Deepak Lal: Climate change: Ethics, science, economics - II
Deepak Lal / New Delhi July 17, 2007
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Inquisitors propagating the theory of climate change cannot do today
what had been done to Galileo.
We recently went to see Bertolt Brecht’s Galileo, which provides
interesting parallels between the last large paradigm shift about
Man’s relationship to the stars, and the current one, in the new
theory of cosmoclimatology discussed in my last column. The scientific
establishment was wedded to a theory which the celestial observations
of the scientific sceptics Copernicus and Galileo contradicted. The
Inquisition tried to suppress the heretics, by excommunication
(Copernicus) or silencing them through showing them the instruments of
torture (Galileo). Today, the peer reviewed process of funding and
validation of scientific research in climatology is equally controlled
by the modern equivalent of the Collegium Romanum (the Vatican’s
Institute of Research), the Inter-government Panel of Climate Change
(IPCC).
They in turn answer to the equivalent of the Inquisition, the Green
ideologists, who, mercifully, can only torment through derision or
denying the heretics research funding, and not the frightening
instruments of torture. But, even the Collegium Romanum was imbued by
the rational scientific spirit and confirmed Galileo’s discoveries in
his lifetime, though it took the Pope till 1993 to formally recognise
the validity of Galileo’s work. Finally, in both cases the new
theories were dismissed by the theologians as they seemed to downgrade
the primacy of God’s agents (human beings) in the universe.
Fortunately, it is much more difficult to suppress the scientific
enterprise today. A recent seriously flawed paper (Lockwood and
Frolich, Proc. R. Soc. A, 25 May, 2007) hyped in the media seeks to
reinforce the CO2 theory. It argues that, whilst the sun had an effect
on the climate during most of the 20th century, since 1988 its
activity has declined but global warming has continued. However, the
paper’s data stop in 2000. In fact, the global temperature record
shows that, when the sun was active the world warmed, and since “it
peaked in the late 1980’s within a few years global warming stalled”
(Whitehouse: “The truth is we can’t ignore the sun,” Sunday Telegraph,
July 15, 2007). When the CERN CLOUD experiment is completed in 2010
and (hopefully) vindicates Svensmark’s cosmoclimatology theory, the
CO2 theory of climate change will be buried. It will be recognised
that humans cannot control the climate and must adapt as they have
done for millennia to its continual changes.
Hence it is ironic that many economists (and policymakers) base their
climate change policy recommendations on acceptance of the CO2 theory
upheld by the IPCC as the irrefutable scientific truth, the latest
example being the Stern Review put out by the UK government. There is
nothing particularly novel about the cost-benefit methodology which is
used, nor about the model used to incorporate the scientific
judgments, as William Nordhaus (the author of the most serious
previous study of the economics of climate change) has noted in a
recent review (W D Nordhaus: “The ‘Stern Review’ of the Economics of
Climate Change,” NBER WP. 12741, December 2006). What is novel is its
conclusion that, without drastic immediate action to curb greenhouse
emissions, the world faces economic catastrophe “on a scale similar to
those associated with the great wars and the economic depression of
the first half of the 20th century”.
This is a dramatically different conclusion from earlier models of
climate change (Nordhaus: Managing the Global Commons, MIT, 1994;
Nordhaus and Boyer: Warming the World, MIT, 2000) that find that the
“optimal climate change” policies involve modest reductions in
emissions in the near future. The reason for the contrary Stern
results is the near zero social rate of discount used, representing a
contentious ethical judgment of the weight placed on the consumption
of future relative to present generations. Apart from the “pure” time
preference component of the discount rate, there is also the component
that depends upon the fact that, with ongoing economic growth, future
generations are going to be richer than the current generation. Hence
a rupee accruing to the richer future generation should be less
valuable than that accruing to the current poorer generation. How much
less valuable depends upon the inter-generational distributional
judgment.
The discount rate crucially determines how far future costs and
benefits need to be counted. If the discount rate is close to zero,
the whole of the infinite future stream of costs and benefits becomes
relevant. Hence, the highly speculative economic damage the Stern
Review adduces from rising temperatures two centuries from now can be
valued equally with any economic costs we have to currently incur to
mitigate them. But, as Nordhaus rightly notes, this low discount rate
can lead to absurd results. It would imply trading off a large
fraction of today’s income to increase the income stream of those
living two centuries from now by a tiny fraction. For, with a near
zero discount rate, this tiny increase in the future generations
income stream is cumulated to near infinity.
By contrast, the estimates I made for the Planning Commission in the
early 1970s (see Lal: Prices for Planning, HEB, 1980) based on the
same methodology as the Stern Review, but with more plausible
parameters, yielded a social discount rate of 7 per cent for India. At
this discount rate, the present value of Re 1 accruing 75 years from
today would be worth nothing, making most of the speculative economic
costs and benefits, and the apocalyptic predictions of the Stern
Review, irrelevant for India.
This does not downgrade the serious current environmental problems
caused by rapid growth in India and China. Anyone who has choked in
the fetid air of Chungking, Xian, Beijing or Delhi will know that no
climate scares are needed to provide a case for dealing with their
unhealthy air pollution. Similarly India and China face a growing
water crisis irrespective of what is happening to global CO2
emissions. Subsidies to energy and water use need to be removed for
efficiency reasons. Whilst, given the political instability and
growing political determination of supplies of fossil fuels from the
countries where they are concentrated, it is sensible to diversify
energy sources. Both nuclear power and India’s coal reserves provide
more secure alternatives. Bio fuels, by contrast, have the
disadvantage of competing for limited land with essentials like food.
However, the sun, which most probably controls the climate, also
offers the backstop technology which will provide the unbounded energy
for India’s continuing economic growth. In thinking about all these
economic issues, the changing climate is a red herring.
--
The object of life is not to be on the side of the majority but to
escape finding oneself in the ranks of the insane. -- Marcus Aurelius
Wherever I go it will be well with me, for it was well with me here, not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS
Joseph R. Darancette
daranc@NOSPAMcharter.net
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