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Voodoo economics reporting, 7: Failing to report the consensus that action is cheaper than inaction

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"Voodoo economics reporting, 7: Failing to report the consensus that action is cheaper than inaction"

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Earlier, I reported on the searing critique of the media’s coverage of global warming, especially climate economics, by a leading journalist (see How the press bungles its coverage of climate economics — “The media’s decision to play the stenographer role helped opponents of climate action stifle progress”).

Now the award-winning Eric Pooley, former national editor of Time, has a must-read piece in Slate, “Surprise–Economists Agree! A consensus is emerging about the costs of containing climate change. So why is no one writing that?” Pooley notes that among climate economists “there is a broad consensus that the cost of climate inaction would greatly exceed the cost of climate action–it’s cheaper to act than not to act.” There is also a consenus that preserving a livable climate is not a budget buster.

If I have one critique of the Pooley piece is that he doesn’t note that the IPCC, which reviews the whole literature in its definitive 2007 Fourth Assessment report (see here), concludes:

In 2050, global average macro-economic costs for mitigation towards stabilisation between 710 and 445ppm CO2-eq are between a 1% gain and 5.5% decrease of global GDP. This corresponds to slowing average annual global GDP growth by less than 0.12 percentage points.

But how is that possible? How can the world’s leading governments, scientifists, and economic experts agree that we can avoid catastrophe for such a small cost?

Because that’s what the scientific and economic literature — and real-world experience — says:

Both bottom-up and top-down studies indicate that there is high agreement and much evidence of substantial economic potential for the mitigation of global GHG emissions over the coming decades that could offset the projected growth of global emissions or reduce emissions below current levels.

In fact, the bottom up studies — the ones that look technology by technology, which I believe are more credible — have even better news:

Bottom-up studies suggest that mitigation opportunities with net negative costs have the potential to reduce emissions by around 6 GtCO2-eq/yr in 2030.

Wow! A 20% reduction in global emissions might be possible in a quarter century with net economic benefits!! Take that, delayers who oppose rapid, mandatory action and supposedly represent the “pragmatic center on climate and energy” — but who in fact represent the fatal siren song of “wait for new technology, wait for new technology.”

This consensus that even a very strong cap and trade bill “would have a marginal effect on economic growth,” is very broad — it is shared by the International Energy Agency and McKinsey (see “McKinsey 2008 Research in Review: Stabilizing at 450 ppm has a net cost near zero“).

Pooley’s key point is that you’d never know about this strong consensus from reading the major media, as he details in his report for Harvard’s prestigious Joan Shorenstein Center on the Press, Politics and Public Policy, How Much Would You Pay to Save the Planet? The American Press and the Economics of Climate Change.

I will reprint his entire Slate piece because over the next 12 to 18 months (and for years to come), the economic debate will be front and center in discussions of climate policy:

Ask a random sample of journalists whether our top scientists agree on the basics of climate science, and they’ll surely say yes: Greenhouse gasses are warming the Earth, man is the cause, and we have to reduce emissions, or else. But ask the same journalists whether our top economists agree on the basics of climate economics–the costs and benefits of addressing the problem–and they’ll almost certainly say no: There’s no comparable consensus among economists.

But that simply isn’t true, and it’s time for the press and public to recognize it. There is an emerging economic consensus about the cost of climate action, but most journalists have failed to notice it, so the public doesn’t know it exists. That’s a problem, since the opponents of climate action use the cost issue–and doomsday analyses based on skewed assumptions [1]–to block cap-and-trade legislation. Gullible press reports [2] treat these junk forecasts as if they are credible and give them equal weight alongside respected academic and governmental studies [3]. I spent the fall at Harvard’s Kennedy School of Government studying how this “he said, she said” reporting style muddies the waters of the climate debate, and I recently published a discussion paper [4] about it. Since the paper came out, I’ve been hearing from economists–some of whom argue that they, too, deserve a share of the blame for this sorry state of affairs. Before we look at what reporters and economists are doing wrong, let’s summarize the economic consensus.

If you look closely at what climate economists are saying, you can discern two areas of basic agreement. First, there is a broad consensus that the cost of climate inaction would greatly exceed the cost of climate action–it’s cheaper to act than not to act. Reducing greenhouse gas emissions by moving to alternative energy sources and capturing carbon from coal-fired power plants will cost less in the long run than dealing with the effect of rising sea levels, drought, famine, wildfire, pestilence, and millions of climate refugees. (There are some outliers who disagree with this–Danish statistician Bjorn Lomborg [5] comes to mind–and some respected economists, like William Nordhaus [6], who argue that future, richer generations will be able to more easily shoulder the cost burden than we can.) But influential mainstream economists from Paul Volcker [7] to Robert Stavins [8] to Lord Nicholas Stern [9] to Larry Summers [10] all agree that action is cheaper than inaction, even if they disagree on much else (Stavins can’t stand Stern’s methodology; Summers prefers a carbon tax to cap-and-trade). Stavins, director of Harvard’s Environmental Economics Program, phrased it this way in a recent paper [11]: “There is general consensus among economists and policy analysts that a market-based policy instrument targeting CO2 emissions … should be a central element of any domestic climate policy.”

The second area of consensus concerns the short-term cost of climate action–the question of how expensive it will be to preserve a climate that is hospitable to humans. The Environmental Defense Fund pointed to this consensus last year when it published a study [12] of five nonpartisan academic and governmental economic forecasts and concluded that “the median projected impact of climate policy on U.S. GDP is less than one-half of one percent for the period 2010-2030, and under three-quarters of one percent through the middle of the century.” (That’s a lot of money–U.S. GDP in 2007 was $13.8 trillion–but Stavins has estimated the cumulative cost of all U.S. environmental regulation to date at 1 percent of GDP, and it has not been an insupportable burden.) Stavins’ climate-cost calculations come in a bit higher than those in the EDF study, ranging from less than 0.5 percent to 1 percent of U.S. GDP; he describes these as “significant but affordable impacts” that are “consistent with findings from other studies.” The Stern Review on the Economics of Climate Change, an influential but controversial 2006 report for the British government, concluded that climate action would cost 1 percent of global GDP (though Stern now warns that our failure to act is raising the price tag) and that inaction could reduce global GDP by up to 20 percent.

You can’t take any of these forecasts to the bank–economic models are notoriously bad at predicting the future–but by aggregating them, as EDF did, you can get a general idea of the impact of climate action. It won’t be free. And it won’t be anywhere near as bad as the economic contraction we’re living through right now, in which U.S. GDP fell by 3.8 percent in the fourth quarter of 2008 alone. (If a cap-and-trade program were enacted by Congress this year or next, by the way, it wouldn’t start phasing in until 2012, by which time either the economy will be on the mend or a second Great Depression will have reduced our emissions the hard way.)

If economists are agreeing on so much, why aren’t more journalists reporting the good news? That’s what I tried to figure out in my Kennedy School paper, and I concluded that the press is botching the assignment. Partly, reporters have missed it because they can’t tell the difference between good and bad economic forecasts. Lame “he said, she said” reporting gives hired-gun naysayers equal weight alongside the academics, and that’s a big problem. (Telling them apart isn’t as hard as it may sound: If a forecast assumes that the transition to a clean-energy economy has already peaked, for instance, don’t trust it.) But there are others. EDF presented the emerging consensus in its paper but didn’t explicitly label it as an emerging consensus–there was no dumbed-down headline selling the big takeaway. But even if EDF had led reporters by the nose, it might not have mattered; since it is an advocacy organization, many journalists tend to discount what it says, even as they treat industry groups that oppose climate action as authoritative sources.

Here’s another problem. Journalists have missed the economic consensus partly because economists are such a querulous bunch–they argue bitterly among themselves even when they agree. When I asked Stavins about the Stern Review, for example, he criticized Stern’s methodology and didn’t mention that he concurs with most of Stern’s broad conclusions.

That sort of quarrelling masks the underlying consensus and communicates a greater degree of discord and uncertainty than actually exists. “One of the strangest things about the Stern Review was that some of the most vociferous comments came from those who drew the most similar conclusions to us,” says economist Dimitri Zenghelis, a lead author of the Stern Review. “In fact, most economists are surprisingly consistent in arguing for early and coordinated action, including cap-and trade-mechanisms.” But because of the intramural vitriol, he says, “journalists and policymakers detect a fog of disagreement and contention and, so, justifiably hold back from setting the record straight.” Economists aren’t likely to change anytime soon. So journalists need to get better at looking past their arguments and seeing where they agree. The consensus is out there.

I actually think the issue is a tad more complicated than Pooley lays out. Yes, I think it is true that most leading climate economists understand that the cost of action is only a small fraction of our wealth. But many of them so grossly underestimate the cost of inaction that they grossly underestimate the effort — and hence the cost — that is both necessary and justified. That will be the subject of Parts 8 and 9.

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13 Responses to Voodoo economics reporting, 7: Failing to report the consensus that action is cheaper than inaction

  1. “But many of them so grossly underestimate the cost of inaction that they grossly underestimate the effort — and hence the cost — that is both necessary and justified.”

    I agree – the economic debate seems surreal when authors such as Stern calmly recommend stabilization targets above 450 ppm CO2e as economically rational, while acknowledging that these levels will lead to outcomes such as loss of coral reefs: http://www.envlaw.com.au/surreal_debate.pdf

  2. I know this is a tough comment but:

    We should decouple the climate from the economy.

    Or at least separate the links between the CO2 numbers and the inflation index. Humans should decide how much climate stability is necessary and then go for it.

    To dance with economic issues means we will soon arrive at the least acceptable level of climate stability. And economists will be arguing about human sustainability levels – not scientists.

    Meanwhile a changing climate will continue to surprise us.

  3. David B. Benson says:

    And then there are some things many can do:

    (1) eat less red meat;

    (2) use biochar in your gardens and yards, “Use of biochar (charcoal) to replenish soil carbon pools, restore soil fertility and sequester CO2″

    http://terrapreta.bioenergylists.org/zteinerpoznanbiochar

    Both of which benefit both the climate and your pocketbook.

  4. john says:

    I think Richard Pauli is exactly right. Climate change should be handled national security is — because it is an existential threat that is comparable (in fact worse) than any military threat.

    You don’t see us having an economic debate about how much society should spend on Defense.

    It takes what it takes.

  5. Mark says:

    I believe the economic costs of mitigation are over-estimated by the IPCC (and other studies) – reason being that most economic studies don’t taken into account the benefits of a cleaner environment and a lower dependency on fossil fuels. Securing foreign sources of fossil fuels is very costly to our economy. Since these costs are highly subjective (although no doubt very significant), they generally aren’t included in the studies. There is also improved quality of life that comes with a cleaner environment, something that has both economic and non-economic benefits.

    On another note, those who preach of economic ruin if we lower emissions are ironically the same folks who call climate scientists “alarmists”. Who’s alarmist?

  6. Richard Tol says:

    “action is cheaper than inaction”

    what nonsense

    neither action nor inaction is defined, so their cost is undefined too

    ever since the first paper on the economics of climate change (Nordhaus, 1977), economists have argued that the impact of climate change justifies emission reduction — by more than 0% and less than 100%

    there is no consensus among economists about the optimal rate of emission reduction

    [JR: It is NOT nonsense. This blog (and IEA and McKinsey and IPCC [mostly]) has completely defined what “action” is — it is staying as close as possible to 2°C warming, keeping concentrations to 450 ppm or less, it is deploying some dozen stabilization wedges from 2010 to 2050. The “cost” of that is lower than the cost of inaction.

    Now I don’t know why you’d criticize a journalist like Pooley for not letting this out quantitatively, especially on a blog where this has been laid out quantitatively many times.

    It is true there is no consensus among economists about the optimal rate of emission reduction, but, as I’ve noted, many (if not most) climate economists “so grossly underestimate the cost of inaction that they grossly underestimate the effort — and hence the cost — that is both necessary and justified.”]

  7. Russ says:

    We should decouple the climate from the economy.

    To dance with economic issues means we will soon arrive at the least acceptable level of climate stability. And economists will be arguing about human sustainability levels – not scientists.

    This would be optimal, but I don’t see any way it could ever be possible. Effective climate action will, at least in the short term, cost something. And the enemies of action will make sure that this debate does have as large an economic emphasis as they can manage. In doing so they’ll do all they can to lie, distort, and, what they do best, monger fear.

    So I don’t think it would be wise to leave them to freely roam this battlefield. As unpleasant as it may be, climate activism must also enter the money-grubber pit.

    You don’t see us having an economic debate about how much society should spend on Defense.

    Some of us have tried to get such a debate going, oh how we’ve tried…

    Here’s another problem. Journalists have missed the economic consensus partly because economists are such a querulous bunch–they argue bitterly among themselves even when they agree. When I asked Stavins about the Stern Review, for example, he criticized Stern’s methodology and didn’t mention that he concurs with most of Stern’s broad conclusions.

    This failure seems endemic to the mass media, where everywhere, not just regarding the climate economics, we see broad agreement embellished with a little sound and fury, and the media can of course only obsess on the tawdry spectacle.

    That’s why we still have this myth of there being some big difference between Republicans and Democrats, because they disagree on stuff like abortion. And yet Obama comes into office with the proclaimed intent of continuing with the vast majority of Bush’s economic and foreign policy (which themselves were in turn largely continuations of Clinton policy, which continued Reagan etc.), even down to retreading the same personnel.

    Why is that not the story, if this really is an “independent”, public service media?

    Even on the climate crisis, let’s face it: There’s not a tremendous difference between most Reps and Dems. While it’s true that e.g. Markey is less of an outlier in his party than Inhofe is in his, still there’s the mainstream agreement in both parties that climate policy, if and when it comes, is still a political frill which must not be perceived to cost too much or otherwise unduly hinder the corporatist system.

    So even though scientists agree, and even though economists largely agree, I don’t know what would have to happen to force politicians to agree that climate policy has to be taken seriously, such that they’d want to pass a bill which imposed a real cap (as opposed to one infinitely gameable), and which they didn’t see as just another pork bonanza.

    We’re certainly not there yet, and we’re almost out of time.

  8. Dano says:

    We should decouple the climate from the economy.

    Personally, I think part of the reason we are in this mess is that our society is decoupled from nature. Furthering this decouplement won’t help us understand the consequences of our action. Or inaction.

    Best,

    D

  9. James Newberry says:

    The world’s present commercial energy system is, for the most part, perversely based on Material Resources and not on energy resources. So-called “fuels” of uranium, petroleum and coal are mined materials. They are the basis for military arsenals (bombs) and their delivery systems.

    Their civilian sustainable energy efficiency is zero and their material waste is 100%. Every irradiated fuel rod and every ton of carbon dioxide permanently burdens all society with thousands of years of poisonous debt. Economically, this means they represent substantial, permanent debt.

    A civilization that does not know the difference between matter (material resources) and energy will ultimately trend toward ecologic and economic bankruptcy. To avert climate feedbacks that are beginning to overwhelm civilization we need to transform “economics” so that we no longer entrench “the fuels of war” in the “market.” Instead, further policy should be established to invest in technologies that provide services (such as naturally comfortable net-zero buildings or rail transit systems) that are based on the abundant energy flows on earth. If we were to transform economics itself away from the metrics of “the fuels of war,” then peace and sustainability might have a chance.

  10. David B. Benson says:

    Economic theories are not well grounded in physical reality. Some few economists are (feebly) attempting to remedy this. I have my (serious) doubts regarding success.

  11. Col says:

    Well said David B. Benson on economic’s lack of connection to the physical world. But for better or worse we’re stuck with this way of thinking as a predominant way to interpret the world. Given that its interpretation is largely positive on climate action, why aren’t proponents of action quoting it more? Also, why don’t they point more often to the ridiculous double standard in its use? Love to see more talk of the economic or cost-benefit analyses of military action, for example, but you don’t of course. And love to see more talk of Bush vs Obama debt. When Obama spends hundreds of billions to help everybody it’s “inter-generational theft”. When Bush over spends by trillions in the name of security, mainstream (bully) comment speaks not of the burdens to come for future generations.

  12. The cost of inaction is infinite: we humans go extinct. That should end the economics argument. Pass this info on to the economists.

  13. John Hollenberg says:

    Just saw a recent report on the cost to Oregon taxpayers of inaction on climate:

    http://www.sciencedaily.com/releases/2009/02/090217125740.htm

    Joe, you may want to blog on these costs, which don’t appear to be in the far distant future, but in about 10 years.