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!

4 comments:

ecowriter said...

I agree that cap & trade is a practical way to get started. The economic theory doesn't quite hold up unless the cap is stable (b/c companies can't accurately project the costs and benefits), but I think it's a reasonable way to start.

The biggest change will come when the vast majority of people are convinced that it's necessary. What percent of people are still on the fence?

Nicole Wires said...

James Hansen recently came out saying our target should actually be something like 350 ppm...terrifying:
http://www.guardian.co.uk/environment/2008/apr/07/climatechange.carbonemissions

Tim said...

To Ecowriter:
When you say the cap should be stable so that companies can more accurately project costs and benefits, do you mean that the total quantity of pollution allowances should not change from year to year?
Futures markets could allow companies to hedge their bets and minimize risk. There is no reason companies couldn't buy allowances to pollute 5 years in advance on a futures market. Many cap-and-trade proposals also allow companies to simply 'bank' allowances; buy allowances now, and pollute later.

As to public opinion, generally we have made a ton of progress and a majority support cap-and-trade (you know you're on the right track when both candidates offer proposals in the same direction). But high gas prices may hurt the case: http://www.nationalcenter.org/PR-Global_Warming_Gas_Tax_Poll_0308.html

To Nicole:
It seems like the 450ppm level is the answer to, "How much can we pollute and still have a decent chance of not sending the whole planet down the tubes?" and 350ppm is more like, "At what level can we be confident that the planet won't go down the tubes?"
Unfortunately, as you know, we are already above 350ppm, so it will take rapid and drastic action to get back there this century, failing the invention of a carbon-munching-on-the-cheap device.

ecowriter said...

Tell us about swinging in Ohio!