On this point, I do not need to reconstruct how climate scientists made their projections, or review the persecution of Soviet geneticists. I did the research and wrote the book on which they base their statement. The skeptics’ summary is based on poor analysis and on an incorrect reading of the results.
The first problem is an elementary mistake in economic analysis. The authors cite the “benefit-to-cost ratio” to support their argument. Elementary cost-benefit and business economics teach that this is an incorrect criterion for selecting investments or policies. The appropriate criterion for decisions in this context is net benefits (that is, the difference between, and not the ratio of, benefits and costs).
This point can be seen in a simple example, which would apply in the case of investments to slow climate change. Suppose we were thinking about two policies. Policy A has a small investment in abatement of CO2 emissions. It costs relatively little (say $1 billion) but has substantial benefits (say $10 billion), for a net benefit of $9 billion. Now compare this with a very effective and larger investment, Policy B. This second investment costs more (say $10 billion) but has substantial benefits (say $50 billion), for a net benefit of $40 billion. B is preferable because it has higher net benefits ($40 billion for B as compared with $9 for A), but A has a higher benefit-cost ratio (a ratio of 10 for A as compared with 5 for B). This example shows why we should, in designing the most effective policies, look at benefits minus costs, not benefits divided by costs.
This leads to the second point, which is that the authors summarize my results incorrectly. My research shows that there are indeed substantial net benefits from acting now rather than waiting fifty years. A look at Table 5-1 in my study A Question of Balance (2008) shows that the cost of waiting fifty years to begin reducing CO2 emissions is $2.3 trillion in 2005 prices. If we bring that number to today’s economy and prices, the loss from waiting is $4.1 trillion. Wars have been started over smaller sums.10
My study is just one of many economic studies showing that economic efficiency would point to the need to reduce CO2 and other greenhouse gas emissions right now, and not to wait for a half-century. Waiting is not only economically costly, but will also make the transition much more costly when it eventually takes place. Current economic studies also suggest that the most efficient policy is to raise the cost of CO2 emissions substantially, either through cap-and-trade or carbon taxes, to provide appropriate incentives for businesses and households to move to low-carbon activities.
One might argue that there are many uncertainties here, and we should wait until the uncertainties are resolved. Yes, there are many uncertainties. That does not imply that action should be delayed. Indeed, my experience in studying this subject for many years is that we have discovered more puzzles and greater uncertainties as researchers dig deeper into the field. There are continuing major questions about the future of the great ice sheets of Greenland and West Antarctica; the thawing of vast deposits of frozen methane; changes in the circulation patterns of the North Atlantic; the potential for runaway warming; and the impacts of ocean carbonization and acidification. Moreover, our economic models have great difficulties incorporating these major geophysical changes and their impacts in a reliable manner. Policies implemented today serve as a hedge against unsuspected future dangers that suddenly emerge to threaten our economies or environment. So, if anything, the uncertainties would point to a more rather than less forceful policy—and one starting sooner rather than later—to slow climate change.
The group of sixteen scientists argues that we should avoid alarm about climate change. I am equally concerned by those who allege that we will incur economic catastrophes if we take steps to slow climate change. The claim that cap-and-trade legislation or carbon taxes would be ruinous or disastrous to our societies does not stand up to serious economic analysis. We need to approach the issues with a cool head and a warm heart. And with respect for sound logic and good science.