Global Warming Is Real and Has Consequences – Part I

Although the consequences of global warming are painfully vivid, some scholars still question whether it requires urgent action. In January, a group of scientists, including those from the United States, Australia, France and the Netherlands, summarized reasons for their skepticism and opposition to findings of the UN’s Intergovernmental Panel on Climate Change. They insist that evidence is lacking to show the world is warming. Citing research of William D. Nordhaus, Yale professor of economics, they maintain that delaying action on climate change for 50 years would impose no serious economic consequences and could even offer benefits to less developed nations as they catch up with developed economies. In part one of this YaleGlobal series, Nordhaus responds to the essay, pointing out faults in the skeptics’ review of climate modeling, temperature trends and basic cost-benefit analysis. The skeptics contend that uncertainties do not warrant alarm or huge investments to launch a transition away from fossil fuels. Nordhaus counters that taking steps to slow climate change won’t result in economic catastrophe, concluding, “The claim that cap-and-trade legislation or carbon taxes would be ruinous to our society does not stand up to serious economic analysis.” – YaleGlobal

Global Warming Is Real and Has Consequences – Part I

Yale economist refutes climate-change skeptics who use his research to recommend standing pat
William D. Nordhaus
Wednesday, April 4, 2012

Burning coal, melting glaciers: Greenhouse gases emitted by plants in cities trap heat (top); rushing water from a melting glacier adds to rising sea level

NEW HAVEN: A January 27 opinion piece in The Wall Street Journal by a group of 16 scientists, “No Need to Panic About Global Warming,” contained many of the standard criticisms of climate skeptics in a succinct statement. The essay argued that the globe is not warming and delaying policies to slow climate change for 50 years will have no serious consequences.

At a time when we need to clarify public confusion about the science and economics of climate change, the 16 scientists have muddied the waters. Here, I describe some of their mistakes.

Their first claim is that the planet is not warming. More precisely, “Perhaps the most inconvenient fact is the lack of global warming for well over 10 years now." It’s easy to get lost in the tiniest details here. Most people will benefit from stepping back and looking at the record of actual temperature measurements. The figure below shows data from 1880 to 2011 on global mean temperature averaged from three sources. We don’t need complicated statistical analysis to see that temperatures are rising. Furthermore, they’re higher during the last decade than they were in earlier decades.

One of the reasons that drawing conclusions on temperature trends is tricky is that the historical temperature series is highly volatile. The presence of short-term volatility requires looking at long-term trends. A useful analogy is the stock market. Suppose an analyst says that because real stock prices have declined over the last decade, which is true, it follows that there’s no upward trend. Here again, an examination of the long-term data quickly shows this to be incorrect. The last decade of temperature and stock market data are not representative of longer-term trends. The finding that global temperatures are rising over the last century-plus is among the most robust findings of climate science and statistics.

Their second argument is that warming is less than predicted by the models: “The lack of warming for more than a decade – indeed, the smaller-than-predicted warming over the 22 years since the UN’s Intergovernmental Panel on Climate Change (IPCC) began issuing projections – suggests that computer models have greatly exaggerated how much warming additional CO2 can cause.”

What’s the evidence on performance of climate models? Do they predict the historical trend accurately? Statisticians routinely address such questions. The standard approach is to perform an experiment in which (case 1) modelers put the changes in CO2 concentrations and other climate influences in a climate model and estimate the resulting temperature path, and then (case 2) modelers calculate what would happen in the counterfactual situation where the only changes were due to natural sources, for example, the sun and volcanoes. They then compare the actual temperature increases of the model predictions for all sources (case 1) with the predictions for natural sources alone (case 2).

This experiment has been performed many times using climate models. A good example is the analysis described in the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Several modelers ran both cases 1 and 2 described above – one including human-induced changes and one with only natural sources. This experiment showed that the projections of climate models are consistent with recorded temperature trends over recent decades only if human impacts are included. The divergent trend is especially pronounced after 1980. By 2005, calculations using natural sources alone under-predict the actual temperature increases by about 0.7 degrees Centigrade, while calculations including human sources track the actual temperature trend closely.

The IPCC report concluded: “No climate model using natural forcings [i.e., natural warming factors] alone has reproduced the observed global warming trend in the second half of the twentieth century.”

The skeptics next attack the idea of CO2 as a pollutant: By this they presumably mean that CO2, by itself, is not toxic to humans or other organisms within the range of concentrations that we’re likely to encounter, and indeed higher concentrations may be beneficial.

The question here is whether emissions of CO2 and other greenhouse gases will cause net damages, now and in the future. This question has been studied extensively. The most recent thorough survey by the leading scholar in this field, Richard Tol, finds a wide range of damages, particularly if warming is greater than 2 degrees Centigrade. Major areas of concern are sea-level rise, more intense hurricanes, losses of species and ecosystems, acidification of the oceans, as well as threats to the natural and cultural heritage of the planet.

A final point concerns economic analysis. The 16 scientists argue, citing my research, that economics does not support policies to slow climate change in the next half-century:

“A recent study of a wide variety of policy options by Yale economist William Nordhaus showed that nearly the highest benefit-to-cost ratio is achieved for a policy that allows 50 more years of economic growth unimpeded by greenhouse gas controls. This would be especially beneficial to the less-developed parts of the world that would like to share some of the same advantages of material well-being, health and life expectancy that the fully developed parts of the world enjoy now.”

I did the research and wrote the book on which they base their statement. The summary is based on poor analysis and 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 economics teaches 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, not the ratio of, benefits and costs.

Suppose we consider 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 an effective and larger investment, Policy B. This second investment costs more, $10 billion, but has substantial benefits,  $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 billion for A. But A has a higher benefit-cost ratio – a ratio of 10 as compared with 5 for B.

In designing the most effective policies, we must look at benefits minus costs, not benefits divided by costs.

My study is just one of many economic studies showing that economic efficiency points to the need to reduce CO2 and other greenhouse gas emissions immediately. Waiting another 50 years is not only economically costly, but will also make transition 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.

Yes, there are many uncertainties. That does not imply that action should be delayed. If anything, the uncertainties would point to a more forceful policy – one starting sooner rather than later – to slow climate change.

The 16 scientists urge avoiding alarm about climate change. I’m equally concerned by those who allege that we’ll incur economic catastrophes if we take steps to slow climate change. The claim that cap-and-trade legislation or carbon taxes would be ruinous to our societies does not stand up to serious economic analysis. We need to approach the issues with a cool head and respect for sound logic and good science.

William D. Nordhaus is Sterling Professor of Economics at Yale University. He has received support for research on the economics of climate change during the last decade from the National Science Foundation, the Department of Energy and the Glaser Foundation. Other than research associated with these and any future grants, the author declares no conflict of interest. This version was adapted by YaleGlobal from the article in The New York Review of Books, with the author’s permission.
Copyright © 2012 Yale Center for the Study of Globalization