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Economic Sense

RSS By: Matt Bogard,

Matt's primary interest is in the biotech industry and ag policy.


Dec 01, 2009

By: Matt Bogard

Recently, a lot of headlines have been made about hacked emails that involved questionable exchanges between climate scientists. Reading between the lines, the emails imply that there was a conscious effort among climate scientists to massage data (possibly omitting data that would weaken their conclusions) as well as blackball authors of peer reviewed research that came to conclusions questionable of climate change. Taking this a step forward, one might even speculate that human influence on climate change, and evidence for taking strong action to stop it has been largely fabricated. (for a more detailed discussion of this see "Rigging a Climate 'Consensus' “ from the Wall Street Journal and here from the Telegraph and a very unbiased and objective analysis from the Knowledge Problem blog here )

However, as I pointed out before, the 'consensus' itself was already pretty shaky.(See my post 'Defining Consensus' for more info).If we accept the IPCC 4th Assessment Report as consensus,(which is the subject of the climategate emails mentioned above) we get the basic conclusion that 9/10 experts believe that humans have a net warming effect on the climate, but when it comes to conclusions about the impact of this warming, they are only 50-66% certain that this will lead to drastic climatic events, droughts, etc.  In other words, all of the big fuss and big rush to do something about climate change isn’t based on hard evidence- it’s largely speculative. 

It is actually appalling, that even pre-climategate, leaders would be willing to take drastic control of our daily lives to prevent climate change, based on such weak conclusions. Little effort is made by those in the media, or politicians, to point out the distinction between forecasts by scientists and 'scientific' forecasts. The controversial 'consensus' has been based largely on 'forecasts by scientists', not necessarily scientific forecasts. As pointed out by Green and Armstrong, in the journal Energy and Environment, ( regarding the IPCC's WG1 Report on climate change):

"The forecasting procedures that were described violated 72 [out of 140 established scientific forecasting principles] principles. Many of the violations were, by themselves, critical. The forecasts in the Report were not the outcome of scientific procedures. In effect, they were the opinions of scientists transformed by mathematics and obscured by complex writing. Research on forecasting has shown that experts’ predictions are not useful in situations involving uncertainly and complexity. We have been unable to identify any scientific forecasts of global warming. Claims that the Earth will get warmer have no more credence than saying that it will get colder."

But, even if we dismiss the climate gate emails and forget about restoring science to its proper place in public policy deliberations and even if we accept the 'consensus' as it is, we still have very little basis for drastic and timely action regarding climate change. Even taking the science as given, there is no consensus among economists about what the price of carbon should be. Two of the more prominent economists in the field of climate change, have reached drastically different conclusions.

Nordhaus ( Using the DICE-2007 model, and based on the science of the IPCC Fourth Assessment)prices carbon at about $30/ ton, with the average person in the US generating about 5tons/yr, for a total of about $150/year, or .09 /gallon of gas and .01/kwh for electricity. However, the Stern Proposal (proposed by another economist in the U.K) estimates the damage from global warming to be closer to $300/ton carbon for the next two decades. In this case we are looking at  an equivalent of increasing gas prices by about $1.20/gallon.

There is just too much uncertainty at all levels of analysis to recommend drastic policies to combat climate change, especially given the sacrifices that would have to be made in terms of jobs and economic growth. A better approach for dealing with climate change or any environmental problem is to develop resilient market based economies that are able to invest in the technology necessary to adapt to ever changing resource constraints.


Kesten C. Green and J. Scott Armstrong
VOLUME 18 No. 7+8 2007

IPCC 4th Assessment Report
Science, July 25,2007 ( link)
W. D. Nordhaus, J. Econ. Lit., in press; (link)
Stern Review: Economics of Climate Change- World Bank (link)
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COMMENTS (2 Comments)

Matt Bogard
That is a good point about economists, lobbyists, and politicians teaming up with big corporations- Enron was one of the largest supporters for the KYOTO protocol and lobbied heavily for climate change legislation. They were BIG believers in global warming and backed it up with BIG money. As you point out special interests have excelled in making climate change bigger than what it is so that we can pass laws to line their pockets.

Of course, no scientific analysis is meaningful without the economics!

All the science tells us is what are the physical, natural, and environmental effects associated with climate change. ( which as the climate emails point out there could be a lot of tweaking here too!)

What economists do is look at the science and translate this into the pros and cons related to what we should do. (Stern really tweaked this one by assuming .1% interest rates).

Many policy makers want to talk about the science and ignore the pros and cons . In other words, they want to ignore the economics if an honest look at the pros and cons of the situation say we would be better off doing nothing.

Like you say, they like to talk all day about the theory behind global warming, but the facts tend to get in the way.

6:02 PM Dec 1st
Ol James- Ala-by-Golly-BAMA
The trouble with most of the reports "generated", is that they were done by economist. Scientist should seek the "Truth" of the matter and report on that. Special Interest Groups get economist to take a report and "tweak" it to get the results that they can best sell or scare the public. It's all in the marketing. Think ENRON, HealthSouth, Fannie and Freddie. You can argue theory, but not fact and reason.
5:37 PM Dec 1st
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