Is Global Warming a Crisis?

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Research done by the Copenhagen Consensus, an international group of leading economists, including Nobel Prize winners, has calculated the relative costs and benefits of different courses of action to increase general well-being and reduce widespread ills. The Copenhagen Consensus found that the benefits of reducing carbon emissions range from 25 cents (cutting carbon emissions alone) to 90 cents (with significant investment in technology) for every $1 spent (while every dollar spent fighting HIV/AIDS returns $40 in benefits).

The EPA also documented severe economic consequences of “green legislation” beyond a significant rise in consumer energy prices.    The agency found by 2050 the proposed legislation such as the Bingaman-Specter bill could cost the United States as much as $1.2 trillion annually (in 2005 dollars) from lost economic production. Lieberman-McCain could cost as much as $1.3 trillion annually, and Lieberman-Warner could cost nearly $3 trillion per year.

In addition, a CBO study confirmed the dire economic consequences of greenhouse gas legislation on the poorest U.S. citizens. Cutting CO2 emissions by merely 15 percent would reduce the disposable income of the poor by an additional 3.3 percent, compared to a 1.7 percent drop for the richest Americans. Deeper carbon dioxide cuts would inflict still more severe economic harm on low-income citizens.

In the 2006 Stern review on the Economic Impacts of Climate Change, the review’s author, Sir Nicholas Stern, used a discount rate of almost zero percent per year to calculate the present value of the costs of future global warming.   This has the effect of treating distant costs as if they were as important as harms. In fact, Stern argues that the only justification for discounting at all is that future generations might not be there. A zero rate of interest causes us to value future costs and benefits just as highly as current costs and benefits. Discontinuing (at a rate higher than zero) causes us to weigh the welfare of future generations less highly than our own.

Besides assuming that worldwide per capita yearly income in 2200 will be $130,000 as compared with $10,000 today, the review also assumes that the costs of fighting climate change are spread over only the next 50 years. By contrast, the benefits of acting, and the costs of inaction, are assumed to accrue for hundreds of years. Stern estimates the costs of global warming to be as much as 20 percent of world GDP. Other studies range from −2 percent (global warming has a net benefit) to 7 percent, with an average of 1.5 percent. By contrast, the Stern review estimates that significantly reducing future global warming would reduce growth by less than 1 percent now and in the future, which was lower than almost every previous estimate.

Award-winning economists such as Robert O. Mendelsohn and William Nordhaus of Yale University and Sir Partha Dasgupta of Cambridge University pointed out the report assumed a 60 percent higher growth rate in global population than expected by international demographers; assumed income growth rates would be less than half the present rate; and used inconsistent and arguably absurd discount rates that substantially underestimate the costs of cutting carbon emissions while simultaneously using a higher discount rate when calculating the benefits of immediate action.   Economists rejected Stern's estimates of the economic costs associated with climate change. They pointed out, for example, that Stern's projections of the damage from climate change did not take into account any adaptive steps.

“Stern attempted to circumvent the economic consensus by cherry-picking statistics to reach a desired conclusion,” said Myron Ebell, director of energy and global warming policy at the Competitive Enterprise Institute. "The report's estimates for reducing greenhouse gas emissions are laughably rosy, while the assumptions about the impact of global warming are ridiculously overblown," said Ebell. "The Stern Review may look professionally done, but it doesn't pass the laugh test."