Yesterday a Climate Change conference organised by Professor Alan Howard and the Howard Trust was held at Cambridge University. A most interesting set of speakers from both sides of the the divide but who apparently just talked past each other.
It is well worth reading what Vaclav Klaus had to say ( who I met once in the nineties to present coal-based combined cycles) because he manages to make his arguments in such a rational way. I have much time for what he has to say and reproduce his entire speech / article below
Not respecting the title of the conference, I will continue using the term global warming, rather than its substitute, retreat already signaling, but in any case misleading term climate change. And I will not concentrate my talk on the current or potentially forthcoming global warming itself because – given the available data and conflicting scientific arguments – I don’t see it as a phenomenon which is threatening us.
I will talk about the Global Warming Doctrine (GWD) because this doctrine, not global warming itself, is the issue of the day and the real danger we face. This set of beliefs is an ideology, if not a religion, which lives more or less independently on the science of climatology. Climate and temperature are used or very often misused inan ideological conflict about human society. It is frustrating that the politicians, the media and the public, misled by the very aggressive propaganda organized by the GWD exponents and all their fellow travelers, do not see this. I hope today’s conference will be a help in this respect.
I have expressed my views about this issue in a number of speeches and articles presented or published in the last couple of years all over the world. My book “Blue Planet in Green Shackles”[1] has been translated into 17 languages. I spoke about it several times also here in Great Britain, in Chatham House four years ago[2], and most recently in the Global Warming Policy Foundation[3]. Some relevance had my speech at the UN Climate Change Conference in New York in September 2007.[4]
The GWD has not yet presented its authoritative text, it has not yet found its Karl Marx who would write its “Manifesto”. This is partly because no one wants to be explicitly connected with it, and partly because it is not easy to formulate.
The GWD, this new incarnation of environmentalism, is not a monolithic concept that could be easily structured and summarized. It is a flexible, rather inconsistent, loosely connected cascade of arguments, which is why it has been so successfully escaping the scrutiny of science. It comfortably dwells in the easy and self-protecting world of false interdisciplinarity (which is nothing else than the absence of discipline). A similar approach was used by the exponents of one of the forerunners of GWD, of the Limits to Growth Doctrine. Some of its protagonists were the same.
What follows is my attempt to summarize my reading of this doctrine:
1. It starts with the claim that there is an undisputed and undisputable, empirically confirmed, statistically significant, global, not regional or local, warming;
2. It continues with the argument that the time series of global temperature exhibits a growing, non-linear, perhaps exponential trend which dominates over its cyclical and random components;
3. This development is considered dangerous for the people (in the eyes of soft environmentalists) or for the planet (among “deep” environmentalists);
4. The temperature growth is interpreted as a man-made phenomenon which is caused by the growing emissions of CO2. These are considered the consequence of industrial activity and of the use of fossil fuels. The sensitivity of global temperature to even small variations in CO2 concentration is supposed to be high and growing;
5. The GWD exponents promise us, however, that there is a hope: the ongoing temperature increase can be reversed by the reduction of CO2 emissions[5];
6. They also know how to do it. They want to organize the CO2 emissions reduction by means of directives (or commands) issued by the institutions of “global governance”. They forget to tell us that this is not possible without undermining democracy, independence of individual countries, human freedom, economic prosperity and a chance to eliminate poverty in the world. They pretend that the CO2 emissions reduction will bring benefits which will exceed its costs.
This simple scheme can be, undoubtedly, improved, extended, supplemented or perhaps corrected in many ways by the distinguished participants of this conference but I believe that its basic structure is correct. The missing “GWD manifesto” should be built along these lines.
There are many disagreements about this doctrine among the scientists in natural sciences, as was demonstrated here this morning, but I also know the stances ofsocial scientists, especially economists, who do not buy into this doctrine either. These two camps usually do not seriously talk to each other. They only come into contact with the self-proclaimed interdisciplinarists from the other field. The social scientists are taken aback by the authoritative statements that “the science is settled”, the scientists in natural sciences a priori assume that there is nothing “hard” in social sciences.
The politicians – after having lost all other ideologies – welcomed the arrival of this new one. They hope that the global warming card is an easy game to play, at least in the short or medium run. The problem is that they do not take into consideration any long-term consequences of measures proposed by the GWD.
Let me briefly outline what the field of economics has to say to this. It is, of course, only a preliminary scheme, not a statement pretending that “science is settled”.
1. The economists believe in the rationality and efficiency of spontaneous decisions of free individuals rather than in the wisdom of governments and their scientific advisors. They do not deny the occurrence of market failures but their science and their reading of history enables them to argue that government failures are much bigger and much more dangerous. They consider the GWD a case of a grandiose government failure which undermines markets, human freedom and prosperity;
2. The economists, at least since Frederic Bastiat, consider it their duty to warn policymakers against the unintended consequences of their actions and against not differentiating between what is seen and what is not seen;
3. The economists know something about scarcity and about the importance of prices and warn against any attempts to play with them. They believe in the cost-benefit analysis and in the rational risk-aversion, not in the precautionary principle. They have a rather developed subdiscipline called “energy economics” which should not be disregarded;
4. They are aware of externalities because they themselves formulated this concept. They understand its enormous complexity and consider it dangerous in unqualified hands. After decades of studies they do not aprioristically see the world as full of negative externalities;
5. The economists base their thinking about intertemporal events on a rather sophisticated concept of discounting[6] which I will discuss later;
6. The economists have some experience with the analysis of time series. Statistics and econometrics used in economic analysis is full of sophisticated models not used in natural sciences because these are based mostly on the analysis of cross-section data samples. They know something about problems with the imperfect quality of data, about measurement errors, about data mining, about precariousness of all kinds of averages and other statistical characteristics. They also have some experience with computer modelling in complex systems, with pseudo-correlations, with the sensitivity of parameter adjustments, etc. For that reason they are convinced they have the right to comment on the statistical analyses of climatologists.
After this brief outline of the economic way of thinking, let me make three, hopefully explanatory, comments:
1. The economists do not believe in the precautionary principle and do not see the outcome of the cost-benefit comparisons of CO2 emission reductions as favourably as the GWD adherents. They know that energy demand and supply patterns change only slowly and see the very high degree of stability in the relationship between man-made carbon dioxide emissions, economic activity and the emissions intensity. They do not expect a radical shift in this relationship. The emissions intensity (as a macrophenomenon) moves only very slowly and does not make miracles. They are, therefore, convinced that the very robust relationship between CO2 emissions and the rate of economic growth is here and is here to stay.
If someone wants to reduce CO2 emissions, he must either expect a revolution in economic efficiency (which determines emissions intensity) or must start organizing a world-wide economic decline. Revolutions in economic efficiency – at least in relevant and meaningful time horizons – were never realized in the past and will not happen in the future either. It was the recent financial and economic crisis, not a technological miracle (nor preachings by Mr Pachauri) what brought about a slight reduction of CO2 emissions.
The GWD adherents should explain to the people worldwide that they consider the economic decline inevitable and desirable.
2. The relationships studied in natural sciences are not influenced by any rational (or irrational) behaviour, by subjective valuations of the variables in question, nor by the fact that people make choices. In social, or behavioral sciences, it is more difficult. To make a rational choice means to pay attention to intertemporal relationships and to look at the opportunity costs. It is evident that by assuming a very low, close to zero discount rate the proponents of the GWD neglect the issue of time and of alternative opportunities.
Using a low discount rate in global warming models means harming the current generations (vis-à-vis the future generations) and the undermining of current economic development means harming the future generations as well. Economists representing very different schools of thoughts, from W. Nordhaus from Yale[7] to K. M. Murphy from Chicago[8], tell us convincingly that the discount rate – indispensable for any intertemporal calculations – should be around the market rate, around 5%, and that it should be close to the real rate of return on capital because only such a rate is the opportunity cost of climate mitigation.
We should never accept claims that by using low discount rate we “protect the interests of future generations”[9] and that the opportunity costs are irrelevant because in the case of global warming “the problem of choice does not exist” (p. 104). This uneconomic or better to say antieconomic way of thinking must not be accepted.
3. As someone who personally experienced central planning and attempts to organize the whole society from above, I feel obliged to warn against the arguments and ambitions which are very similar to those we had to live with decades ago. The arrogance with which the GWD alarmists and their fellow-travelers in politics and media want to suppress the market, control the society, dictate the prices (directly or indirectly by means of various interventions, including taxes) is something I know well from the past[10]. All the old, already almost forgotten economic arguments against communism should be repeated now. It is our duty to do so.
To conclude, I agree with many serious climatologists who say that the warming we experience or is on the horizon will be very small. Convincing argumentation can be found in Ian Plimer’s recent book.[11] I agree with Bob Carter and others that it is difficult “to prove that the human effect on the climate can be measured” because “this effect is lost in the variability of natural climate changes”[12]. From the economic point of view, in case there will be no irrational interventions against it, the economic losses connected with such a modest warming will be very small. A loss generated as a result of a completely useless fight against global warming would be far greater.
[1] Klaus, V.: Modrá, nikoli zelená planeta Co je ohroženo, klima nebo svoboda?,Praha, Dokořán, 2007; English version: Blue Planet in Green Shackles, Competitive Enterprise Institute, Washington DC, 2008.
[2] The Other Side of Global Warming Alarmism, Chatham House, London, November 7, 2007
[3] The Climate Change Doctrine is Part of Environmentalism, Not of Science, The Global Warming Policy Foundation Annual Lecture, London, October 19, 2010
[4] Speech at the United Nations Climate Change Conference, New York, September 24, 2007. All these and many other texts on this topic are available on www.klaus.cz.
[5] This is what Ray Evans calls „The Theory of Climate Control“, Quadrant, No. 3, 2008.
[6] The misunderstanding of it on the side of the environmentalists brought me into the subject of GWD years ago.
[7] A Question of Balance: Weighing the Options on Global Warming Policies, Yale University Press, June 2008
[8] Some Simple Economics of Climate Changes, paper presented to the MPS General Meeting in Tokyo, September 8, 2008
[9] M. Dore: “A Question of Fudge”, World Economics, January–February 2009, p. 100
[10] I agree with Ray Evans that we experience the “Orwellian use of the words market and price to persuade people to accept a control over their lives”, The Chilling Costs of Climate Catastrophism, Quadrant, June 2008
[11] Plimer, I.: Heaven and Earth: Global Warming, The Missing Science. Ballan, Australia, Connor Court Publishing, 2009.
[12] Heartland Institute’s International Conference on Climate Change, New York City, March 2009, p. 23. Professor Carter’s arguments are more developed in his recent book “Climate: The Counter Consensus”, Stacey International, London, 2010
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