In this series, Bjorn Lomborg explores the smartest investments to respond to global challenges—and readers get to have their say. See the earlier articles here. And read Bjorn’s responses to readers and find out which investments are currently at the top of Slate readers’ priority list. Be sure to vote in the poll at the bottom of each article.
Of all of the issues in the Copenhagen Consensus 2012 project, climate change is perhaps the most talked-about and charged. Although efforts to strike an international climate deal have come to naught, more newspaper space and celebrity attention has been devoted to this issue in the past decade than any other.
Copenhagen Consensus 2012 devotes four research papers to this topic. The climate change research is released today. These papers build on a 2009 Copenhagen Consensus project that focused solely on this topic. (You can read all of the project’s research in this Cambridge University Press book, Smart Solutions to Climate Change.)This lets us look at very different ways to deal with this global challenge.
Let’s look first at the path that policymakers have chosen so far. Richard Tol makes the case that there is wide agreement in the economic literature that reducing greenhouse gas emissions is best done through a carbon tax. Climate policy, he notes, is not about spending money. It is about raising money (and, of course, about finding the best way to spend the revenues raised through a carbon tax).
Tol argues that the costs of deep emission cuts are relatively small if the following conditions are met: Emission reduction targets are lenient at first but accelerate over time; every part of the economy emitting carbon is regulated; all gases are regulated and at the same price; all countries reduce emissions; and climate policy is coordinated with other policies. If these rules are violated, then the costs of reducing harmful emissions rapidly escalate.
Unfortunately, policymakers violate these rules a lot in the real world. It is increasingly clear that governments have great difficulty in delivering the cheapest possible emission-reduction programs. (See Tol’s earlier paper looking at the very large price tag of European Union climate change policies.)
Very stringent emission-reduction targets such as the long-term goals of the European Union simply do not pass the benefit-cost test: They actually cause more damage than they prevent. However, very modest reductions in carbon emissions appear to be justifiable with any number of assumptions, while more stringent emission reduction needs more favorable assumptions.
Tol finds that a low tax of about $1.80 on each ton of carbon would generate benefits (of avoided climate damage) worth between $1.50 and $9. However, a high tax set at $250 would cost much more than it would gain, with benefits of just two cents to 12 cents, putting it in the category of ”does more damage than it prevents.”
Isabel Galiana and Christopher Green propose a technology-led climate policy. This means dramatically increased research and development, testing and demonstration of scalable, reliable, and cost-effective low carbon emitting energy technologies. This will be funded by a low but gradually rising carbon tax, but unlike Tol’s proposal the main focus is on innovating cheap, green energy sources.
They argue that the size of the energy technology challenge is huge, and there is a current lack of technological readiness and scalability in low-carbon energy sources. They show that adopting a “brute force” approach to reducing emissions with a carbon tax before green technology is actually ready to take over from fossil fuels could generate economic costs 10 times or more than widely published estimates of CO2 mitigation cost estimates.
The authors argue that while the importance of new technologies to slowing and eventually reducing global emissions is more widely accepted than it once was, there have been no fundamental developments on the low-carbon energy front in recent years. Moreover, funding has gone mainly to subsidizing manufacture and deployment rather than to research. With continued increases in carbon emissions despite an enduring global economic crisis, the case for a technology-led climate policy is stronger than ever.