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Tom Worstall: Climate Change Is Less Important Than We Thought

This is an interesting paper in Nature on the uncertainty we have about the future of the environment and ecosphere. A short description here and thefull paper here. I doubt very much that this is what the paper’s authors would say is the correct interpretation but what they’re really saying is that climate change is less important than we previously thought. In fact, we can quite plausibly say that their results are such that we should do less about climate change than we currently do.

All the usual caveats apply: this is one paper, it is indeed a speculative paper and so on. Also, my apologies that this is necessarily rather geeky about the economics of climate change, inevitably so.

The argument put forward is that there are things other than climate change which might cause the entire breakdown (or less emotionally, substantial and unpredictable change in) the environment and ecosphere that supports us all. This isn’t controversial at all: we’re all aware that a decent sized asteroid strike, an outburst of vulcanism like the Deccan, a nuclear war, these could mean more than just that the daffodils flower a little earlier each year.

They specifically point to the cumulative impact of x billions of human beings on the planet. We do each have an impact and more of us can be assumed to have a greater impact certainly. They go further and point to, just as one example of their argument, the way in which population rise could lead to a phase change, a chaotic and of unknown outcome, rapid and irreversible change in our environment.

At one point they point out that if fertility continues as it did from 2005-2010 then by 2100 we could have 27 billion humans alive and yes, I think we’d all rather agree that this is likely to lead to some fairly major changes in varied ecosystems.

So let us take that as our set up. We are being warned that it is not just climate change that might lead to catastrophe: population growth could do this as well. Fair enough, a reasonable enough assumption.

What does this mean for our discussions of climate change? Well, it means that Stern is wrong in his discount rate, that the currently assumed social cost of carbon emissions is too high, that we should almost certainly be doing less about climate change than is currently planned and finally, that we should, again almost certainly, aim for more economic growth even at the expense of carbon emissions and climate change than is currently thought optimal.

Please note, there’s nothing strange about any of this either: this is all reasoning entirely within the basic structures of what is accepted climate science and the economics of it. The IPCC, the Stern Review and so on are all being treated as entirely correct.

As to Stern’s discount rate: the essential way that Stern gets to his $80 a tonne CO2-e social cost of carbon is by using a very low discount rate. In effect he entirely abandons market interest rates (given that humans are known for hyperbolic discounting this is fair up to a point but perhaps he takes it too far) and bases his discount rate on the possibility that we’ll all get blown up by something other than climate change. Asteroid strikes and nuclear war are, from memory, two of the examples he uses. But here we have another thing, pure and simple population pressure, that might do us all in over this same time scale. Thus that risk must be raised: which in turn raises the discount rate that must be used and lowers the social cost of carbon emissions in the present.

There’s nothing odd or strange about this at all: if we’ve just discovered another method by which we can all go to damnation and perdition then that discount rate must rise. And raising that discount rate really does lower that social cost of carbon emissions.

I will admit that this result amuses me.

Now if the social cost of carbon emissions comes down that means that we should be doing less about such emissions now. For it is that very price, that social cost of emissions, which determines how much effort we should be putting into reducing them.

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