Wed, Nov 15, 2006 - Page 9 News List

Time to tax the global warmers instead of scratching our heads

From an economist's point of view, a simple calculation of risks clearly shows that we cannot afford to continue debating the existence of global warming

By Joseph Stiglitz

The British government recently issued the most comprehensive study to date of the economic costs and risks of global warming, and of measures that might reduce greenhouse gas emissions, in the hope of averting some of the direst consequences.

Written under the leadership of Sir Nicholas Stern from the London School of Economics, who succeeded me as chief economist of the World Bank, the report makes clear that the question is no longer whether we can afford to do anything about global warming, but whether we can afford not to.

The report proposes an agenda whose cost would be equivalent to just 1 percent of annual consumption, but would save the world risk equivalent costs that are five times greater. The reported costs of global warming are higher than in earlier studies because it takes into account the mounting evidence that the process of global warming is highly complex and non-linear, with a considerable chance that it may proceed much faster than had previously been thought and that the extent of warming may be much greater than had previously been thought.

Higher costs

Indeed, the study may significantly underestimate the costs. For instance, climate change may lead to more weather variability, a possible disappearance or major shift of the Gulf Stream -- of particular concern to Europe -- and a flourishing of disease.

When I served in 1995 on the Intergovernmental Panel on Climate Change, the scientific group that periodically assesses the science of global warming, there was overwhelming evidence that the concentration of greenhouse gases in the atmosphere had increased markedly since the beginning of the industrial revolution, that human activity had contributed significantly to those increases, and that they would have profound effects on climate and sea levels.

But few saw, for instance, the Arctic ice cap melting as rapidly as now seems to be the case.

Still, some suggest that because we are not certain about how bad global warming will be, we should do little or nothing. To me, uncertainty should make us act more resolutely today, not less. As one scientist friend puts it: If you are driving on a mountain road, approaching a cliff, in a car whose brakes may fail, and a fog bank rolls in, should you drive more or less cautiously?

Global warming is one of those rare instances where the scientific community is more fearful of what may be happening than the population at large. Scientists have glimpsed what it is that the future may portend.

As the Stern report points out, as usual, the poor are the most vulnerable. A third of Bangladesh will be underwater by the end of this century. The Maldives and a host of Pacific Island states will disappear -- a modern Atlantis.

Tax changes

To an economist, the problem is obvious. Polluters are not paying the full costs of the damage they cause. Pollution is a global externality of enormous proportions. The advanced countries might mean Bangladesh and the disappearing island states no harm, but no war could be more devastating.

A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.

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