I'll Take a Little of That Global Warming

After several days of rain here in Oregon, and with the certainty of many, many more cold and rainy days yet to come, words like greenhouse and warming start to sound pretty good. Forget about a Pigovian tax, it's time for a Pigovian subsidy. Joseph Stiglitz brings me back to my senses:

Snowballing costs, by Joseph Stiglitz, Project Syndicate: The British government recently issued the most comprehensive study to date of the economic costs and risks of global warming, and of measures that might reduce greenhouse gas emissions, in the hope of averting some of the direst consequences. Written under the leadership of Sir Nicholas Stern of the London School of Economics, ... the report makes clear that the question is no longer whether we can afford to do anything about global warming, but whether we can afford not to.

The report proposes an agenda whose cost would be equivalent to just 1% of annual consumption, but would save the world risk equivalent costs that are five times greater. The ... study may actually significantly underestimate the costs: for instance, climate change may lead to more weather variability, a possible disappearance or major shift of the Gulf Stream - of particular concern to Europe - and a flourishing of disease. ...

Still, some suggest that because we are not certain about how bad global warming will be, we should do little or nothing. To me, uncertainty should make us act more resolutely today, not less. As one scientist friend puts it: if you are driving on a mountain road, approaching a cliff, in a car whose brakes may fail, and a fog bank rolls in, should you drive more or less cautiously? ...

As the Stern report points out, as usual, the poor are the most vulnerable. A third of Bangladesh will be underwater by the end of this century. The Maldives and a host of Pacific Island states will disappear: our twenty-first-century Atlantis.

To an economist, the problem is obvious: polluters are not paying the full costs of the damage they cause. Pollution is a global externality of enormous proportions. ... A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.

Although President George W Bush says he believes in markets, in this case he has called for voluntary action. But it makes far more sense to use the force of markets - the power of incentives - than to rely on goodwill, especially when it comes to oil companies...

Exxon has reportedly been funding so-called think tanks to undermine confidence in the science of global warming, just as the tobacco industry funded "research" to question the validity of statistical findings showing the link between smoking and cancer. Some companies even seem to celebrate the melting of the polar ice cap, because it will reduce the cost of extracting the oil that lies beneath the Arctic Ocean. ...

[P]rice signals that show the true social costs of energy derived from fossil fuels will encourage innovation and conservation. ... We have but one planet, and should treasure it. Global warming is a risk that we simply cannot afford to ignore anymore.

And, a bit more. According to these estimates, emissions are up significantly in recent years:

Greenhouse emissions grow more rapidly, by Fiona Harvey, Financial Times: Greenhouse gas emissions have been increasing four times as fast as in the 1990s... Research carried out for Unesco found ... that the rate of increase in emissions from burning fossil fuels between 2000 and 2005 was four times that between 1990 and 2000. ...

[T]he global growth rate was 3.2 per cent in the five years to 2005 compared with 0.8 per cent in the period 1990 to 1999, according to data from the Global Carbon Project.

Paul Crutzen, professor of chemistry at the Max Plank Institute for Chemistry in Germany and a Nobel Prize winner, said: “The jump in emissions is remarkable. One would expect a smoother transition but it seems there has been a tremendous shift in the past five years. The lower rate in the 1990s was most likely due to the collapse of the communist regime. Unfortunately, once emissions go up it’s very hard to bring them down again.”

The rate of increase will make it more difficult to hold levels of carbon dioxide in the atmosphere below 550 parts per million, cited by the recent Stern review on climate change as the limit of safety for the climate. ...