Roggeveen appears to have taken on board the work of Warwick McKibbin, who noted that many early adopters of Kyoto targets have failed (in some cases absymally) to meet them. The argument is further supported by the comments of Ted Norhaus, who argues that the UK and Germany only reduced their emissions because of pre-Kyoto reforms. In this light, Roggeveen offers up the Cato Institute's Jim Manzi's paper for comment highlighting the following conclusions:
In summary, then, the best available models indicate that 1) global warming is a problem that is expected to have only a limited impact on the world economy and 2) it is economically rational only to reduce slightly this marginal impact through global carbon taxes. Further, practical knowledge of the world indicates that 1) such a global carbon-tax regime would be very unlikely ever to be implemented, and 2) even if it were implemented, the theoretical benefits it might create would almost certainly be more than offset by the economic drag such a regime would produce.
What Roggeveen has come across is the great paradox of the collision of economic instruments to manage environmental problems. While the tools of economics such as trading schemes are designed to increase efficiency in achieving environmental outcomes at least cost, the assumptions that economists apply to the world come into conflict when dealing with issues such as the precautionary principle and intergenerational equity.
Much of the economic commentary on climate change discounts the effect of the problem for two simple reasons. Firstly, economists discount the future interests of individuals compared to the present generation based on the fact that there is a 100%probability that the living exist, whereas there is a less than 100% chance of subsequent generations. Second, economics assumes a continuing narrative of economic expansion and hence discounts current estimates of the value of today's paper money. The Stern Review was praised in some quarters for using a very low discount factor to cost future damage from climate change. However the Productivity Commission took issue with its figure of 1% discount per annum over a hundred years for precisely this reason. The cited economist, Ted Norhaus, prefers to discount future impacts by 6% per annum. The net result is that while Stern costs climate damage in 2100 at 37% current value, Norhaus costs it at 0.0295%.
Conversely, when estimating the cost of climate policy, the tendency of anti-action economists is to count the carbon cost imposed by trading, exaggerate it out to a projected level of equality with renewables based on years of underfunding, factor in extra costs such as lost land usage for renewable plant and completely discount a commensurate surge in the renewable industry. One does not even need to include the ramifications of lost productivity through the risk of interruption to the mythical baseload power supply to see the carbon reduction ledger firmly in debit.
The piece de resistance of this argument is the 'best available models' line. Economics demands certainty, but we have very little when it comes to climate behaviour. We can only postulate about the speed and magnitude of changes caused by retention of increased heat in the atmosphere. When these figures are fed into economic theories of discount and growth, we get a series of statistical lies which speak to the Bjorn Lomborg school of climate change being an overhyped waste of resources.
What Norhaus, McKibbin et al fail to note in their critique of Kyoto targets is that Kyoto should be judged versus business as usual, not whether targets were met courtesy of Thatcher's coal mine closures or the fall of communism. It is painfully obvious that investment follows return, and that means that creating markets through the introduction of trading systems and renewable energy targets allied with clean energy funding is the way to go. Governments need to understand their role is to promote good policy and secure their nation's welfare into the future and not rely on the prejudices of the past.
The merits of climate change action will depend on the scope of that action and its capacity to reduce emissions while promoting sustainable development. Thus developing programmes that can gradually build from a national to regional to global level, buttressed by agreements ensuring common but differentiated responsibility is far more desirable than a 'do nothing', rely on technology alone approach.
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