The COP28 President, Sultan Al Jaber, is embroiled in a controversy from which he is attempting to extricate himself. At the heart of the issue is a statement he made in a video purporting that there there is “no science” supporting the notion that reducing carbon dioxide atmospheric emissions would prevent the global temperature from rising above 1.5 degrees Celsius above preindustrial levels.
In the weeks preceding COP28, two eminent climate scientists communicated contrasting perspectives about this issue. Everyone participating in or following events at COP28 needs to understand these two perspectives, and how they relate to Al Jaber’s remark—because the issues are far more nuanced and subtle than the way they have been portrayed.
What The Scientists Say
James Hansen, the foremost climate scientist in the world, issued a statement saying that his new research indicated that the future sensitivity of the climate to carbon dioxide emissions will be 60 percent higher than past estimates. This is cause for fear. Hansen warns that the planet’s temperature will increase by more than 1.5 degrees Celsius above pre-industrial levels, not just by the end of the century, but within the next six years. Most importantly, Hansen calls for a global tax on carbon dioxide emissions.
Michael Mann, a highly respected climate scientist, issued a statement to say that climate sensitivity will remain stable if the world decarbonizes now. This is cause for hope. He also states that Hansen’s assertion about temperature increase would only be germane, if the world does not immediately reduce emissions. Mann makes no mention about a tax on carbon.
Notice that both scientists’ statements are conditional. Both depend on what the speed with which the world reduces emissions. That is the critical issue around COP28, whose focus is both on increased fossil fuel consumption in the short term and increased investment in alternative energy. If at the end of COP28, fossil fuel consumption continues to rise, there is reason to be fearful about climate sensitivity and crossing the 1.5 degree Celsius threshold within the next few years.
In his current work, Hansen and his co-authors suggest that a doubling of atmospheric carbon dioxide would increase the atmospheric temperature by 4.8 degrees Celsius. Mann points out that most scientists assume that climate sensitivity is 3 degrees Celsius. Notably, in 1988, Hansen and his fellow researchers made a thirty year forecast of the global atmospheric temperature of the planet, under the assumption that a doubling of atmospheric carbon dioxide would increase the atmospheric temperature by 4.2 degrees Celsius. That forecast proved to uncannily accurate, which should give readers pause.
What Economic Integrated Assessment Models Say
In my new book, The Behavioral Economics and Politics of Global Warming, I provide an analysis of the key issues underlying the differing views. Here are a few key points.
The global community has only recently begun to move away from business-as-usual emission behavior. Because the community lacks the collective will to impose an effective global carbon tax, it is highly likely that annual global carbon dioxide emissions will actually peak before 2030. A key question is whether there is serious movement at COP28 to change this state of affairs.
The integrated assessment model developed by Nobel laureate William Nordhaus forecast that for 2025, the global ratio of climate damage from emissions to gross domestic product would be 0.3 percent. The U.S. National Climate Assessment recently estimated the value of this ratio, for the U.S., to be at least 0.6 percent, or double. This is cause for concern.
Research into this issue is providing important insights. For example, a recent academic study finds that flood risk reduced U.S. aggregate output by 0.52 percent in 2018, 80 percent of which stemmed from expectation effects and 20 percent from direct damages. In addition, the most recent annual global report of the Lancet Countdown on health and climate change reports that weak climate policies are generating rapidly increasing health risks.
Integrated assessment models hold important implications about the kinds of energy projects investors are willing to fund. These models make clear that a lot depends on investors’ required return on capital.
Nordhaus’ model implies that without a surprise surge in technologies for alternative energy and the removal of carbon dioxide from the atmosphere, projected emissions will lead the global temperature to cross 1.5 degrees Celsius no later than 2035. Indeed, the assumptions in the most recent version of his model imply that preventing a temperature rise above 1.5 degrees Celsius is impossible. With this in mind, reflect carefully about the context of Al Jaber’s “no science” remark.
What The Wall Street Journal Says
In the last two years, stock prices for fossil fuel companies have approximately tripled. An indication of this is the performance of the Energy Select Sector SPDR Fund
Greg Ip, chief economics commentator at the Wall Street Journal, analyzes the stock market data further. His discussion touches on slowing demand for electric vehicles, government investment in alternative energy, and the reluctance to impose a tax on carbon, the issue raised by James Hansen.
The Social Cost of Carbon
What the Wall Street Journal says heightens the importance of James Hansen’s contention about the global failure to price carbon at its social cost. The failure is significant because pricing carbon at its social costly would encourage the global community to transition more quickly and more strongly from fossil fuels to alternative energy sources.
While the social cost of carbon is less intuitive than a market price, the concept is straightforward to describe. Think about the current emission scenario and focus on a point in time such as 2030. Suppose the value of the damage done to global gross domestic product, post 2030, from emitting one more ton of carbon in 2030 is $50. Then economists would say that along this scenario, the social cost of carbon in 2030 is $50.
The global temperature will likely cross 1.5 degrees Celsius before 2035, if the world continues along the current scenario. If we want to prevent the temperature from crossing 1.5 degrees Celsius during the current century, not just before 2035, then we need to place a much higher value on the damage done in 2030. This might require, for example, the social cost of carbon to be $350 in 2030. Notably, the Environment Protection Agency uses $190 as the social cost of carbon.
In a sense, the “no science” controversy at COP28 is a distraction. Much more important is the failure to price carbon anywhere near its social cost. This is because pricing below social cost leads to higher costs than necessary to achieve climate goals; or worse, it makes those higher goals unattainable.
Source: Fox Business
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