Counting the Costs of Global Warming

Reuters has published an interesting, if basic, article on attempts to compute the near- and long-term costs of global warming. While at some levels, this may serve primarily as an exercise for academic economists, the political ramifications of such thinking are clear: the US has refused to enter the Kyoto Protocols because, according to the White House, mandatory caps on emissions would “[raise] energy costs, [slow] the economy, and [put] Americans out of work…” On the other side of the fence are those arguing for looking at the long term:

While experts agree new technologies are vital, many see the economic argument as spurious. Higher costs may also be a necessary evil since they spur innovation and companies will act more aggressively if inaction hits where it counts.

John Reilly of the Massachusetts Institute of Technology’s Joint Program on the Science and Policy of Global Change has examined the economic effects of several proposals.

“When we looked at implementing Kyoto … we estimated that would be 6/10ths or 1 percent of the economy. We thought that was costly but that’s not wrecking the economy,” he said.

Obviously, problems arise from both positions. While the Bush White House claims seem alarmist, not having the US on board is also costly.

What is needed, they say, is a world-spanning deal with fair goals. “You will never be able to solve this problem without all of the major emitters being involved,” said Katie Mandes of the Pew Center on Global Climate Change.

Experts say economic risks could be eased with a Kyoto-like allowance trading system so the regions best able to make affordable cuts can sell their achievement to those less able.

While the United States can’t fix the problem alone, Reilly said it should lead the way with meaningful steps.

“I think it’s one of the great tragedies of our era that the administration hasn’t risen to the occasion on this. It’s committing future generations to extraordinary costs and problems,” said James Gustave Speth, dean of the Yale School of Forestry & Environmental Studies. “In the same breath, I have to say I wish the prior administration had done more itself.”

Ultimately, though, we are dealing with one “great unknown”: the price of inaction.

“There are real economic costs associated with not taking action, including changes to water supply infrastructure, industrial capital, like pipelines, and with human health,” said Janet Peace, senior research fellow, economics at Pew.

“With droughts, there’s a cost. With increased flooding, there’s a cost (and) with increased hurricanes and tornadoes.”

While Kyoto is problematic on a number of levels, the President’s head in the sand routine (while his buddies in the oil and gas industries are recording record profits), is unsustainable. While we can’t put an exact figure on long-term costs of global warming, any person with an ounce of foresight has to understand that costs will come. Since we’ll likely not go back to the oil and gas companies asking them for compensation for these costs, how can we prepare economically for costs that may not arise until the next generation or after? At what point will we be able to look (back) and say “This is the result of inaction by the globe’s largest polluters?” What’s a politically tenable way of bringing our citizens on board to create some kind of economic buffer for the prices that are certain to arise? What are the most sensible investments we can make? Obviously, I’m just thinking out loud here… feel free to do the same.

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