Calm down, dear. There’s plenty of time

02 December 2009

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The Stern Review is four years old but remains a vital tool for Copenhagen’s policy-makers. It shows them exactly what not to do, says Robert O. Mendelsohn

Only if everything goes wrong simultaneously will the environmental damage turn out to be anywhere near the level required economically to justify the aggressive carbon reduction policies being advocated by Lord Stern.

If society opts for stricter targets for carbon emissions — which is the goal for many at the Copenhagen summit — we will all be very dependent on rapid technological advances. For example, the technology needed to hold greenhouse gas concentrations at the levels demanded by climate zealots (no more than 450 parts per million by volume) do not yet exist. So those who advocate these carbon reduction targets are rather boldly assuming that new technologies will become available quickly at a reasonable cost. If that does not happen, then these targets can only be met by deep reductions in global economic output over several decades. In short, these strict targets could be dangerously expensive. This is the economic flaw in their argument.

This has obvious implications for the Copenhagen summit. Extreme targets should be abandoned in favour of a mild global climate change policy that tightens over time as the problem worsens. Looser targets both give society more time to find new technology and require less abatement. In short they are cheaper, and that means we can adjust to them more easily.

And there are better reasons to choose less stringent targets. If the costs of the programme are very high, the incentives by each country to cheat will be high and the international treaty will probably be weak. However, if the costs are low (that is, the targets are reasonable), every major polluting country in the world could afford to join. The worst environmental outcomes could be avoided and the treaty could be binding.