Moore: How much is climate change going to cost us?
Grist recently published an excellent overview of Frances Moore's research on how much climate change is going to cost us:
How much is climate change going to cost us? How much is it worth to avoid it? How do we figure that out?
Well, first we develop models in the physical sciences that show how biophysical systems will react to changing levels of atmospheric gases. Then we feed that data into economic models, usually Integrated Assessment Models (IAMs), to project the economic cost of a given change in temperature.
It’s a dice-y undertaking. (You’ll get that joke later.) The physical-science models have their challenges, but they have a lot of historical data against which to test their projections. As they get better at “backcasting,” we have more confidence in their forecasting. They can pin down their probability ranges pretty well, especially at longer time scales.
Economic models are a different animal altogether. They grapple with forces — economic growth, demographic changes, technology development — that are difficult to predict even a few years out, much less 10, 50, or 100. There’s a good case to be made that the models we use to assess future climate damages are mostly reflecting our assumptions back at us. Nonetheless, they are what the climate community uses to produce advice and scenarios for political leaders.
That matters. Despite the multiple converging catastrophes described in the physical-science models, the economic models offer up incongruously small projections of damages from climate change, frequently not enough to justify the aggressive mitigation many climate hawks favor.
Those small damage projections are the basis of the more sophisticated sort of climate skepticism, the Lomborg/Manzi version, which says: yes, climate change is a problem, but the damage it is projected to do is much smaller than the damage of other, more immediate problems like disease and hunger, so at least at present it is not worth paying very much to avoid it.
This perspective was well-summarized in a recent piece by climate economist Richard Tol. His argument, in a nutshell, is that climate damages will accumulate in the long term, so it is worth taxing carbon at a relatively low level to begin the shift away from fossil fuels, but it is not worth aggressive or “war time” measures (he is particularly irritated by renewable energy subsidies). If we’re aggressive on carbon, we’ll end up paying more for mitigation than it’s worth and shortchanging other areas where the same spending could produce more human welfare (say, clean cookstoves, malaria nets, or cheap generic drugs).
This position is premised on low damage projections from IAMs. After a long introduction all about the uncertainties involved and the difficulty of projecting impacts, Tol more or less accepts the IPCC’s projections:
The current evidence, weak and incomplete as it may be, as summarized by the Intergovernmental Panel on Climate Change, suggests that moderate warming—say, what we might expect around the year 2075—would make the average person feel as if she had lost 0.2 to 2.0 percent of her income. In other words, a century worth of climate change is about as bad as losing a year of economic growth.
As you can see, even if that estimate is off by a few notches either way, it’s not that big a deal. Events like financial crises and wars affect incomes far more than that on a much shorter-term basis. By this reasoning, if we sacrificed more than 0.2 to 2.0 percent of our incomes by 2075 trying to mitigate climate change, we’d be squandering money we could have spent helping poor people more.
So what about those IAMs, anyway? As I’ve discussed many times before, there are all sorts of contestable assumptions built into them (see, e.g., discount rates). Tol, however, says that contesting those assumptions is not real economics:
Many disagree with this plan of action, of course, calling for a rapid retirement of fossil fuel use. Economically, their justification rests on assuming that we should care more about the future than we do in contexts other than climate change, that we should care more about small risks than we do, or that we should care more about poor people than we do. These justifications rest in politics or raw moral logic, not economics.
This is a hilarious bit of econo-narcissism, as though the values embedded in economic models are objective or scientific, while alternative values are little more than touchy-feely moralism.
But whatever. Are there other, less touchy-feely reasons to think IAMs are substantially underestimating the “social cost of carbon,” i.e., the economic value of avoiding a ton of carbon emissions?
Yes there are, according to a new bit of research in Nature Climate Change from Stanford scholars Frances Moore and Delavane Diaz. Let’s back up a bit. (Yes, I realize we’re already 1,000 words down a wonk rathole, but let’s back up a little more anyway!)