Wednesday, June 25, 2008

Drawing Straws

Today a classified intelligence report focused attention on some of the lesser-known evils of unabated global warming, including poverty, weak governments, and terrorism. The report concludes that those problems are exacerbated by global warming, similar to previous assessments by U.S. security agencies.

While the theory isn't new, the provocative findings remind me of an interesting question that economists and policy wonks continue to puzzle over: How can uncertain and dramatic hypotheses about global warming tell us how to stop it?

In a simpler world, if every ton of global warming pollution caused $10 of damage to society (such as by withering crops), then economists would simply want to tax global warming pollution at $10/ton. That way, the price of things that cause global warming pollution would rise (by $10 per ton of pollution caused), and people would only pollute when it was worth it to them, despite the added financial cost. Pollution would still exist, but less of it, and only when it was worth it to society overall.

Unfortunately, as we were reminded by the report today, the cost to society from global warming is far from simple. The potential consequences range from changes in weather, such as more flooding and droughts, to changes in economies, such as declining agriculture in areas that currently use rain instead of irrigation, to changes in geo-politics, such as more civil unrest and extremism in poor areas where agriculture is no longer able to feed the people. Understanding any one of these areas is enough to keep hundreds of scientists or social scientists busy for their entire careers.

So, if you had to make a rough guess, how much damage would you say a ton of CO2 creates, over it's 100-year life-cycle? $10?

If the question seems absurd, you're probably on the right track. Not that economists aren't already trying to answer that question, but with all the uncertainties involved, not just in scale of damage, but also in terms of how much pollution will cause which effects, existing science is just not up to the task.

But there is one calculation that many climatologists have begun to answer that can be just as informative for global warming policy. Because many of the consequences of global warming (such as melting ice and thawing permafrost) are expected to cause more global warming pollution, and there are several very bad things that could happen all at once (such as the Antarctic ice sheet collapsing, lifting sea levels by several meters), many climatologists have begun to see global warming pollution like straw on a camel's back: it may be tolerable for a while, but at some point, one straw too many will make all the difference.

The Intergovernmental Panel on Climate Change (IPCC), the worlds most respected consensus of global warming-related scientists, has even started to put a number on it. They say, if we want to have a decent shot at avoiding the worst consequences of global warming (the broken camel), we must keep the concentration of global warming pollution to below 450 parts per million.

Interestingly, that understanding does little to help us calculate the ideal tax on global warming pollution. But it does point to another solution: cap-and-trade. Make sure that we reduce our pollution by at least 80% by 2050, and unleash the power of our free market economy to figure out how to get there.

So let's get to it!