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The Grey Zone of Climate Economics

Authored by Serban V.C. Enache via Hereticus Economicus:

Last fall, a paper came out: The Economics of 1.5°C Climate Change,
annual review of environment and resources, by Dietz, Bowen, Doda, Ghambhir, and Warren.

Its abstract reads:

The economic case for limiting warming to 1.5°C is unclear, due to manifold uncertainties. However, it cannot be ruled out that the 1.5°C target passes a cost-benefit test. Costs are almost certainly high: The median global carbon price in 1.5°C scenarios implemented by various energy models is more than US$100 per metric ton of CO2 in 2020, for example. Benefits estimates range from much lower than this to much higher. Some of these uncertainties may reduce in the future, raising the question of how to hedge in the near term. Maintaining an option on limiting warming to 1.5°C means targeting it now. Setting off with higher emissions will make 1.5°C unattainable quickly without recourse to expensive large-scale carbon dioxide removal (CDR), or solar radiation management (SRM), which can be cheap but poses ambiguous risks society seems unwilling to take. Carbon pricing could reduce mitigation costs substantially compared with ramping up the current patchwork of regulatory instruments. Nonetheless, a mix of policies is justified and technology-specific approaches may be required. It is particularly important to step up mitigation finance to developing countries, where emissions abatement is relatively cheap.

The paper makes several conclusions. It admits there is no clear answer regarding the economic costs and [in particular] benefits of whether or not the 1.5°C target passes a cost-benefit analysis. It claims that the benefits of limiting warming to 1.5°C, compared with 2°C, are very significant for natural ecosystems and significant for water resources, agriculture, and human health, especially in poorer regions. Evidence suggests limiting warming to 1.5°C reduces the risk of crossing climate tipping points, like the melting of the Greenland and Antarctic ice sheets, however, the reduction in risk of these events cannot presently be quantified. The global economy would need to be de-carbonized at an unprecedented rate to stay within the 1.5°C objective, likely entailing large costs and huge reductions in energy demand across the whole economy and heavy reliance on negative emissions technologies, principally bioenergy with carbon capture & storage (CCS). Delay in pursuing an emissions path consistent with 1.5°C likely renders that objective unreachable via conventional means, instead relying on expensive large-scale carbon dioxide removal (CDR), or risky solar radiation management. Business groups have already showed interest in the latter method. The authors argue that the case for carbon taxation being central to climate change “mitigation” is stronger than ever, but say there’s room for more interventionist policies on top of that. They urge the UNFCCC [United Nations Framework Convention on Climate Change] and Paris process to find speedy ways to channel finance and technology to developing countries and take advantage of “cheap abatement.”

Now, before we dive into the implications, I want to address something. Half a degree of warming may not seem much. Ditto for one more degree added to the global average. But consider this analogy of a person running a fever. When you’re running a fever of 37°C, symptoms are minimal to non-existent. You can walk, you can do work, you have an appetite, you don’t have headaches, you don’t sweat. All that changes if your fever reaches 38°C. Now you’re tired. You’re more sensitive to light. Your appetite is smaller. You have headaches, shivers. You’re sweating. It’s more difficult to stand up and do work. You may feel like throwing up. And as the fever gets higher, these symptoms amplify, new ones develop, and once you reach 40°C, you’re a case for the hospital emergency room. The climate is an open system; and no model [to predict it] is perfect. That being said, it’s beyond question that human civilization must strive to replace antiquated technology with better systems; to become more productive, more efficient, and eco-friendly. We should strive to do more with less, not less with less.

When conducting cost/benefit analysis, policy makers certainly need to keep an open mind and look beyond monetary costs and monetary gains. The paper proposes complementary approaches to the traditional cost/benefit analysis: “multi-criteria decision analysis, the precautionary principle, and human rights.” Speaking of prudence, I highly oppose views and organizations pushing countries to cede national sovereignty to supra-state institutions on the altar of ‘fighting climate change.’ It’s a very slippery slope, with severe socio-economic and geopolitical constraints, while the big polluter nations [who buy other countries’ rights to emit CO2] increase their industrial base, further educate their workforce, ensure high paying jobs, energy independence, expand infrastructure, and further improve their geopolitical situation. Developing countries and least developed countries [LDCs] are the primary target of these supra-state institutions, especially when it comes to [questionable] social engineering schemes.

With regard to carbon capture and storage, we need to know how much land this will require, materials necessary for these facilities and relevant equipment, the amount of labor, and electricity. Knowing this, we’re able to determine how much resources we have left for other objectives and functions. And this is the real question, to which we need a clear and definite answer. So we can know for sure what we’re sacrificing, even though it’s unclear what the benefits will be, or if we’ll even be able to identify these benefits and tally them up. The authors of the paper ask the same thing, “Can the reduction in the risk of crossing key tipping points in the global climate system, brought about by limiting warming to 1.5°C, be quantified?”

The Green New Deal touted today didn’t even have climate change in mind. Saikat Chakrabarti, chief of staff to Democratic representative Ocasio-Cortez, confessed to this. “The interesting thing about the Green New Deal is it wasn’t originally a climate thing at all. We really think of it as a how do you change the entire economy thing.”

Even though this research paper claims there’s a strong cost-benefit case for carbon taxation, alongside higher Government interventions to correct market failures, results from the Energy Information Administration’s model on CO2 taxation and emission levels are quite discouraging. A tax of up to $300 per ton dropped emissions 58 percent below 2010 levels, but not until 2050! The model crashed when the tax was hiked past that threshold. At a $300 tax per ton of carbon and associated regulations, a family of four would incur a loss of almost $8,000 per year due to higher energy costs, higher consumer prices, and foregone wages. Over a 20 year period, the total cost is $165,000. During that same time window, the tax would take out an average of 1.1 million jobs per year and diminish GDP by a total of more than $15 trillion. It’s obvious why the so-called Green New Deal gathers a lot of criticism from people of various persuasions, including those who believe in man-made climate change. Realistically speaking, just to keep the present rate of warming, a 60 to 80 percent cut in emissions worldwide would be required; and it would still take decades for the atmospheric concentration of CO2 to stabilize.

Given the impotency of CO2 reduction on climate change, I find the emphasis put on carbon taxation rather exaggerated – especially when invoked as a way to “raise revenue” for investment in renewables [see Taxes for Revenue are Obsolete by Beardsley Ruml, 1946]. Meanwhile, other elements contribute to pollution, and they hardly get enough air time. Things like chromium, industrial waste water, pesticides, sulphur dioxide, mercury, asbestos, arsenic, cadmium, lead pollution etc. These substances infiltrate our water, air, and soil; cause cancer, birth defects, asthma, emphysema, bronchitis, brain damage, and other nasty things. More so, many supporters of a carbon tax say that revenue from this tax should be distributed to the people as a social dividend. However, this creates a perverse effect/incentive, in which people hope for higher revenue [aka. more CO2 being produced] in order to receive a higher dividend. And, of course, CO2 taxation translates into higher prices, disproportionately hitting the lower income brackets – who, ironically, produce the least amount of lifestyle emissions.

Last, but not least, in spite of being a research paper on economics, land prices and the word rent aren’t mentioned at all. All of this huge investment [state and private] in buildings and infrastructure is going to be a major free lunch for money lenders and landlords, at the expense of labor and capital. To talk about “market failures” without addressing the issue of economic rent is an exercise in futility and ignorance. The classical economists understood that in order for markets to function well, they had to be free of the rentier elements. In a rentier market/finance capitalism, however, economic agents – be they state, private, or quasi – operate in a pernicious and distorted environment. And socialist policies, which leave economic rents uncaptured, deliver sub-optimal results and are destined to fail. The same goes for libertarian policies.

Things would be so, so different today had countries in the 20th century fully embraced industrial capitalism and eliminated rent-seeking, with everything it entails. Today’s prices would be derived from value, instead of value being derived from prices. Free of the rentier excess charge [in the form of rent, interest, patents, lobbying, and cartelization], the cost of production would have gone down and down, due to leaps in science and technology: lower input, faster throughput, higher output. We would have had the greatest economic growth in history [value creation] accompanied by the greatest price deflation in history, with the highest incomes in history.

At any rate, without a clear picture on costs vs benefits, without eliminating much of the surrounding mysteries of so-called climate change mitigation, without a way to quantify it… efforts are going to be sporadic and large sections of public opinion will remain unconvinced. A recent YouGov survey makes this clear. Note the phrasing “human activity is mainly responsible” for climate change.

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PlatonJane KarlssonEd MorissCarbon TimJohn C Durham Recent comment authors
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Sally Snyder
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Sally Snyder

As shown in this article, in the future, governments around the world may be willing to go to extreme lengths to punish nations that breach climate protocols:

https://viableopposition.blogspot.com/2019/09/climate-intervention-how-far-will.html

So much for sovereignty.

M4A MMT
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M4A MMT

“I am most concerned about the mounting level of government debt and the lack of political will to solve the problem.”
There is no “mountain” of debt. And it’s not a problem to be solved.
US Government debt = checking accounts at the FED, saving accounts at the FED, cash notes & coins.

Jane Karlsson
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Jane Karlsson

The best way to limit CO2, if that’s what you want, is to plant trees and remineralise the soil. Our soils have been seriously depleted of trace minerals by the use of NPK fertilisers which do not contain them. Adding rock dust can make plants grow faster and use up more CO2.
https://en.wikipedia.org/wiki/John_D._Hamaker

According to government figures, vegetables in the UK have lost three-quarters of the copper they had in 1940.
https://www.ncbi.nlm.nih.gov/pubmed/14653505

That tells you how serious the mineral depletion is. Alzheimer brains were recently found to have severe copper deficiency.
https://www.ncbi.nlm.nih.gov/pubmed/28654115

lzzie dw
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lzzie dw

From what I read, it is getting cooler, not warmer. I think the chief of staff of Amanda Occasio Cortez gave the whole show away with his remarks. Will paying taxes affect the action of the sun or the volcanos or the earthquakes ? – all of which increase during a global cooling period – no, of course not. Remember also that Greenland is not called Greenland for no reason. It was at one time green. Science shows that the earth has gone through periods of warming and cooling for many thousands of years. This is caused by the activity… Read more »

Artron the Black
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Artron the Black

https://climate.nasa.gov/internal_resources/1802 The above graph compares global surface temperature changes (red line) and the Sun’s energy received by the Earth (yellow line) in watts (units of energy) per square meter since 1880. The lighter/thinner lines show the yearly levels while the heavier/thicker lines show the 11-year average trends. Eleven-year averages are used to reduce the year-to-year natural noise in the data, making the underlying trends more obvious. The amount of solar energy received by the Earth has followed the Sun’s natural 11-year cycle of small ups and downs with no net increase since the 1950s. Over the same period, global temperature… Read more »

Platon
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Platon

It sounds like you have no idea what is causing the process you describe, or if it actually exists. But you say we must act anyway.
Sounds American and a bit like the chicken little story.

Far more plausible is that the neo-Malthusians, who are also the Neo-Bolshevik neo-Cons, simply need some focal point around which to gather the hysterics and then seize all the remaining power, which is lying on the ground in Washington.

Have you considered the political uses and the political dimension of this highly disputed and implausible theory you propound.

Luiz Rio
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Luiz Rio

The amount of solar energy received by the Earth has followed the Sun’s natural 11-year cycle of small ups and downs with no net increase since the 1950s. Over the same period, global temperature has risen markedly. It is therefore extremely unlikely that the Sun has caused the observed global temperature warming trend over the past half-century. No. The Sun can influence the Earth’s climate, but it isn’t responsible for the warming trend we’ve seen over the past few decades. The Sun is a giver of life; it helps keep the planet warm enough for us to survive. We know… Read more »

John C Durham
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John C Durham

It’s all about the Sun. Poles are shifting, is a small factor. The water vapor (clouds) is a also a small factor. CO2 is a non-factor in the tiny tiny amounts we find it. A hundred years ago CO2 was higher. And, it was higher before that going up to 8,000ppm 10 million years ago. Still a nothing volume of CO2 to do anything having to do with climate although we couldn’t breath it but it would be great for plants. Al Gore is a Religious fanatic. Science will not support these stupid ideas. The computer models don’t work because… Read more »

Carbon Tim
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Carbon Tim

How the hell were CO2 levels higher 100 years ago? There is too strong a correlation between man-made Co2 and the increase in the average global temperature. Water vapor is the strongest greenhouse gas there is. Your “all about the sun statement” doesn’t hold up to the data. CO2 does contribute to warming. I’m not saying humans should commit suicide and stop producing CO2 altogether, but it’s incredibly foolish and ideological to ignore the man-made contribution to climate change.

John C Durham
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John C Durham

I don’t appreciate a hoax being treated seriously. This author needs to do some research into “Climate Change” and the political (and financial) forces behind this junk science. This is like the oil from dinosaurs hoax. There isn’t a biological component in any part of oil. Oil is chemistry, compression and heat working to make millions of barrels of oil deep in the Earth every day. This was proven prior to the ’50’s. Now we have the Trump RussiaGate hoax. But, we have had more than 70 hoaxes pulled on us to create phony stories to facilitate Regime change. It’s… Read more »

Ed Moriss
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Ed Moriss

You’re talking bs. Go sit close next to a pile of leaves burning. Stand in the smoke. And inhale all that CO2, see how that fares for you. Oil reserves are being depleted, they’re not being filled back. And even if they had the renewable property, nature wouldn’t fill it up at a fast enough speed to keep up with the global economy as is, let alone how it will be in the future.
You talk about finance, well, see who’s behind the financing of both fossil fuels and renewables. It’s the same companies, it’s the same shareholders. It’s called hedging!

Jane Karlsson
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Jane Karlsson

Yes oil from dinosaurs is nonsense, as the Russians have always said, and so is global warming from CO2.

Platon
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Platon

Interesting how the Talmudo-Satanist West’s brazen attempts to make a nuclear WW3 almost inevitable do not seem to trouble many virtue-signaling do-gooders in that place.

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