Politics – Page 135 – a sibilant intake of breath

Climate economics and the discount rate

Perhaps the most long-running debate in climate change economics concerns what discount rate ought to be used, when working out what the probable costs of future climate change mean in the present. The basic idea of a discount rate is that things are often worth more acquired immediately than they are delivered at some future time. This is reflected in the existence of positive interest rates, which compensate people for waiting.

In the context of climate, the discount rate is basically a measure of how much we care about future generations, and what burdens we are willing to accept in order to improve their lives. If a 1% sacrifice in our generation will avert catastrophe for people a few generations off, it is probably something we should do. By contrast, if a massive sacrifice now only creates incremental improvements later, we may want to hold off. The Stern Review of climate change economics attracted both praise and criticism for choosing a very low discount rate. This choice was made on the basis of the moral argument that we should be equally concerned about the welfare of all generations. Even if climate change won’t become a disaster for a hundred years, or more, we should still be willing to consider the costs imposed by our emissions as meaningful. If you choose the sort of high discount rates used for business decisions, you basically shrink the importance of anyone living more than a few decades away down to almost zero. William Nordhaus is one economist who advocates such a rate, despite how using the 3% rate he prefers makes costs in 25 years half as significant as costs now.

One problem with using formal discount rates is that they can produce strange results when applied mathematically:

Paul Klemperer, an economics professor at Oxford University, points out that very long-term securities carry very low interest rates. When the British government recently issued 40-year index-linked bonds, for instance, it did so at a 0.5% real rate. And over the very long term standard discount rates lead to strange conclusions. At a modest 2% rate, for instance, a single cent rendered unto Caesar in Jesus’s time is the equivalent of about $1.5 quadrillion (or 30 times the value of the entire world economy) today.

Another major reason for which people advocate high discount rates is because they believe that people in future generations will almost inevitably be richer than those alive now, and thus able to deal with any particular physical problem using a smaller fraction of their wealth. While building coastal defences for low-lying cities might use up a lot of our wealth now, the argument goes, people in the future will be better able to cope. Personally, I don’t think we can assume any longer that people decades from now will be richer than us. Firstly, the costs associated with climate change are going nowhere but up. Secondly, the bonanza of cheap fossil fuel energy is ending. Future generations are going to have some big hurdles to jump.

The choice of discount rate has a massive effect on whether your economic modeling tells you that mitigating climate change is a better deal than trying to adapt to it. If you have discounted away the welfare of people in 50 or 100 years, the fact that they could be put into an intolerable situation is largely unimportant. Personally, I think climate economics is given too much credibility due to the false precision it seems to offer. Rather than abstracting down to a single number and then giving it so much importance, perhaps we should think about risk management in a more qualitative way. Rather than using math to investigate the question of whether we should take the lives and welfare of those in the future seriously, we should acknowledge the strong moral case that we should not seriously damage the planet for all those who will follow us.

The cost of avoiding loss

Ken Caldiera has come up with a nice reversal of the “does it make sense to spend money fighting climate change” question:

“If we already had energy and transportation systems that met our needs without using the atmosphere as a waste dump for our carbon- dioxide pollution, and I told you that you could be 2% richer, but all you had to do was acidify the oceans and risk killing off coral reefs and other marine ecosystems, risk melting the ice caps with rapid sea-level rise, shifting weather patterns so that food-growing regions might not be able to produce adequate amounts of food, and so on, would you take all of that environmental risk, just to be 2% richer?”

You would have to be mad to say ‘yes.’

Spoofing Canada on climate

Earlier today, pranksters impersonating Environment Canada issued a phony press release which contained new targets for greenhouse gas mitigation in Canada. While Canada’s actual targets are 20% below 2006 levels by 2020 (equivalent to about 3% below 1990 levels) and 60-70% below 2006 levels by 2050, the press release included the much more ambitious figures of 40% below 1990 levels by 2020 and over 80% below 1990 levels by 2050. The release also made reference to a major transfer of funds to the developing world, as compensation for past harm and to encourage both mitigation and adaptation actions.

Compared to Canada’s real targets, the phony tougher targets are much more in line with an emissions pathway set up to reduce the risk of more than 2°C of warming. The stunt also draws attention to how Canada isn’t really negotiating in Copenhagen. We came in with a pair of targets that we say we will reach, regardless of what anyone else does, though we also frequently say that we won’t do anything until the US acts. Indeed, our environment minister was saying less than a month ago that Canada won’t take meaningful action for years. It should also be recalled that the government once promised that their intensity-based approach would lead to emissions peaking by 2012. Nobody mentions that pledge anymore.

The identities of those behind the stunt remain unknown. Hopefully, it will draw attention to Canada’s evasion and lack of ambition, prompting a genuine change of targets and approach soon.

Walkout at Copenhagen

The latest from Copenhagen is that the climate talks are stalled due to a walkout by poorer nations. As distant as I am from all the manoeuvring, it is impossible to know how significant this is. Most news sources are suggesting that the move is a calculated negotiating tactic. Some of those reporting on the conference have been critical of the drama; others have focused attention on how the probable outcome remains uncertain, though it is very unlikely to be a finalized agreement.

Arguably, the toughest thing will not be to hammer out a new global agreement of some sort, but rather to produce a document that will significantly change outcomes for major emitters in both the developed and the rapidly developing world. Canada’s record of signing on to a reduction target, then never developing and deploying a plan to reach it, is certainly not encouraging in this regard.

Copenhagen global editorial

Along with 56 other newspapers in 20 languages, The Guardian recently printed a front page editorial about the Copenhagen climate change conference. Apparently, the tactic of having many papers print it simultaneously has not been used previously. It seems fitting that this happen on an issue of such universal importance.

The editorial highlights the risks associated with climate change, and the inadequacy of actions taken so far. It also includes a brief response to the CRU emails issue:

The science is complex but the facts are clear. The world needs to take steps to limit temperature rises to 2C, an aim that will require global emissions to peak and begin falling within the next 5-10 years. A bigger rise of 3-4C — the smallest increase we can prudently expect to follow inaction — would parch continents, turning farmland into desert. Half of all species could become extinct, untold millions of people would be displaced, whole nations drowned by the sea. The controversy over emails by British researchers that suggest they tried to suppress inconvenient data has muddied the waters but failed to dent the mass of evidence on which these predictions are based.

They acknowledge that a comprehensive deal is unlikely in Copenhagen, but propose that one be adopted in next year’s June meeting in Bonn.

The whole piece is worth reading.

A page for waverers

[Image removed at the request of a subject (2019-10-01)]

This page is intended for those who (a) don’t believe that climate change is happening, (b) don’t think human beings are causing it, or (c) don’t think it’s something we need to take action on. You may believe that nothing is changing at all, or that the problems associated with adapting to climate change would be a lot more manageable than those associated with stopping it in the first place.

Those in your position should consider a few things. First, there is the matter raised by Greg Craven. In the face of something potentially threatening, we cannot always wait indefinitely to make a decision. Indeed, we are making a decision implicitly in every day when we fail to take action. What we need to do is make the most intelligent choice based on the information we have, not decide definitively who is right: those who think climate change is an enormous problem, or those who think it is a manageable or non-existent one.

Consider the decision to take some precautionary action. While that does leave us facing the risk of taking more action than eventually proves to be justified, we also need to be aware of the risk that climate change is just as serious a problem as those who are most concerned about it have been claiming. If they are right and we do nothing, the future of civilization could be at risk. Precautionary climate policies may also produce other benefits, such as less dependence on imported fossil fuels and reduced emissions of air pollutants.

I recommend that you have a look at some of the high-quality sources of information linked on my climate change briefing page. I also recommend that you give some serious thought to risk management, the credibility of various sources, and the potential consequences of making the wrong choice.

It may be worth noting that, when I first started reading about climate change seriously back in 2005 or so, I was sympathetic to the argument that it might not be all that serious a problem, and perhaps we should aim to adapt to it rather than stop it. The understanding of climate science I have accumulated since then has left me deeply concerned that climate change is an enormous problem, about which we need to take decisive action quickly. I think many fair-minded people who take the time to look through the credible information available will read the same conclusion.

If you take a fair shot at that and still want to argue against climate action, at least you will be doing so from a more nuanced and well-informed perspective.

Last updated: 10 December 2009

Open thread: Canada and Afghan detainees

As anyone who reads the news knows, it has been alleged that many detainees passed on by Canadian troops to elements of the government of Afghanistan were subsequently tortured, and that the government of Canada was aware of this likelihood. If true, that could represent a violation of Canadian and/or international law on the part of both those who gave the orders to continue making the transfers and those who actually carried them out. Knowingly passing along a prisoner to an authority that will torture and abuse them is a violation of the Geneva Conventions, but it is not yet fully known what Canadian troops and officials knew or believed prior to making these transfers.

The latest development is a reversal of position by Walter Natynczyk, Canada’s Chief of the Defence Staff. He now accepts that a man was taken into custody by Canadian soldiers in 2006 and subsequently severely beaten by Afghan interrogators.

Given that Canada cannot single-handedly reform the Afghan government and security services, this raises the question of how Canadian troops should be dealing with anyone who they capture during the course of Canada’s ongoing involvement in that country. Given that Afghanistan won’t be turning into a liberal-democratic state governed by the rule of law anytime soon, how should Canadian forces deployed there behave in the future?

Climate change and winter

During the last few days, I have had a depressing number of people approach me quasi-triumphantly, pointing to either the CRU emails or the first winter snowfall as evidence that climate change is nothing to worry about.

Both comments are worrisome, given that we are in the midst of negotiations at Copenhagen that will play a significant role in determining whether we keep temperature rise under 2°C or not. The CRU emails already have a post of their own, but I thought I would say a couple of things about winter.

The latter argument – about the snow – is especially absurd. Climate change is about a shifting distribution of temperatures. There will always be extremes of hot and cold, it’s just that the former are becoming more frequent relative to the latter. That said, I recall reading about a study that found that most Canadians cannot explain why there are seasons at all, with a plurality offering the theory that is has to do with the distance between the Earth and the sun. Of course, our winter is summer in the southern hemisphere, which shows that this hypothesis cannot be valid. Winters are the consequence of the fact that the Earth rotates on an axis that is presently tilted 23.44° off from the direction of our orbit. That makes the length of days variable, and changes how the distribution of temperatures across the globe plays out. That level of tilt varies across geological time due to tidal forces. When the tilt is greater, the variation between the seasons is alo larger; when the tilt is lesser, the weather towards the poles remains more consistent year-round. The level of tilt has an affect on processes like glaciation.

This will continue to happen essentially forever, regardless of how much warming we experience. The distant polar regions will always experience months of darkness, and will thus always be colder than the equator during those spans. Indeed, this is a nice demonstration of what a massive amount of energy the sun adds to the Earth system. None of this disproves the fact that greenhouse gasses being added to the atmosphere warm the planetary system overall.

The two queries also highlight some potentially important psychological issues. People on both sides of the argument are sometimes overly quick to grab at any piece of evidence that seems to support what they already believe. In his book, Greg Craven goes on at some length about the importance of this ‘confirmation bias.’ Such sloppy reasoning is one reason why the climate change debate is so flawed. Hard as it can be to do so, we need to question data and sources of information even when they seem to confirm our existing beliefs – just as we must take into consideration sources and data that seem to contradict what we hold to be true. That doesn’t mean, however, that we should remain paralyzed forever, unable to take action due to uncertainty. We take precautionary action on the basis of uncertain threats all the time. A risk management approach to climate change is one where the preponderance of evidence is sufficient to drive preventative action.

Above and beyond that, I think the fact that people cheerily point to a snowfall to argue that the planet isn’t in danger shows that they don’t yet seriously appreciate how dangerous climate change could be. The fact that it is still often treated as a half-joking matter bodes ill for our ability to put our society on a course where the largest risks of catastrophic or runaway climate change can be avoided.

Copenhagen underway

The Copenhagen climate change negotiations are now underway, and there already seems to be a fair bit of rancour:

The UN Copenhagen climate talks are in disarray today after developing countries reacted furiously to leaked documents that show world leaders will next week be asked to sign an agreement that hands more power to rich countries and sidelines the UN’s role in all future climate change negotiations.

The document is also being interpreted by developing countries as setting unequal limits on per capita carbon emissions for developed and developing countries in 2050; meaning that people in rich countries would be permitted to emit nearly twice as much under the proposals.

Hopefully, both developed and developing nations will appreciate the vital importance of producing a workable international agreement soon. If this cannot be accomplished this December, hopefully the talks will at least establish the foundation for future success.

What’s the Worst That Could Happen?

Written by a high school science teacher, Greg Craven’s What’s the Worst That Could Happen? A Rational Response to the Climate Change Debate is a worthwhile and unusual addition to the catalogue of books on climate change. Craven’s chosen task is not to determine whether climate scientists are right in their projections of what human activity is and will do to the climate; rather, he is trying to prepare readers to make the best choice, given the uncertainty that will always exist.

This is the same basic message he popularized in a series of viral videos, the first and last of which are especially worth watching:

I do have one slight quibble with both. Craven’s decision grid suggests that we will eventually be able to look back and know if we made the right choice. I don’t think that’s true. If we take aggressive action and stop climate change, we may never know with certainty just how bad it would have been if we had ignored it. No matter how sophisticated they become, simulations can never give us total certainty, and we don’t have another planet with which to run an experiment. Similarly, if we take no action and climate change proves catastrophic, we will never know for sure what level of action would have been sufficient to stop it – or whether doing so was still possible at any particular point in time.

Craven’s approach is based around heuristics: examining the ways in which people make decisions, taking into consideration pitfalls like confirmation bias, and then developing an approach to make an intelligent choice. In this case, it involves developing a way to roughly rank the credibility of sources, look at who is saying what, and complete a decision grid that shows the consequences of climate change either being or not being a major problem and humanity either taking or not taking major action. His own conclusion is that taking action unnecessarily isn’t likely to be exceptionally economically damaging, and can be considered a prudent course for ensuring that the worst does not happen.

On the question of why action has not yet been taken, Craven focuses primarily on human psychology. We respond to threats that are immediate, visible, and have a hostile agent behind them. Since climate change is none of these things, it doesn’t trigger strong responses in us. Cognitive factors also help explain why people are so confused about the state of climate science, though individual failings in information assessment are accompanied by the failure of the media to pass along good information effectively.

Craven concludes that raising political will is the key action that needs to be taken, and that cutting individual emissions is of very secondary importance. Like many others, he draws on the analogy of WWII to show what the United States is capable of achieving when it has the determination.

Some readers may find the book’s informal style and fill-in-the-blanks exercises a bit annoying, or feel that they trivialize the issues at hand. That being said, Craven has produced a very accessible book that recasts the climate change debate in a valuable new way: evaluating what choice to make, under uncertainty, rather than trying to determine authoritatively who is right. For those wishing to grapple with the practical question of what ought to be done about climate change, this book is well worth reading.