| Details1: | Climate change – opponents’ views
In his challenge paper, William Cline paints a picture of severe long-term economic
damage which would result from climate change if Mankind does not take decisive action
to reduce greenhouse gas emissions in the near future. His preferred option is the
introduction of aggressive carbon taxes which would rise steadily over the next 2-300
years. Robert Mendlesohn, in his opposition paper, takes issue with the logic and analysis
which leads Cline to these conclusions.
In Mendlesohn’s view, Cline makes the mistake of proposing very costly (and
economically damaging) strategies in the short term, to tackle potential problems which
might result from the action of future generations. He thinks it would be fairer for those
costs to be borne by those generations causing the problem, if they so choose.
Economists use a process called discounting to compare costs and benefits over time.
This accounts for the commonsense fact that it is only worthwhile spending money now
if it produces future benefits greater than the interest which could be gained by saving it.
Because Cline believes that climate damage in the far future is so important, he sets an
artificially low discount rate so that the cost of damage appears large in present-day
terms.
Another flaw is his reliance on older studies for estimates. More recently, there is
systematic evidence from the literature that likely climate damage had previously been
overestimated, since studies had failed to allow for adaptation and climate benefits. For
example, countries in the Polar Regions would receive large benefits from warming,
those in mid-latitudes would benefit as long as the average temperature rise was less than
2.5 °C, and only tropical and sub-tropical regions would suffer short-term harm to the
degree previously suggested. Overall, benefits of global warming are likely to outweigh
damage until the rise is greater than 2.5 °C, and even then the net damage would be far
smaller than originally thought.
Such reduced impacts imply that fossil fuel use would not need to be cut as drastically as
Cline suggests, and that carbon taxes should be much lower. These would start at only
$1-2 per tonne, rising to $10-20 per tonne by 2100. This does not take account of the
concerns about potentially catastrophic events such as shutting down the thermohaline
circulation in the Atlantic, but Mendelsohn believes it is unrealistic to link current
emissions to such hypothetical events.
He also argues that emissions of greenhouse gases should be controlled in the same way
as any other pollutant: by the use of tradable permits. Companies can be issued with
permits to emit a certain amount of carbon dioxide; if they release less, they can sell part
of their allowance. A further major abatement policy which Cline does not cover is
carbon sequestration: removal of carbon dioxide from the atmosphere, for example by
growing trees. Mendlesohn believes that an optimal forest management programme can
be constructed which could account for one-third of the total abatement. This would
reduce the level of emissions tax needed.
Based on the more recent evidence, none of the options proposed by Cline would be
cost-effective, in Mendlesohn’s view: only the much more modest proposals of carbon
tax rates between $1 and $20 per tonne for the next century have a benefit/cost ratio
Not to be released before 30 April 2004...
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