The Unbearable Lightness of the Climate Change Industrial Complex
Thursday, November 14, 2013
I recently wrote a brief summary critique of the Environmental Protection Agency’s “analysis” of the “social cost of carbon.” In a nutshell: (1) the EPA analysis fails to recognize that U.S. policies would have virtually no effect on temperatures or “climate” regardless of which climate model is assumed to be the most useful; and (2) the analysis is poor methodologically and inconsistent with analytic guidelines that have been imposed on executive agencies by the Office of Management and Budget. My observations elicited several comments, varying substantially in analytic quality, to which I respond below.
I thank the several commentators for arguments both thoughtful and collegial in response to my brief observations on the EPA analysis of the “social cost of carbon.” However, many of those reactions are not persuasive. With respect to an initial aside from Wil Burns, the director of energy policy and climate at Johns Hopkins University, AEI as an institution does not take positions on policy issues; only its scholars do so, and those views do not purport to represent the views of AEI or of its officers or sponsors.
Burns's argument that "prospects for manipulation of the [cost-benefit analytic] process are reduced by insulating the process from elected officials" is curious, in that the meaning of “insulating the process” is a good deal more ambiguous than Burns seems to recognize. There is no such thing as "objective" analysis by a government bureau headed by an administrator appointed by an elected official and confirmed by the Senate. Moreover, the bureaucracy itself is an interest group pressing for an expansion of its workload, and is very likely to be ideologically biased toward certain classes of policy prescriptions. More generally, government bureaus are not peer-reviewed journals, and a self-evaluating organization is an oxymoron.
The bureaucracy itself is an interest group pressing for an expansion of its workload, and is very likely to be ideologically biased toward certain classes of policy prescriptions.
Does Burns really believe that the EPA bureaucracy will follow wherever rigorous benefit/cost analysis leads even if the findings are diametrically opposed to the political preferences of such appointees as former EPA chief Lisa Jackson and the agency’s new head, Gina McCarthy? The question answers itself. And any such analysis inevitably requires judgments and choices that are more art than science; should the future paths of benefits and costs, for example, be evaluated at the same discount rate (that is, with the same assumed value relationship between current and future effects)? Accordingly, the avenues by which analytic "findings" favored politically can be justified are myriad; that is why the EPA “analysis” of the “social cost of carbon” is so crudely dishonest, and why demands for greater analytic rigor on the part of bureau staff are doomed to failure in terms of the insulation preferred by Burns. By the way, the very phrase — “the social cost of carbon” — itself is a construct that answers the question before it is asked, in that a sufficiently high discount rate means that anthropogenic warming yields net benefits even if one accepts the view that it would result in apocalyptic effects a mere century from now. With respect to impending apocalypse, see chapter 12 of the United Nations Intergovernmental Panel on Climate Change AR5 Working Group I’s “The Physical Science Basis”; Table 12.4 (p. 12-78) is rather more modest about doom and gloom than has been the case in the past IPCC assessment reports.
Only political accountability can impose constraints on such analytic behavior by government bureaus, in the form of a requirement that Congress explicitly approve rules that would impose costs above some threshold. This would yield a crude balancing of costs and benefits as perceived in the complex bargaining processes underlying the collective actions of Congress. That may not yield the regulatory outcomes favored by the environmental Left, but the preferences of voters and interest groups as reflected in congressional outcomes are far more consistent with the pursuit of the consent of the governed than is likely with the nostrums favored by political elites.
Having endorsed rigorous benefit-cost analysis unsullied by the unwashed fingers of politics, Burns then applauds the precautionary principle mandate subsumed within the UN Framework Convention on Climate Change (UNFCCC), by definition and from its birth a self-dealing international bureaucracy driven by politics. Burns’s inconsistency here is amusing, as is the precautionary principle itself — a framework under which no one would venture outdoors at any time for work or play, as any number of horrors loom, all of which carry probabilities greater than zero. Even indoors, of course, the precautionary principle requires eternal vigilance, as Pravda in its glory days would have put it, as the roof might collapse at any time. I am surprised that the Left has not proposed a requirement that individuals wear hard hats when indoors, a diktat qualitatively identical to seatbelt and motorcycle helmet laws and other such manifestations of nanny-statism.
The precautionary principle, accordingly, is a fundamentally totalitarian construct, as it leads inexorably toward a world in which government dictates which risks are acceptable. Since Burns offers no actual evidence on the magnitude of anthropogenic warming, the basis for his characterization of various asserted ancillary effects of climate change — e.g., “loss of species” — as "pretty egregious" is far less than merely obscure. It is essentially religious. Moreover, Burns's suggestion of an artificially low discount rate as a crude offset for a refusal to include purely speculative adverse effects utterly devoid of supporting evidence — bear in mind, again, that a sufficiently high discount rate makes global warming a net winner even if we accept the apocalyptic predictions — is far worse than merely inconsistent with his earlier demand for analysis insulated from politics. It is preposterous as a matter of analytic rigor.
The preferences of voters and interest groups as reflected in congressional outcomes are far more consistent with the pursuit of the consent of the governed than is likely with the nostrums favored by political elites.
The comedy highlight of Burns's observations is the argument that "U.S. action would help to galvanize [actions by] other countries." The global warming/climate change industrial complex has begun the 19th (!) session of the Conference of the Parties, and the only certainties are that considerable sums of other people's money will be spent, deafening self-applause on the part of the environmental Left will be the dominant feature of the proceedings, and the only agreements that will be reached will be on the restaurants to be patronized in Lima in 2014 and Paris the year after. Oh the humanity. Burns concludes with a "moral authority" argument: U.S. action will increase "pressure [on] emerging economies" (the Chinese!) to undertake actions as well. Can it possibly be the case that he actually believes something so silly?
Marilyn Brown and Matt Cox of Georgia Tech, along with Paul Baer from the Union of Concerned Scientists, begin with the observation that I fail to “deny that climate change is occurring, that humans are principally responsible, and that it is bad for the planet." Apart from the fact that those assertions are outside the scope of my brief critique of the EPA analysis, they reflect, again, the religious nature of global warming orthodoxy. The climate has been changing at least since the end of the little ice age. The degree to which those changes are anthropogenic is something that no one knows, and anyone claiming to know it is simply not being entirely honest. Nor do we know even the direction, let alone the magnitude, of feedback effects. Nor do we know whether the anthropogenic portion of climate change would be "bad for the planet." (See the point above about the analytic effect of a higher discount rate). Even something seemingly as straightforward as the surface temperature record is fraught with difficulty.
We do know that standard climate physics, and many of the general circulation models, predict that anthropogenic warming should create a slight cooling effect in the stratosphere, and that there is some satellite evidence in support. We know also that the same science and almost all of the models predict a heating effect in the tropical mid-troposphere, the evidence for which is largely lacking. Above all, we know that the policies being proposed by the Obama administration would have effects trivial at most in the context of any general circulation model and any assumed U.S. emissions path employed by the IPCC, National Center for Atmospheric Research, or any of the European agencies. So: It is likely that anthropogenic warming is real, there is little evidence that it is important, the climate models are deeply problematic, the issue of feedback effects is something about which our understanding is poor, and U.S. policies clearly would be all pain and no gain. And yet the scientific and policy certainties claimed by the global warming/climate change industrial complex are pervasive.
Brown et al’s point that "the U.S. is responsible for roughly 27% of the CO2 in the atmosphere" is irrelevant. For purposes of policy analysis, it is marginal changes that matter: Would the reduced greenhouse gas (GHG) emissions attendant upon a given policy make a difference sufficiently valuable to be worth the costs? Brown, Cox, and Baer must have in the back of their minds an argument similar to Burns’s flawed “moral authority” position: A useless gesture by the United States will engender a widespread bandwagon effect on the part of the Chinese and others. Again: Please…
Even something seemingly as straightforward as the surface temperature record is fraught with difficulty.
Brown et al also ignore, for obvious reasons, a related point that I made: Because radiative forcing (the warming effect of GHG emissions) is a logarithmic function of atmospheric GHG concentrations, the trivial effects of U.S. actions will become smaller still as GHG concentrations rise as a result of Chinese and other emissions. This means that the marginal “social cost of carbon” will decline over time. They then claim that the trivial effect of U.S. policy does not matter because "it is the cumulative impact of many small actions that leads to significant change." True enough, depending on one’s definition of “significant,” but the precise identity of those "many small actions" is not something that Brown and her colleagues bother to delineate. Please allow me to suggest one: Perhaps we should cancel COP-19 and all the subsequent international soirées, and thus eliminate the emissions attendant upon all that air travel and limousine use. Or is climate-change sacrifice only for the little people?
The Hudson Institute's Lee Lane discusses quite well the inefficiencies of the wealth transfers from the current generation of Americans largely to future generations of foreigners — transfers that would be the net result of policies designed to reduce American GHG emissions and of the EPA methodology for calculating the purported social cost of carbon. But Lane does not go nearly far enough, because attendant upon the policy preferences of the Obama administration are wealth transfers across the current generation of Americans that clearly are the motivating effects of the proposals. Policies making some energy sources more expensive inexorably will create such redistribution because states and regions differ in the proportions of their energy use derived from alternative technologies. In particular, the president’s proposals will penalize areas and industries disproportionately dependent on coal-fired power. A recent MIT study concludes (p. 34) that under a policy to reduce GHG emissions: “California, the Pacific Coast, New England, and New York generally experience the lowest cost … while the South Central [Arkansas, Louisiana, and Oklahoma], Texas, and Mountain States face the highest cost.”
That conclusion is consistent with the data on average retail electricity prices reported by the EIA, as summarized in the following table.
The winners are states with high power costs or with significant inexpensive hydroelectric resources that would be unaffected by GHG policies. The losers are states with low power costs driven by disproportionate use of coal-fired power. By driving power costs up in the latter group of states, the GHG policies would reduce the competitive disadvantages of the former group.
The policies examined in the MIT study surely differ from those that will emerge from the regulatory processes given force by the president. But if the effect of the latter is some substantial reduction in GHG emissions, in particular from electric power generation, then it is difficult to see how the distributional impacts might differ substantially from those reported in the MIT study, and it also is difficult to believe that the basic red-to-blue transfer is accidental. Instead, given that the actual climate effects of reductions in U.S. emissions would be trivial, it is straightforward to hypothesize that the direction of the wealth transfer is the central motivating objective of the policy proposal — and of the EPA “analysis” of the “social cost of carbon.”
Stephen Maloney's point that market price signals “have an event horizon that thins out to illiquidity beyond 6 months and essentially dissipates to nothing 12-18 months out” is, at best, either confusing or confused. If price signals are that evanescent, how does the private sector evaluate long-lived energy investments?
Perhaps we should cancel COP-19 and all the subsequent international soirées, and thus eliminate the emissions attendant upon all that air travel and limousine use.
Ike Kiefer’s discussion of the varying radiative forcing effects of different GHGs is useful, although a bit oversimplified; but the more important point is his recognition that IPCC in the AR5 has reduced its predictions of the adverse effects of increasing GHG concentrations considerably relative to those in the earlier reports (I noted this above). It is clear that the EPA analysis of the social cost of carbon ignores this, as the estimate per ton has increased from about $21 per ton in the 2010 estimate to $37 in the (revised) 2013 estimate. Many of Kiefer’s subsequent points about the perversities attendant upon many “environmental” policies — the renewable fuel (ethanol) standard is a good example — are correct.
Peter Gardett argues that my original comments “fail to address the real question,” but then seems not to tell us what that is, except for an admonition in favor of “earlier emissions rules,” whatever those are. His assertion that “environmental interests have… panick[ed] the general population” simply is inconsistent with the polling evidence, with the few votes on this general issue in Congress, and with the behavior of the Obama administration, which has had to resort to administrative fiat so as to move forward with its preferred regulatory apparatus.
Global warming became climate change, which became extreme weather, which became changing weather, which became SUPERSTORM SANDY! Thus do we find the global warming/climate change industrial complex clinging to anecdotes like so much flotsam in an ocean devoid of actual evidence.
Such is the essential nature of a religious movement. Once upon a time, the earth was Eden. But mankind, having consumed the forbidden fruit of the tree of technological knowledge, has despoiled it. Only through repentance and economic suffering can we return to the good graces of Gaia.
And the plight of ordinary people? For them the environmental Left has no concern and no sympathy, but much contempt.
Benjamin Zycher is a visiting scholar at the American Enterprise Institute.
FURTHER READING: Zycher also writes “The 'Science' of Global Warming,” “'Carbon Pollution' and Wealth Redistribution,” and “Methanol May Be Part of the Answer, But Not for Now.” Aparna Mathur and Adele Morris discuss “Distributional Effects of a Carbon Tax in Broader U.S. Fiscal Reform” while Michael Barone says “New Report Undercuts Global Warming Alarmists.” James Pethokoukis examines “The Role of Geoengineering in Dealing with Climate Change” and Mark Perry reveals that “U.S. Carbon Emissions Fell Last Year to the Lowest Level Since 1994.”
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