view that the developed world needs to prioritize the undeveloped world in its decision making process. The term “undeveloped world” will likely be obsolete long before global climate change has any material negative economic impact.
In short, while Bjorn’s points may have little impact on your decision making process, they may have a great deal of impact on the average voter, who will ultimately be deciding the fate of climate change policy.
If Britain maintains its present course then the average voter will (within 10 years) experience significant negative consequences on a personal level. I doubt that a 3.5% improvement in global GDP 300 years in the future will be sufficient to save any government associated with the high price of British energy in 2018. For this task, only a relatively imminent fear of catastrophe will suffice.
August 25th, 2008 at 1:01 pm
1) I think in some circles it is obligatory to respond negatively when cited favorably by Bjorn Lomborg. Notwithstanding specific differences regarding the characterization of his economic projections Dr. Yohe probably had to prevent the damaging perception that he might be a tacit ally of one of the world’s most dreaded non-alarmists.
2) It is difficult to get excited about economic projections a century into the future. Whether a highly speculative graph crosses an axis in 2070 or 2100 is hardlt worth arguing about.
3) If the world does not develop significant new energy sources and technologies during the coming, blissfully warm, rather pleasant 60-70 years, excess carbon in the atmosphere may be among the least of our problems.
4) I disagree with Solman that instilling a false sense of imminent catastrophe is a necessary political device.
I think people understand that the costs of fossil fuels at the pump and in indirect costs (involvement with despotic governments, environmental costs) are going up and that change requires investment.
Chicken Little politics is a short-term, treacherous way to go with an enormous risk of backlash. The elitist notion that the stupid electorate should and can be fooled and stampeded by their betters into what’s best for them is delusional. Idiotic articles by the likes of Oliver Tickell are always counter-productive in the long run.
August 25th, 2008 at 3:07 pm
Bjorn: Apologies. If the aim is to point out how wrong Tickell is, then this is the appropriate interpretation of Fig 4.1. This blog is entitled “Yohe v Lomborg”, however, and if discussion is about the Copenhagen Consensus and climate policy, then one should focus on the incremental impacts, which turn negative around 2025 — that is, before emission reduction has much of an effect.
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.
We had an adaptation-only scenario in the Copenhagen Consensus paper, but it did not do well, as adaptation can take away only so much of the impacts. Adaptation only is clearly suboptimal, as shown here
http://ideas.repec.org/p/sgc/wpaper/126.html
On long-term scenarios: You cannot do climate research without them.
August 25th, 2008 at 3:10 pm
Roger (in response to comment #17):
Space for discussion of contested issues is always good – the direct interchange between Lomborg, Yohe and Tol with space for the nuances is priceless! The case is clear that Lomborg is misrepresenting the work of Yohe and Tol et al.
But I find it disturbing that you actually use the CC exercise in one of your classes as a tool “for learning about the strengths and weaknesses of CBA” unless you are using it to illustrate how easily CBA can be misused. In a world of finite resources, there are trade-offs, and choices do indeed have to be made, but a good case has also been made that Lomborg misrepresents the trade-offs, e.g., by picking an arbitrary number within a wide range of uncertainty, thereby positioning himself in the “reasonable” or mythical middle ground – that place “above the fray” where many strive to position themselves in policy debates. Which is what you also seem to be trying to do. (I wrote a whole series of posts on that last fall, all at this link.
His schtick is best summed up in the question he was asked by Stephen Colbert: “How can we say it won’t be a problem if it has never happened”
Finally, for CBA to have any validity, there has to be some agreement about the policy objective. When there are value conflicts, it doesn’t hold. You have to also look at actual choices rather than hypothetical ones. And I would add, the underlying institutions, yada yada (this is going on a tangent). Lomborg is hardly contributing to a reasoned debate.
August 25th, 2008 at 3:33 pm
Hi Sylvia-
Here is my syllabus:
http://sciencepolicy.colorado.edu/students/envs_5000/syllabusfall2008.pdf
Comments welcomed.
No matter what one thinks about CBA as a methodology, we’d be doing a disservice to our students if we did not teach then about it, given its standing in the real world. You can’t provide an intelligent critique of something that you don’t understand. And cba (lower case) — the idea that decisions are based on a valuation of expected outcomes — if fundamental to all theories of rationality — substantive or procedural. In any case students are smart, they can handle the material and don’t need to be shielded from controversial works.
I don’t have any idea what you mean by “picking an arbitrary number within a wide range of uncertainty”. The economists involved in the CC are far more nuanced than you suggest. And your accusation that I do this is pretty bizarre — If you take a look at Chapter 5 of The Honest Broker you’ll see an approach far different than this strawman. But perhaps you are thinking of something else?
Obviously you have some issues with Lomborg, but like Yohe and Tol, it would be better if your arguments we a bit more substantive than invoking Steven Colbert;;-)
August 25th, 2008 at 4:38 pm
Roger,
I was referring to Lomborg, not you, as picking arbitrary numbers from within a wide range of uncertainty. eg, how can he say sea level rise will be no more than a foot by the end of the century? He is just picking a figure in the middle and ignoring uncertainty… See the Dasgupta review of his book for a concise explanation of why that invalidates cba. My comments are based on that and other reviews of Lomborg’s book which I will readily confess I have not actually read but you can find links to several reviews within the series of blog posts I linked to in my last comment. I was also trying to be brief and thought Stephen asked him a very intelligent question that dejargonizes this whole discussion very nicely. And perhaps irony is a better way to deal with Lomborg’s arguments, since he never responds to his critics. And that is all the time I am going to spend on this.
August 25th, 2008 at 4:59 pm
Hi Sylvia-
Judging arguments solely by the characteristics of who makes them (or who critiques them) is perfectly fine tribal politics in the blogosphere. But sometimes information/analyses actually matter in policy making. This is the case I make in my book, and why I emphasize opening up space for debate and discussion among people who disagree. Walter Lippmann once said that politics is about getting people who think differently to act alike. Politics is not about getting people to think alike.
Your suggestion that Dasgupta presents any argument “invalidating” CBA is just wrong. Dasgupta, like most economists, argues for the appropriate application of CBA methodologies, not its fundamental inappropriateness. How to apply CBA in the context of climate change is indeed contested, and Dasgupta has taken issue with Stern as well as Lomborg. But these arguments are about the methods of CBA, not CBA as an approach. Indeed, this thread shows some considerable disagreement, not just between Yohe and Lomborg, but hints at disagreement between Green and Tol. Economics is post-normal science, too;-)
August 25th, 2008 at 6:10 pm
Hi Roger,
You are mischaracterizing what I said – in fact, what I said is that Dasgupta argued that, in light of the large uncertainties, CBA was not being applied appropriately, not that it is fundamentally inappropriate. Here is a direct quote from the review:
Good to have space for illuminating points of disagreement. This thread is making Lomborg’s game more transparent, which is key to policy debates. He needs to be held accountable.
August 25th, 2008 at 10:15 pm
Sylvia I would like you to consider this:
I’m a AGW skeptic/denier or whatever you wish to call it. Up until I read Lomborg’s books and Roger’s blog, I was against any mitigation enterprises there was, to the exception of wind farm. Bjorn and Roger did convince me that their can be some benefit to mitigation, although I’m not ready to go as far as Roger yet.
Think that I’m reconsidering my stance anytime someone who react so negatively to Lomborg’s arguments. Let me makes things clear attitude like yours, Gore, Hansen, and many others who vilified anyone who don’t share their point of view makes people like me reject anything you propose. Believe it or not I’m not the only that feel that way.
While you consider Lomborg’s as an enemy you should thank him for the work he has done to make people me like accept some of your point.
Here are some other turn off for skeptics/deniers like me:
1) When Gore speak that AGW is a moral issue while being one of the worst individual polluter. Buying carbon credit doesn’t reduce is carbon footprint, and the do as I say, not as I do attitude does nothing to forward is cause to skeptics.
2) When James Hansen claim that AGW will provoke an hunger crisis in the future while supporting the use of biofuels which in turn help create an hunger crisis today.
And here are some solution that I support yet aren’t supported by many alarmist:
1) Impose an energy cap around 1500KW/h/month/individual housing. Such a cap would affect a minority of people, would cost little to nothing to implement and would reduce Co2 emission today as well as reduce the increase in energy consumption.
2) Interdict the sale/ or heavy tax for cars with energy consumption of less than 35mpg to the exception that it is required for work.
Such solution which would achieve exactly what you wish would be no concern to me since I can’t afford cars that don’t reach 35mpg and that I can’t pay more for my electricity and I already limit my electricity consumption to about 1300kw/h/month.
August 26th, 2008 at 12:00 am
Roger: There is nothing post-normal about economics. The post in post-normal was introduced by Funtowicz and Ravetz to distinguish it from Kuhn’s normal science. Regretably, F&R did not read the entire book by Kuhn, who clearly states that his description of “normal science” applies to natural sciences only. Economists have long known that one cannot separate facts and values when giving policy advice — and have long warned their students that one should nonetheless try.
As to my disagreement with Chris Green, this is about facts, not values. (As far I can tell, Chris and I agree on many value issues.) Green proposes a large scale applied research programme funded by the government. Previous attempts to do that have failed — indeed, the proponents of this approach frequently quote the Manhattan and Apollo projects as their biggest successes. As this experience suggests that the Green proposal would be expensive and ineffective, I would rather not repeat it for climate. This type of research has to be done by companies, not by national laboratories, and companies respond better to taxes than to R&D subsidies.
August 26th, 2008 at 3:47 am
If I may venture a few comments:
1. It seems to me that Tol and Yohe have a point that Lomborg has confused his readers as to what Yohe and Tol concluded, but fail to focus on the point of confusion – only Roger seems to have caught the drift, but doesn’t identify any responsibility for Lomborg in it.
Lomborg first mentions Yohe as “one of the lead economists of the IPCC” who “For the Copenhagen Consensus … did a survey”. But in concluding what climate policy should be, Lomborg completely ignores the strong recommendation of Yohe and Tol (for a policy that focusses on mitigation, with R&D investments to be primarily market driven and some limited government-funded efforts to aid adaptation in developing countries) for “the best climate solution from the top economists from the Copenhagen Consensus”, without making any effort to clearly distinguish Yohe/Tol from those who voted on the CC ranking.
Says Lomborg, “if we are to find a workable and economically smart solution, we would do well to look at the best climate solution from the top economists from the Copenhagen Consensus. They found that, unlike even moderate CO2 cuts, which cost more than they do good should focus on investing in finding cheaper low-carbon energy. This requires us to invest massively in energy research and development (R&D). Right now, we don’t – because the climate panic makes us focus exclusively on cutting CO2.”
But none of these conclusions can be derived from the Yohe/Tol work, and since Lomborg first refers to them, it is a puzzle that he did not do a better job of distinguishing their conclusions from those of the CC voting panel of economists.
2. The disjunction between Lomborg scoffing at Tickell’s concerns about the immediate and long-term effects of a global average warming by 2100 in the range of 3-4 degrees C (with costs to global GDP of only a few %) and but then nevertheless insisting arguing that climate risks “requires us to invest massively in energy research and development (R&D)” is more than a bit much.
If there’s no serious problem, why should our governments do anything about it? If there is – and a global average temperature increase of 3-4 degrees C sounds EXTREMELY serious to me – why is having governments throw money at the best solution? Why does Lomborg think the CC ranking mean we should ignore what the entire economics profession has been telling us for decades about pricing carbon, and letting private markets determine where investment funds should flow and what other behavior changes are warranted?
3. Lomborg’s assertion that “climate panic” makes us focus exclusively on cutting CO2, at the expense of R&D, is not merely unsupportable but manifests a fundamental misconception – apparently also embedded in the CC process – as to what drives (and who makes) investment in market economies.
Absent a serious concern about climate change, there is simply little justification for government funding of low-carbon energy R&D investments. That we are finally seriously talking about such investments in the US (Warner-Lieberman was full of such pork) is only a result of what Lomborg dismisses as “climate panic”. Clearly, then, mitigation and government R&D funding can go hand-in-hand and in fact are intimately linked.
But the more basic confusion is that R&D of the type Lomborg and the CC calls for is in fact already underway – in the private economy. Because there is really little justification for the government to be making such investments, it is wrong to some how lump this R&D into government expenditures, in the manner that both Lomborg and the CC do. Rather, the vast bulk of such investments can be made by the private economy once carbon pricing mechanisms – which are really a form of factor pricing with respect to what has until now been a valued but unpriced open-access resource – are in place.
For purposes of the CC valuations, the only real governmental cost to be measured is the cost of establishing measures to administer carbon prices; these can be extremely cheap if carbon taxes are used, or more expensive if politicians prefer opacity and side deals for rent-seekers. In either case, the administrative costs will be much less than the level of private R&D that carbon pricing will elicit from markets.
********************
TT
August 26th, 2008 at 7:10 am
Hi Richard (#27)-
A few replies:
1. “There is nothing post-normal about economics.”
Funtowicz S, and Ravetz JR 1994: “The Worth of a Songbird: Ecological Economics as a Post-normal Science”, Ecological Economics, 10(3):197-207.
Post-normal science refers to situations of high uncertainty coupled with high stakes. Surely economics enters this territory.
2. Your disagreement with Green rests not in economic theory but in expectations of political effectiveness. Green’s paper begins by emphasizing the political limitations associated with budgeting. Indeed, the Copenhagen Conesnsus’ budget limit of $50 billion is one reason why the results (of the ranking) turned out as they did.
Your points suggest that I should do a Yohe et al. v. Green post sometime soon.
August 26th, 2008 at 7:19 am
Hi Tom-
1. I wasn’t confused by Lomborg’s piece, but perhaps this is because I am familiar with the CC exercise. Of course, Yohe is also familiar with the piece, and yet he was confused.
So if Lomborg was trying to deceive people, it was a pretty poor effort at deception. Knowing all of those involved, I chalk it up to imprecise writing (and reading) about complex subjects. Others will ascribe their own motivations.
2. Everyone needs a foil. Lomborg chose Tickell (Tol agreed). Yohe chose Lomborg (Tol agreed, then stepped back a bit). And you’ve got me
(I’ve got Joe Romm!)
3. We will have to disagree on this claim:
“Absent a serious concern about climate change, there is simply little justification for government funding of low-carbon energy R&D investments.”
The costs of energy, energy demand, energy security, and non-climate environmental concerns all provide solid justifications for such investments.
I suggest this paper:
Bozeman, Barry; D. Sarewitz. “Public Value Failures and Science Policy.” Science and Public Policy 32.2 (2005): 119-36.
http://www.cspo.org/ourlibrary/PublicValuesandFailure.htm
I expect that you’ll have some reactions;-)
August 26th, 2008 at 8:35 am
Just a few comments on this discussion. It is far better than other discussions elsewhere on the blogs that have lapsed into a forum for contrarian speak and acidic responses that resemble neither a conversation nor a discussion. Thank you, Roger, for creating this arena; it is clear evidence that you are doing, provocatively, exactly what you said you wanted to do in #17.
I have made my points about where we spoke of distributional issues, and the discussion seems to have moved on to worry about the policy implications.
I can summarize my take on our views about R&D efforts quite simply.
They will not work as well as they can if we rely on governments try to pick winners.
They will not work very well if we ignor diffusion and market penetration.
They will not work as well as they can if the price of carbon is zero.
Indeed, there are many technological possibilities (in carbon capture and
sequestration) that will not work at all as long as carbon emissions are free.
These last two observations are the qualitative reason why it should be beyond debate that mitigation efforts need to be included in the policy portfolio. That is what we found in our paper. Even severely constrained, we get a benefit-cost ratio well above unity.
This finding brings me back to Bjorn’s piece. It is why we are so disturbed by Bjorn’s claim that “unlike even moderate CO2 cuts, which cost more than they do good”. Where did that come from? Not from Chris Green’s piece, and not from ours.
August 26th, 2008 at 9:08 am
Thanks Gary!
I’d like to hear back from Bjorn on this:
“It is why we are so disturbed by Bjorn’s claim that “unlike even moderate CO2 cuts, which cost more than they do good”. Where did that come from?”
August 26th, 2008 at 10:39 am
“These last two observations are the qualitative reason why it should be beyond debate that mitigation efforts need to be included in the policy portfolio. That is what we found in our paper. Even severely constrained, we get a benefit-cost ratio well above unity.”
I don’t agree that your analysis was “severely constrained.” Didn’t the benefits you *assumed* would accrue from 70 years to a mind-boggling (and absurd) 300 years into the future significantly affect your cost-benefit results?
What if your analysis had been stopped at 50, 70, or 90 years into the future? What would the cost-benefit ratios have been in those instances? Would any of them have been above unity?
Also, I think your projections for temperature changes under business as usual were much too high.
Here are the temperature rises you projected, relative to the year 2005 (from Figure 3.2):
2015 = 0.5 deg C
2025 = 0.9 deg C
2035 = 1.3 deg C
If any of you authors would like to place even money that the temperature rise from a 5-year average centered around 2005 to a 5-year average centered around 2015 will be 0.5 deg C, or 0.9 deg C by 2015, or 1.3 deg C by 2025, or 1.6 deg by 2035, I’ll be happy to agree to those bets.
I’m talking about bets of like $1 to $100 available to the first 2 authors who respond. I’m not at all interested in taking your money. I *am* interested in you standing behind the temperature projections you used, or else acknowledging that the temperature projections on which you based your analysis were probably too high.
August 26th, 2008 at 10:53 am
Roger: There is nothing post-normal about economics, because economics is a social science. Therefore, it was never normal in the Kuhnian sense of the word, and cannot be post-normal in the Funtowiczian sense of the word. Besides, economists recognised the “post-normal” features of economics decades, perhaps centuries before the term post-normal was coined. In other words, Funtowicz and Ravetz should have done their homework. They said nothing new, but as they did pretend otherwise, they have given license to a whole lot of natural scientists moonlighting in the social sciences — on average with appalling quality.
On Green v Tol: This is not a theoretical issue but an empirical question — and one that has been decidedly answered in my favour.
August 26th, 2008 at 11:00 am
Hi Richard-
If everyone shared your views of the social sciences — especially many social scientists — I’d agree. However, they don’t.
I will invite Chris Green to participate, and he has the impression that it is his views that are correct. The exchange will be useful and enlightening.
Thanks!
August 26th, 2008 at 2:02 pm
And 0.25 degrees by 2010. Like most of these arguments they stand or fall by the initial assumptions. When these are obviously wrong the rest is academic. Maybe a more realistic warming scenario should have been tested too.
August 26th, 2008 at 2:45 pm
Hello Roger,
I have refrained from answering every issue you have raised because it seems like bait to go off on more tangents and I am truly more interested in hearing Bjorn’s response to Gary’s question in comment #31. And also to the simple question Stephen Colbert asked him, that he didn’t, or perhaps didn’t have time to answer, i.e., “How can we say [a 4.7 degree rise in temperature in the next 100 years] won’t be a problem if it has never happened?” (video clip here.
But in the meantime, perhaps I should try to clear up a few things. I cited Dasgupta regarding uncertainty and CBA because I knew that if I cited Funtowicz and Ravetz, that Richard T would just dismiss it out of hand. I am also genuinely more interested in finding areas of overlap than in picking an argument, which is, in part, why I abandoned ecological economics and became the ronin geographer that I am. Economics is indeed a broad subject in which there are multiple perspectives, and provides useful information when used appropriately. However, the part of it that has dominated the policy and decision-making process gets it’s mantle of authority from imitating physics and pretending to be value free. So the critique of post-normal science is generally a valid one.
A slightly more complete definition than the one you cited is that it addresses situations in which “facts are uncertain, values in dispute, stakes high, and decisions urgent” for which traditional scientific methods are not by themselves adequate (you left out the part about conflicting values). Policy relevance is then a critical criteria for quality. I call my blog the Post-Normal “Times” because, for purposes of policy dialogue, I find it more useful, at least as a point of departure, to focus on the context – and it certainly seems like a good description of our era, regardless of what Thomas Kuhn meant by “normal science”. Also, on what is the problem we are trying to solve – from which the relevant analytical methods would then follow. Part of the problem science has (I don’t just mean economics) is that it has placed more emphasis on methods than on social relevance, and ends up sounding like gobbledygook to anyone outside the particular discipline field. It gets even messier when we try to put it all back together interdisciplinary exercises like the Millennium Ecosystem Assessment and make it relevant for policy.
As best I can tell, Lomborg’s game is to claim he is using CBA, which gives him a mantle of “authority,” but he is only using it as a fig leaf to back up a policy preference. If someone wants to pay me for my time, I’d be happy to actually review the original material from the CC and get more specific. Otherwise, citing credible authorities will have to suffice. And since Yohe and Tole provided the foundation for the CC, this discussion is of particular interest. As for you, very odd that you dismiss the relevance of honesty in scientific debate after writing a book called “the Honest Broker.”
August 26th, 2008 at 3:22 pm
Hi James,
You write, “And 0.25 degrees by 2010. Like most of these arguments they stand or fall by the initial assumptions. When these are obviously wrong the rest is academic. Maybe a more realistic warming scenario should have been tested too.”
Actually, the 0.25 degrees Celsius from 2005 to 2010 is the MOST probable.
Their analysis effectively has a warming of 0.5 degrees C per decade from 2005 to 2015, then 0.4 deg C in the decade after that, then 0.4 deg C in the decade after that.
Unless I’m mistaken (I’m too lazy to look it up and calculate it, as from the NASS GISS website), there has *NEVER* been a single ten-year period in which the 5-year rolling average value for surface temperature has increased by even 0.4 deg C.
And yet their analysis would have you believe that it’s reasonable (or even “severely constrained”!) that the temperature would increase 0.4 to 0.5 deg C per decade–EVERY decade–for the next 3 decades.
So why did they do that? Why have such high numbers? Well, it’s the only way they can make global warming mitigation efforts look good.
And even then, they somehow felt it necessary to go forward a staggering *300 years* in their economic analysis! Can you imagine someone in the United States (or anywhere else in the world) in 1706 projecting what the world economy would be like in the year 2000? That’s 70 years before even the American Revolution! But that’s what they’ve done.
Bjorn Lomborg is far too kind.
Mark
P.S. Seriously, it’s probably that I’m too harsh. But it really bugs me to see the nonsense being used to affect multi-billion-dollar (even potentially *trillion* dollar) decisions.
August 26th, 2008 at 3:44 pm
Dear Gary.
You write in 31: “It is why we are so disturbed by Bjorn’s claim that “unlike even moderate CO2 cuts, which cost more than they do good”. Where did that come from?”
I wrote:
“If we are to find a workable and economically smart solution, we would do well to look at the best climate solution from the top economists from the Copenhagen Consensus. They found that, unlike even moderate CO2 cuts, which cost more than they do good, we should focus on investing in finding cheaper low-carbon energy.”
In commentary 12, I pointed out that the top economists from the Copenhagen Consensus referred to the Copenhagen Consensus Panel with its five Nobels. My statement comes from the Panel ranking CO2-cuts lowest, and R&D in low carbon technologies towards the middle.
Best
bjorn
August 26th, 2008 at 4:01 pm
In other words, they made a policy judgment not based on anything. I rest my case that what the CC did was not CBA.
August 26th, 2008 at 4:21 pm
[...] Pielke Jr. posted a discussion of Yohe vs. Lomborg. Evidently, Yohe thinks Lomborg misconstrued his views; both Lomborg and Yohe. Both Yohe and [...]
August 26th, 2008 at 4:23 pm
Bjorn:
Fine, and thanks for the reply. Your experts reported only that the portfolios with mitigation and R&D option had very low benefit cost ratios. That is why they placed our portfolio options at the bottom of their list. Your summary of their deliberations mentions only “low” benefit-cost ratios. But…..
Your experts did not (and they could not given the information that they had before them) assert that the benefit cost ratio for mitigation, when part of a portfolio that includes R&D was less than one – i.e., that “even moderate CO2 cuts …. cost more than they do good”. And so, we are still left with the question: where did your side comment come from?
Gary
August 26th, 2008 at 5:20 pm
[...] Pielke Jr. posted a discussion of Yohe vs. Lomborg. Evidently, Yohe thinks Lomborg misconstrued his views; both Lomborg and Yohe. Both Yohe and [...]
August 26th, 2008 at 10:34 pm
Roger,
First, let me say that I enjoy the even-handed nature of your blog in addition to the spirited debate that ocassionally occurs, which is free of ad hominem attacks.
My problem with the issues that you discuss with respect to the policy of Climate Change is that it neglects to view things from a “real world” perspective. That is, in theory, the concepts of mitigation, adaptation, or R&D all seem to have merit (either individually, or in combination). But as Solman (#18) points out, how is this going to play to the masses?
What you speak of today with respect to policy and climate has also played itself out in the recent past in other ways. For example, Rep. Tom Tancredo (R-CO), as you are probably aware, is one of the most vocal opponents of illegal immigration. And I believe that polling has shown that a majority of US citizens would favor deporting those working in the US without proper documentation. However, that same majority does not consider cost/benefit relationships. If they were told that produce prices would rise by 20% or more if all undocumented persons were deported, I would guess that they would bite their collective tongues.
This same scenario has played itself out in the textile, computer, and automotive industries as well (albeit, for differing reasons).
In a theoretical world, the policy issues that are discussed here, and in countless academic venues make sense. But what happens when implementation occurs? How will people react to a carbon tax that could effectively add 10% or more to almost all goods and services? After all, manufacturers, utilities, airlines, etc. will surely pass that cost along to the consumer. All the scare tactics in the world will be useless when a society that is already overburdened with taxes (and staring at a black hole we call entitlements) is asked to pony up even more.
This, IMHO, is the pickle. How do you transfer from the theoretical (academic) world to the “real world”? If you can’t find a way, then these conversations are all for naught.
Just some food for thought.
Regards,
Lee
August 27th, 2008 at 3:17 am
Hello Roger,
In comment 30 above you state, among other things:
The costs of energy, energy demand, energy security, and non-climate environmental concerns all provide solid justifications for such [government-funded] investments.
Solid, you say?
My friend, insofar as it implies that government bureaucrats are better equipped than free markets to handle your list of worries, and insofar as it would necessitate coercive governmental action on a rather massive scale, and insofar as it intimates a conspicuous disregard for the incontrovertible failure of statism worldwide — I must say to you, with all due respect, that your claim to a “solid justification” is, at the very least, debatable. But I’ll tell you what: you sign that, have it notarized, and I’ll take it under consideration.
The article you subsequently link us to, however, is, I’m afraid, absolutely beyond serious consideration.
Its beginning says it all:
Science policy in the United States is constructed upon a foundation of economic rationality.
Really? Since when? Certainly not within the last 100 years, that’s for sure.
Moreover, the ensuing list of grievances against, in their words, “neoclassical economic reasoning” contains a curious omission: no mention whatsoever of the inalienable right to life and property, nor any mention of the fact that publicly funded science is inherently compulsory. Inalienable, for the record, means “that which cannot be transferred.” Quoting the fiery political philosophy Isabel Paterson:
“Persons unaccustomed to attach exact meanings to words will say that the fact that a man may be unjustly executed or imprisoned negates this proposition [of inalienable rights]. It does not. The right is with the victim nonetheless; and very literally it cannot be alienated, for alienated means passing into the possession of another. One man cannot enjoy either the life or liberty of another. If he kills ten men he will not thereby live ten lives or ten times as long; nor is he more free if he puts another man in prison. Rights are by definition inalienable; only privileges can be transferred. Even the right to own property cannot be alienated or transferred, though a given item of property can be. If one man’s rights are infringed, no other man obtains them; on the contrary, all men are thereby threatened with a similar injury” (Isabel Paterson, God of the Machine).
When Americans (your article continues) seek to determine the value of resources, goods and services, they reflexively look for price indices, eschewing more complex and indeterminate approaches to assessing value.
Indeed. And, presumably, by “Americans” these authors mean folks like my next door neighbor, who works in a cement plant outside of Fort Collins and has five mouths to feed. In assessing the best bang for his buck, the better to support his family, this poor fellow — and I think we can all agree on this — really should make a greater effort to let go of his passe prejudices for things like prices indices (i.e. how much he has to pay for things) and enthusiastically embrace more complex and indeterminate approaches. To be honest, though, I don’t believe it’s primarily the “complex and indeterminate approaches to assessing value” that Americans like my neighbor in general eschew. It’s the utter nonsense of this sort postmodern jargon that Americans like my neighbor (rightly) eschew. And so do I.
In response to your article suggestion, I suggest this:
http://www.the-thinking-man.com/clean-air-act.html
August 27th, 2008 at 4:15 am
Dear Gary.
You say in 41 that one could not “assert that the benefit cost ratio for mitigation, when part of a portfolio that includes R&D was less than one”. This is certainly true for the estimates in your paper, which show a cost-benefit of 2.1.
However, and this is also abundantly clear both in my text and in 39, that this is not the solution I talked about. I talk about mitigation only. As I mentioned in 39, this ranked “lowest” (which was mitigation). As I say in my text: “unlike even moderate CO2 cuts, which cost more than they do good…”
When you talk about mitigation being part of a portfolio with R&D my text in 39 would have had to read “next to last” and – more importantly – my text in the original article would have to have said: “unlike even moderate CO2 cuts with R&D”. Which it didn’t.
And this mitigation alone, according to table 4.1 in your paper, has a payoff of $0.9 per dollar invested, or costs more than it will do good, which was what I wrote.
Best
bjorn
August 27th, 2008 at 5:05 am
It’s all too simplistic and ignores the human element. There are 3 aspects – consumers, current producers and future innovators. A punitive tax works on only a small subset of them.
Consumers must be persuaded to switch to geothermal heating/cooling and low energy devices. Taxes would do that slower than incentives because people will have less money. Instead they need to be convinced of the long-term savings and be given a mechanism to afford it. So a part-market, part-government solution is needed.
Current producers incur extra costs with punitive taxes which gives them less options for change rather than more – they will simply cleave towards nuclear power since it is already established. Again they need to be encouraged not punished. Business is about making more money, not losing less.
Finally, we know that innovators are more likely to start up by tax breaks and grants than by anything else. If you economists had ever been in business you’d know that start-up funding is incredibly difficult to achieve because every capitalist wants to be second in rather than first, because the first investor takes all the risk. Only once the technology is established are the investors then keen. So government has to push and let investors pull.
The idea that punitive taxes by themselves will somehow encourage changes by magic market forces is neither logical nor proven. Neither life nor economics can be represented by graphs of two variables. Go out and talk to people for heavens sake!
August 27th, 2008 at 8:59 am
My take on this “misrepresentation” kerfuffle follows, first, with the relevant passages from Lomborg’s original text followed by my annotations.
I will open up a new thread soon on Green v. Yohe et al. vs. Copenhagen Consensus Panelists, in order to revisit the substantive policy issues that many wish to discuss, as I think we’ve sufficently figured out what is going on here.
Yohe et al. actually use a model that projects a temperature rise of slightly less than 3.5 degrees by 2100.
As written, this passage seems to be a perfectly fair characterization of what Yohe et al. present, though both Yohe and Tol would prefer that the distribution of costs/benefits in space and time be discussed rather than the aggregate totals. The choice of what benefits/costs matter most is of course a political choice. Yohe et al. do present a disucssion of impacts at regional scales, but at the same time it is a very small part of their paper.
This is Lomborg’s view which he contrasts with Tickell, which Tol (#20 above) seems to generally agree with.
This sentence was sufficiently ambiguous that it seems that Yohe interpreted its phrase “best climate solution” to refer to the highest BCR in Yohe et al., whereas Lomborg was in fact referring to the overall ranking of the Copenhagen Consensus Panel, which considered only a subset of the Yohe et al. approaches, plus others from the response papers. So the “best climate solution” Lomborg referred to was in fact one from the paper by Chris Green. Lomborg and Yohe obviously talked right past each other on this point.
Here Lomborg was again sufficiently ambiguous to lead Yohe to think that the” moderate CO2 cuts” might be in the context of other policies, such as R&D, whereas Lomborg was referring to the “mitigation only” option presented by Yohe et al. The “moderate CO2 cuts” referred to the lowest BCR option from Yohe et al. whereas finding “cheaper low-cost energy” refers to the option from the Green analysis.
It seems that these confusions and characterizations might have easily been resolved in an email exchange, rather than in public on the webpages of the Guardian. Already the notion advanced by Yohe that in this instance Lomborg is a willful liar has been accepted in internet discussions, such as here by Joe Romm:
http://www.cato-unbound.org/2008/08/26/joseph-romm/goklany-okay-with-250-foot-sea-level-rise/
Based on the above, this characterization is unfair and should be corrected. In the hot politics of the climate change debate, attacks upon character are of course an unfortunate part of the dynamics, but in this instance I see only ambiguous/imprecise writing (Lomborg) followed by a rush to public judgment (Yohe) in a context where policy preferences are not shared (Yohe/Tol – Lomborg).
August 27th, 2008 at 10:10 am
Bjorn:
Thanks for your final response (#46). It took a while, but we are now on the same page – you were quoting from our results and not the expert panel in your side comment that “unlike even moderate CO2 cuts, which cost more than they do good…”
Thanks for clearing that up, and I must admit that you are right as far as you go. Indeed, we make that statement in our text.
BUT, you also know that we went beyond that statement in our analysis. The number upon which you base your claim was the result of our severely constrained option. In Table 5.1, we make the point that “mitigation alone” could be a viable economic option if it were more efficiently implemented. That table reports, specifically, that a “mitigation alone” option with the same $800 bln present value cost (derived from the Consensus budget constraint) allocated to an annuity from which costs could be covered efficiently over time (rather than lock-step year in and year out adherence to the Consensus budget constraint) would produce $2676 bln in present value benefits even with 4-5% discounting – a benefit-cost ratio of 3.3. We also discuss what the same “mitigation only” scheme would do if risk premia born of uncertainty were added to the calculations.
Perhaps we were wrong not to work from these numbers as a baseline for our portfolio, but we wanted to give an honest accounting of the bottom line for the Consensus exercise, per se. It was a “worst of all possible designs” starting point for our analysis and not a conclusion; this was the point of Section 5, encouraged by you and your staff, on “Discussion and Caveats.
I suppose our ultimate point, therefore, is that your brief reference to only one of our numbers (and I do understand word limitations for newspaper articles) was misleading. From communications that I have been receiving over the e-mail, it has certainly given readers of the many pieces that you have published over the past six weeks in newspapers and magazines around the world the impression that our analysis supports your summary statement.
To our mind, our analysis can be more accurately portrayed as showing that poorly designed mitigation options are not a good idea – a familiar theme, no doubt. Recall that Richard and I have a paper in the volume entitled “Avoiding Dangerous Climate Change” that shows that there is such a think as “dangerous climate policy”.
We think that one of our bottom line message is that even the “mitigation only” option can do the planet alot of good with a little bit of work on design — and, of course, that adding R&D plus adaptation to the portfolio does even better.
Anyway…. Roger seems to want to bring this to a close, and that is a good idea. We all have other things to do. Indeed, I owe Roger a document by the end of the week.
As we move forward, I hope that you will add a few words in your next iterations of your discussion piece that make these points more clearly when it refers to our work. Thanks.
Gary
August 27th, 2008 at 10:26 am
Thanks much Gary. I’ll give Bjorn a chance for a last word, than I’ll close out comments on this thread.
August 28th, 2008 at 3:12 am
Well, wouldn’t a little summary also help? Here is my attempt.
Gary claims that Björn misrepresented Yohe et al when he wrote “They [CC experts] found that, unlike even moderate CO2 cuts, which cost more than they do good”. Börn counters and says that in Yohe et al in table 4.1 mitigation only got a cost benefit ration <1, that the experts ranked that particular proposal last and that therefore he is right with his claim.
So far, everyone on board?
Now, who is right?
Quite frankely, I find Björn’s sentence (including the surrounding text) a misrepresentation of Yohe et al, in particular there is a simple error in logic behind it.
For the CC exercise, there were VERY stringent rules on how those proposed billions could be used, so essentially Björn went to Yohe et al and asked “Please calculated for me the cost-benefit ratio of mitigation only, but mitigation only has to be designed according to the following rules: [now some rules, like 75 billion over a limited time period etc, which were bent by Yohe et al a bit but in general were still very stringent]“. So, Yohe et al did, and what their table 4.1 shows is that mitigation only, designed under the SPECIFIC contraints and rules of CC, has a cost benefit ration <1. That result then was ranked lowest by the experts.
In Björn’s text for the Guardian, this becomes “modest mitigation doesn’t pay”, whereas it should have been “modest mitigation under the silly rules of CC doesn’t pay”. He makes a classical logical error in deducing from a specific result to a general result with absolutely no backup.
Let me give you some examples that might make my point more clear. Imagine Björn had gone to Yohe and asked “please calculate cost benefit ratios for a mitigation only scenario, but as a rule you can only consider replacing coal plants with solar ones for your mitigation”. Again, this would be an exercise in calculating a very constrained mitigation scenario, and it would be dead wrong to conclude from those results anyhting about cost benefit ratios of ALL mitigation options.
So, Björn set silly rules for the Yohe et al study (i.e. with respect to timing of mitigation), gets a result that mitigation doesn’t pay and sells this as if mitigation would also not pay without those silly rules in the Guardian, without a single word that those results say more about the constraints of the CC exercise than mitigation.
Could he have know? Yes, Yohe et al explicitly write in their text that the reason they get 0.9 for mitigation in table 4.1 is a result of the CC rules, NOT a general result. Read section 5 in Yohe et al. They make it VERY clear that without the silly rules of CC, mitigation only has a cost benefit ratio of 3.3, making it VERY clear that Björn’s claim that “moderate CO2 cuts, which cost more than they do good” should have read “moderate CO2 cuts, constrained with rules that I set for a silly exercise, cost more than they do good, without those contraints I came up with, they do good”.
August 28th, 2008 at 6:04 am
I would agree with davidacoder: the misrepresentation here lies in the silly rules of the CC exercise and the liberties Lomborg takes in describing the conclusions.
The whole premise of the CC is that if governments are going to spend a limited pot of money, what would they spend it on? The economists’ panel recognized the foolishness of this in part by putting Doha at second to the top – and explained that freeing trade costs nothing and in fact improves GDP. Much the same for climate change – although in this case the economists didn’t focus on the question of whose pocket the money was coming from. To pose the issue starkly, if governments imposed and fully rebated carbon taxes, what do the carbon taxes cost the governments? Nothing, but an effective mitigation industry nevertheless springs up. Meanwhile, governments remain free to spend on other priorities.
Of course, and observer might note that if governments DON’T rebate carbon taxes or permit revenues, they actually have MORE revenues to spend on a Copenhagen Consensus agenda, not less.
Accordingly, the CC ranking tells us almost nothing about climate change policy.
Thomas Schelling’s explanation for the low ranking for climate change specifically confirms that they were looking only at government dollars spent, for which one looks at mitigation only if it is the government paying industry/utilities to mitigate:
“The reasons why climate change measures came out so low on the list of priorities are that, for one, the Conference tried to look at cost-benefits, and, for another, its original idea was to rank things in terms of priority for immediate expenditure of money. Therefore, we proposed to eliminate poverty over and above anything else. The trade liberalization ranked fairly high. This was expected, whenever economists got together to talk about a variety of things including trade liberalization. The climate issue became lower ranks, because the paper on climate advocated for the project that stretched out to the year 2250 with the estimated costs to be in many trillions of dollars. We did not see how spending any part of 50 billion dollars on climate change measures would make a difference, although putting way down the list did not necessarily mean that we considered it as not an urgent subject. We put climate way down the list of priorities, because we did not see how spending a little bit of money over next few years would significantly improve the cost effectiveness.”
http://www.gispri.or.jp/english/Annual/2005-9.html
Further, as I and others have noted, the papers presented and the conclusions of the economists panel certainly don’t tell us, as Lomborg would have it in his editorial, that mitigation strategies “cost more than they do good”. This is a liberty too far, not only from the Yohe/Tol paper, but from Chris Green’s as well. Green specifically suggests using a mitigation-spurring carbon tax to raise the pot of money for government-spent R&D:
“If the $60 billion were raised by a carbon tax, then even a tax with a 25% cost of public funds would stay within the CC budget constraint ($60 + 25(60) = $75 billion). A tax of $4 per ton CO2 on just 50% of the approximately 30 GtCO2/yr (~8GtC/yr) currently emitted would raise 60$ billion/yr. But frankly, if it were politically feasible, I cannot see why we cannot do better by starting with a more robust $8-10/tonne CO2, and then allow the tax to rise gradually over time. To keep within CC ground rules the extra revenues could be used to reduce other taxes that have even higher marginal costs of public funds.”
*************************
Tom
August 28th, 2008 at 6:34 am
Roger, as to justifications for government R&D soending, I think my main point stands; namely, that Lomborg is wrong to blame “climate panic” and a focus on mitigation for stymieing low-carbon energy R&D investments.
In market economies, it is the private economy that makes investment decisions and drives wealth, not the government. While there is plenty of low-carbon energy R&D investments already underway, one of the the most effective ways to get more research done is to send the market carbon pricing signals. The government may of course decide to drive research by spending for it itself, but this as well is money that has to come out of the pockets of the private economy.
In either case, the government can only act in a meanful way if politicians are supported by a sufficiently serious concern about climate change. Those who argue for mitigation are NOT getting in the way, but are obviously pushing things along. If Lomborg believes that the best way to move policy along is to bash his putative allies and throw government money/pork to those are blocking policy change, then even while I oppose pork I’d at least be able to understand where he is coming from.
In response to my position that “Absent a serious concern about climate change, there is simply little justification for government funding of low-carbon energy R&D investments,” you argue that “The costs of energy, energy demand, energy security, and non-climate environmental concerns all provide solid justifications for such investments.” In this, apparently I am even more of a “non-skeptic heretic” than you, who take a classic big-government position (hard to say whether your position is liberal or conservative these days, after we’ve just wasted trillions in Iraq on an “energy security” fantasy).
The market addresses all of these concerns well. The only items I have sympathy for are some you haven’t listed – but Jim Manzi argues for at Cato:
“improved global climate prediction capability, visionary biotechnology to capture and recycle carbon dioxide emissions, or geo-engineering projects to change the albedo of the earth’s surface or atmosphere”
http://mises.org/Community/blogs/tokyotom/archive/2008/08/23/more-on-manzi-cato-on-climate.aspx
We should leave decisions on investments in energy technologies with private markets. Governments will never have more knowledge than markets do, and they tend to give us pork-barrel boondogles instead, like synfuels and corn-fed ethanol.
************************
Tom
August 28th, 2008 at 2:56 pm
If this is a jury, I agree with the summary by davidacoder, and find it much more accurate than that of the “honest broker”
August 28th, 2008 at 4:57 pm
Sylvia-
You’ve already shared with us your propensity for commenting on books that you have not read, so let me assure you that The Honest Broker is not an autobiography, but rather a book about science policy.
While I am not in a position to offer to pay for your time to read it, I can offer to post up a book review here at Prometheus, should you be so inclined to write one. The book is situated squarely, and explicitly, in the realm of post-normal science, which I gather is an interest of yours.
August 28th, 2008 at 9:58 pm
Roger,
I’d be delighted to review it if you can send me a review copy. There is quite a bit we actually agree on and I would welcome a more nuanced conversation about it. But your defense of Lomborg is odd.
August 29th, 2008 at 5:08 am
I just read Björn’s reply to Gary in the Guardian from 27 August. I repeat my point: He is misrepresenting the results of Yohe et al again in that one. Björn writes:
“Yohe claims that I say reducing CO2 emissions is a waste of resources. I have repeatedly gone on record arguing for a small reduction in emissions – it is a large reduction that I believe is a waste. And this is exactly what came out of Yohe’s own analysis, showing that for each dollar spent on a simple reduction in carbon emissions, we would achieve about 90 cents worth of benefits.”
This is wrong. Yohe et al show that the cost benefit ratio of simple reduction in carbon emissions is 3.3 (in section 5), i.e. a benefit. It only is 0.9 (for exactly the same mitigation cost) under the silly rules of copenhagen consenus, which were set by Björn. I fail to see how anyone can take Björn’s presentation here as not deeply misleading.
Roger: Are you in touch with Björn? It would be good to get a reply from him here on this issue
August 29th, 2008 at 5:16 am
davidacoder-
I’d be happy to ask . . . also, the issues are not so black and white. Here is how Gary Yohe recently explained the same point (emphasis added):
“Since the effects of climate change have been observed in many areas around the world, thinking about mitigation makes sense everywhere. But we found that mitigation alone did not meet a standard cost-benefit test. We allowed specified annual costs of climate policy to grow in proportion with global GDP through 2100 from an initial annual benchmark of $18 billion. The discounted cost of the resulting stream of fixed annual costs totaled $800 billion, but damages avoided by this approach amounted to a discounted value of only $685 billion.”
http://www.project-syndicate.org/commentary/yohe1
August 29th, 2008 at 9:46 am
Funny how TT is still happy to share his jaded theory that the market always knows best now that we have the devastating trillion dollar housing/banking bust upon us (following on the dot com bust before it). Then we also have the extremely high probability that it was commodity speculation, not real scarcity, behind the oil price rise and by extension probably the world food price rise too.
So can government agencies do better than the private sector? On the recent evidence placed before us, could they possibly be any worse?
One thing free marketeers and climate scientists have in common is the ability to blithely ignore real world evidence that tells them that their theory is just too simplistic. Dogma blinds them to the reality.
August 29th, 2008 at 11:25 am
re 57/58
Davidacoder is right. Under the rules of the Copenhagen Consensus, mitigation alone has a benefit-cost ratio of 0.9 (not worth funding). However, without those rules, mitigation alone has benefit-cost ratio greater than one (worth funding) — and indeed this has been the case since Nordhaus (1991). That said, targeted R&D and adaptation can further improve the benefit-cost ratio.
And all this based on boring old mainstream economics.
August 30th, 2008 at 3:27 am
JamesG:
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.
August 30th, 2008 at 2:52 pm
The start of the discussion here was about whether Figure 4.1. in Yohe, Tol et al. can serve to point out how wrong Oliver Tickell was in his Guardian article.
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?
August 31st, 2008 at 5:01 am
Kaare:
The finding that the economic impacts of climate change are initially positive is not unique to my work. It follows from the fact that the world economy is concentrated in the temperate zone, where winter deaths far exceed summer deaths, and where space heating is much more expensive than space cooling. Note that the world population is concentrated in the (sub)tropics, so that the majority of the people will be negatively affected (despite positive effects of CO2 fertilization), even as the “majority of dollars” will see positive impacts. Note also that the curve turns around 2025, that is, incremental impacts are negative from that point.
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.
August 31st, 2008 at 10:19 am
Richard Tol:
Of course there are more winter deaths than summer deaths in the temperate zone. The question is if in the next decades there will be RELATIVELY fewer winter deaths due to temperature CHANGES.
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 ?
September 1st, 2008 at 11:38 am
Kaare: Epidemiologists agree that the decline in winter deaths will be stronger than the increase in summer deaths, in the temperature zone, in the medium term.
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.
September 1st, 2008 at 2:14 pm
Richard Tol:
Epidemiologists agree . . I am not so sure about that, I think there are rather diverging opinions, at least on certain aspects. But this is probably not the place to go into details with that.
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.
September 2nd, 2008 at 6:20 am
Kaare: Agreed on the discount rate. As we used dynamic optimization models fitted to observations, we had to stick to the discount rate we had. As the rest of the Copenhagen Consensus used simpler methods, they should have used our discount rate.
September 3rd, 2008 at 12:45 am
Comment to Tol, # 67 (and also to Lomborg):
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.
September 5th, 2008 at 1:46 am
There has now been ample opportunity for persons that were involved in the Copenhagen Consensus conference to comment on my latest post here and correct me if I were wrong. As this has not happened, I conclude that my critique concerning the differing discount rates was warranted.
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.
March 14th, 2009 at 10:20 am
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