Costing climate change
Now that the dismissal of climate change is no longer fashionable, the professional deniers are trying another means of stopping us from taking action. It would be cheaper, they say, to wait for the impacts of climate change and then adapt to them. They have the figures to prove it. It is tempting to prove them wrong. Given the new projections of major drought in continental interiors, of a possible global food deficit, of sea level rises with the potential to affect billions of people, it should be easy to demonstrate that the price of waiting for the catastrophe is higher than the price of reducing emissions. But it’s a temptation we should resist. Such calculations use costs which simply cannot be compared. The most famous exponent of the comparison is the Danish statistician Bjørn Lomborg. In his book _The Skeptical Environmentalist_, he argues that the cost of doing nothing about climate change – of letting nature take its course – is $4,820 billion. The cost of stabilizing global temperatures at 2.5° above the 1990 level would be $8,553 billion; and the cost of stabilising them at 1.5° above the 1990 level would be $37,632 billion. He warns that ‘with the best intentions of doing something about global warming we could end up burdening the global community with a cost much higher or even twice that of global warming alone’. It would be better to use our money to make investments with higher returns, leaving ‘future generations of poor people with far greater resources’. Many environmentalists have taken him to task, claiming that his costs for taking action are too high and his costs for the impacts of climate change are too low. But they have been drawn into a fake debate. For while the costs of taking action can reasonably be measured in dollars, most of the costs of climate change cannot. We are told, for example, that the financial costs of Hurricane Katrina, which may have been exacerbated by climate change, amount to some $75 billion, and we can use that number to help derive a price for carbon pollution. But does it capture the suffering of the people whose homes were destroyed? Does it reflect the partial destruction, in New Orleans, of one of the quirkiest and most creative communities on earth? Does it, most importantly, measure the value of the lives of those who drowned? In other words, is it possible to place an economic price on human life? Or on an ecosystem, or on the climate? Could such costs, when rolled out around the world, really be deemed to amount to $4,820 billion, give or take the odd dollar? Such figures are not just wrong. They are meaningless. When economists have tried to put a price on such things, they have simply exposed the limitations of their science. In 1996, for example, a study for the Intergovernmental Panel on Climate Change estimated that a life lost in the poor nations could be priced at $150,000, while a life lost in the rich nations could be assessed at $1.5 million. The researchers produced these figures by estimating how much people would be prepared to pay for the adaptive measures that would save their lives. Unsurprisingly, they discovered that the lives of rich people were worth more than the lives of poor people. These days, economists are less prepared to expose themselves to ridicule. So anything that cannot be quantified is simply excluded from the balance sheet. What this means is that the loss of all the really important things – a functioning ecosystem, human communities, human life – is overlooked. Because they aren’t counted, they don’t count. It would be wrong to blame only Bjørn Lomborg and the economists whose work he promotes for taking this line. Almost everyone feels obliged to attach a price tag to global catastrophe. The British Government, for example, has decided that the ‘social cost’ of carbon emissions is somewhere between $60 and $250 per tonne, with a middle value of $120. We might reasonably ask what the heck this means. Does the British Government really believe it can put a price on the people of Africa? On Bangladesh?
‘Either we decide that it is right to spend a lot of money seeking to prevent catastrophic climate change or we decide that it isn’t, but we must make that decision on the grounds of how much we value people and places as people and places, rather than as figures in a ledger’
The answer appears to be yes. In its White Paper on aviation, it washes its hands of responsibility for the 235-per-cent growth in flying expected in Britain between now and 2030. The massive boost to greenhouse gases this will cause should be remedied, it says, by encouraging the airline industry to ‘pay the external costs its activities impose on society at large’. But how? Should a steward be sacrificed every time someone in Ethiopia dies of hunger? As Bangladesh goes under water, will ministers demand the drowning of a commensurate number of airline executives? The only suggestion it makes is that aviation fuel might be taxed. The implication is that a payment in pounds or euros would somehow cancel out the ‘external costs’ of rising emissions, which means death and ecological collapse. Taking action, in other words, must be a moral decision, not an economic one. Either we decide that it is right to spend a lot of money seeking to prevent catastrophic climate change or we decide that it isn’t, but we must make that decision on the grounds of how much we value people and places as people and places, rather than as figures in a ledger. This is not the only way in which different kinds of costs have been conflated. The denial industry also manages to mix up money actually spent with money that might have been made if regulations suppressing climate change weren’t in place. But spending money that really exists and not having money that might have existed are costs which are felt quite differently. At the moment, all of us ‘suffer’ economically as a result of the ban on psychotropic drugs. If this trade had been legal, it would have increased the size of the economy, which means that on average we would be slightly richer today than we are. But, with the exception of a few people who have been hoping to sell these items legally, we do not walk around under a cloud, lamenting the fact that money which might have entered our pockets has been denied to us. The impact of this constraint is real, but it has not been felt by us. No-one’s bank account is emptied by what might have been. The political impact of the two kinds of ‘cost’ is very different. Even when taking action means spending real taxpayers’ money, it is not always true that this always represents a genuine social cost. It depends on how the money would otherwise have been spent. One of the arguments made by those who claim that we should take no action is that if the same amount of money were spent on relieving hunger, or supplying clean water, or preventing AIDS or tuberculosis or malaria, it would save more lives. This approach tends to overlook the fact that climate change is likely to cause more hunger, more water stress and more communicable disease, thereby raising the cost of addressing them. But this is not the strongest response to their argument. Behind their case is an unfathomable assumption: that money spent on preventing climate change is money not spent on foreign aid. In other words, it supposes that the climate change budget is in direct competition with the rich countries’ foreign aid budgets, rather than with any other kind of spending. If the rich countries were already doing everything in their power to help the poor, this argument would carry some weight. But it is hard to think of a national exchequer which has ever been endangered by its foreign aid spending. The governments of Europe have agreed that by 2015 – a mere 35 years after the date they first set for themselves - they will give 0.7 per cent of their national income in foreign aid. The US currently spends 0.17 per cent of gross domestic product – just over $19 billion - on aid. Britain spends 0.36 per cent, or about $7.5 billion. In other respects these governments are more generous. Britain’s budget for the widening the M1 motorway is $6.3 billion. This is nearly seven times as much as it is currently spending every year on tackling climate change. In his book _Perverse Subsidies_, published in 2001, Professor Norman Myers adds the direct payments US corporations receive from their government to the wider costs they oblige society to carry, and arrives at an annual figure of $2.6 trillion. This is roughly five times as much as the profits they were making at the time his book was written. As well as the annual $362 billion the 30 richest governments were paying their farmers when _Perverse Subsidies_ was published, they were spending some $71 billion on fossil fuels and nuclear power and a staggering $1.1 trillion on road transport. Worldwide, governments pay companies $25 billion a year to destroy the earth’s fisheries, and $14 billion to wreck our forests. In the European Union, according to the European Environment Agency, direct and indirect subsidies for the coal industry amounted to $17 billion in 2001, and subsidies to the oil and gas industry to $11 billion. In the US, Joseph Stiglitz, the former chief economist at the World Bank, and Linda Bilmes, an economist at Harvard, calculate that, on ‘very conservative’ estimates, the war in Iraq has so far cost their country between $1 and $2 trillion. This is not a choice between state spending on climate change or state spending on foreign aid and essential public services. It is a choice between state spending on climate change or state spending on coal, oil, roads, farm subsidies, environmental destruction and unprovoked wars. We could reasonably ask why governments seem to find it so easy to raise the money required to wreck the biosphere, and so difficult to raise the money required to save it. So please don’t take the ‘costs’ of climate change – either its impacts or action prevent it – at face value. Even when teased apart, they mean less than economists claim. We cannot use a spreadsheet to decide whether or not to act. We can only use our conscience.