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Costs and benefits matter in the climate debate

Dealing with climate change involves recognizing what is practical instead of what is ideal

By Bjorn Lomborg

At its heart, much of the debate over climate change deals with just one divisive and vexing question: How big should cuts in carbon emissions be?

This narrow focus makes the debate unconstructive. Everybody wants to prevent global warming, and the real question is: How can we do that best?

We should be open to other ways to stop warming — such as cutting carbon emissions in the future instead of now, or focusing on reducing emissions of other greenhouse gases. Global warming will create significant problems, so carbon reductions offer significant benefits. Cutting carbon emissions, however, requires a reduction in the basic energy use that underpins modern society, so it will also mean significant costs.

Prominent climate economist Richard Tol of Hamburg University has analyzed the benefits and costs of cutting carbon now versus cutting it in the future. Cutting early will cost US$17.8 trillion, whereas cutting later will cost just US$2 trillion.

Nonetheless, the reduction in carbon dioxide concentration — and hence temperature — in 2100 will be greater from the future reductions. Cutting emissions now is much more expensive, because there are few, expensive alternatives to fossil fuels. Our money simply doesn’t buy as much as it will when green energy sources are more cost-efficient.

Tol strikingly shows that grand promises of drastic, immediate carbon cuts — reminiscent of the call for 80 percent reductions by mid-century that some politicians and lobbyists make — are an incredibly expensive way of doing very little good. All the academic models show that, even if possible, limiting the increase in global temperature to 2ºC, as promised by the EU and the G8, would cost a phenomenal 12.9 percent of GDP by the end of the century. This would be the equivalent of imposing a cost of more than US$4,000 on each inhabitant every year, by the end of the century. Yet the damage avoided would likely amount to only US$700 per inhabitant.

The real cost of ambitious, early and large carbon-cutting programs would be a reduction in growth — particularly damaging to the world’s poor — to the tune of around US$40 trillion a year. The costs would also come much sooner than the benefits and persist much longer. For every dollar that the world spends on this grand plan, the avoided climate damage would only be worth two cents.

It would be smarter to act cautiously by implementing a low carbon tax of about US$0.5 per tonne and increase it gradually through the century. This would not cut carbon emissions spectacularly, but nor would it be a spectacular waste of public funds. Each dollar would avoid US$1.51 of global warming damage — a respectable outcome.

Taxing fossil fuels to reduce carbon emissions is a sensible part of the solution to climate change, but it is not the only or best way to prevent warming. There are other ways to cut carbon from the atmosphere. One of these is protecting forests, since deforestation accounts for 17 percent of emissions. If we are serious about grand promises to keep global temperature rises below 2ºC, we obviously need to find ways of making this cheaper. Brent Sohngen at Ohio State University points out that forests could be important: Including forestry in the control of greenhouse gases could reduce costs somewhat.

Moreover, although politicians focus nearly exclusively on cutting carbon emissions, carbon dioxide is not the only gas that causes warming. The second-biggest culprit is methane.

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