Columnists
Answer to climate change must not wait till tomorrow
(China Daily)
Updated: 2009-12-01 08:02
Mainstream economists and political scientists refuse to accept that climate change is the greatest crisis facing mankind. Even those who accept global warming as a real problem -- like the highly influential Yale economist William Nordhaus -- argue that the world economy should move away slowly from carbon-intensive development instead of imposing (according to them) radical cuts on greenhouse gas (GHG) emissions. Then we have the environmental technocrats who claim "resource problems of today will force prices up tomorrow", necessitating the creation of new technology that will save the day both for the economy and ecology.
In other words, the world today has to spend much more to fight climate change than it would say 100 years from now. So we should leave the problem for later generations to solve. Let's go back to Nordhaus to see what this means. He places a low value on later generations' welfare but assumes they will be wealthier than the present ones. This, according to him, means later generations can afford to spend a hell lot more to mitigate the climate or any other crisis.
How did he arrive at such a conclusion? Through "discount rate". Discounting here means how we value the future against the present. The "discount rate" works inversely to compound interest - that is, if compounding measures how much investments made today would be worth in the future, discounting tells us how much future benefits are worth today. Nordhaus attaches a high "discount rate" to the future.
So strong is his and his fellow economists' and statisticians' belief in this hypothesis that they even discount former World Bank chief economist Nicholas Stern's arguments. In his The Economics of Climate Change (more famous as Stern Review), Stern recommends that substantial investments be made immediately to mitigate global warming. He says it is morally inexcusable to place the burden of the problems we have created on the shoulders of our children.
But Nordhaus is not ready to accept this, even though it comes from one of his fellow economists. Stern discounts the future at 1.4 percent a year, whereas Nordhaus gives it about 6 percent. For Stern, having $1 trillion a century from now is the same as having $247 billion today, but for Nordhaus, it is only $2.5 billion. So when Stern advocates imposing a tax of more than $300 per ton of GHG emission - to be increased to $1,000 by the end of this century - Nordhaus says a $30-50 tax would suffice, which could be raised to $85 by 2100.
Nordhaus has the support of many mainstream economists. For instance, Danish statistician and political scientist Bjorn Lomborg has termed the Stern Review as "fear mongering", and even argues that the fight against climate change would cost more and cause more harm than letting it happen.
This confusing way of fighting climate change gives us an idea about how mainstream economists and political scientists plan to make the world a better place to live. They want the economy, especially in the rich world, to keep growing even if it does so at the cost of an environmental catastrophe. For them, as their fellow economist Milton Friedman said, the environment is not a problem because "ecological values can find their natural space in the market like any other consumer demand".
Mainstream economists have never counted the human and environmental costs of economic development. Some members of the Copenhagen Consensus, which Lomborg organized in 2003, even argue that the rich world should not show as much interest as the developing nations to fight climate change. Why? The answer is simple: because the developing world will suffer disproportionately more from its effects. In fact, Nordhaus, Stern and their ilk say a human life, in effect, is worth only what it contributes to the economy. Hence, if global warming causes more deaths in Bangladesh or an African country, they will be reflected in economic models to the extent that they hurt the economy. Since the effect of poor people's deaths will be next to nothing in Nordhaus' economic model, he would rather not do anything to prevent them.
Many mainstream economists do accept that global warming has been wreaking havoc in many poor countries, handicapped as they are in mitigating or adapting to the changing climate. But they say these countries are poor because they have failed to develop their agriculture, that is, failed to implement the World Bank- and IMF-recommended structural adjustment policies (SAPs).
Why can't mainstream economists and political scientists, who determine the course of the world, accept that global resources are diminishing and economic development harming the environment further? Economists can make rich governments advance their science and technology to galactic levels, but like the rest of the world they, too, have to depend upon nature for survival. Science can help them develop genetically modified seeds, but these seeds can still fail to yield the desired results, as it has from India and African countries. And whether mainstream economists accept it or not, economic and technological development cannot solve any of nature's problems. They can be solved only if we restore (or try to restore) the environment to the state it was in when our forefathers handed it to us, not by passing it down to our children after devastating it.
