A lesson in math, science, and economics for Bjorn Lomborg

Bjorn Lomborg, a long time climate skeptic, published an article yesterday in the Washington Post, asserting that reducing carbon emissions would cost the world 40 times more than any benefits we could expect to get. He claims his argument is based upon data in a forthcoming book by Richard Tol, a leading economist in assessing damages from climate change. More likely than not, he has misused Tol's analysis. Lomborg's favored estimate for the cost of inaction in the face of climate change is 3% of world GDP, a figure arrived at by William Nordhaus based upon the same research Tol uses. But that research forecasts climate damages that are far larger than the $1 trillion claimed by Lomborg. Moreover, Lomborg's previous claims that the cost of inaction would be 3% of world GDP imply a cost of inaction which is far higher than what he asserts is the cost of climate mitigation in 2100, $40 trillion. Of course, Lomborg cherry picked the 3% estimate, it being the lowest estimate available from respected climate economists. Economic analysis from the British government (the Stern Review), following Nordhaus's 3% estimate, pegged climate damages at 5-20% of world GDP. The Stern Review is considered to be the most detailed and authoritative study to date. But never mind.

Let's start with the math:

The "$1 trillion in benefits, $40 trillion in costs" claim:

Had Lomborg done his math, he would have realized that $1 trillion dollars is somewhere on the order of .03% of world GDP in 2100, if world GDP grows by 4.43% per year, the average of CIA's estimates over the last 5 years. (Last year world GDP grew by much more — 5.2% — during a period of global economic recession). Even if we make a very pessimistic assumption of 3% global GDP growth, $1 trillion would be less than 0.11% of world GDP in 2100 — in blatant contradiction with Lomborg's earlier claims that climate damages would cost 3% of world GDP. Oops. This is nowhere near 3%. His $40 trillion cost estimate for climate mitigation in 2100 would amount to 1.2% of world GDP, still much less than his preferred estimate for the cost of inaction, 3% of world GDP.

Science:

In addition to math, Lomborg has to contend with science.

Nordhaus and Sterns' estimates were based upon what we now know is outdated science. More recent studies have revealed that natural sinks for carbon are smaller than previously assumed, emissions are higher than previously assumed, the temperature response to emissions is higher than previously assumed, and observed impacts are happening faster than previously assumed.[1] There is only one direction for damage estimates: up.

Trade (more math):

Let's also address Lomborg's claims of an additional loss of $50 trillion dollars of world GDP, presumably a result from trade protectionism he argues would result from climate legislation. We should reject the premise behind this argument on two grounds:

1) Anyone who knows basic economic theory knows that markets are inefficient in the presence of "externalities," such as pollution. When such externalities exist, we have what economists call market failure — and global warming is arguably one of the biggest market failures the world has ever seen. When markets have externalities, assessing penalties on them actually improves gains from trade.

2) Lomborg seems to be assuming that carbon charges will be assessed on carbon-intensive imports in perpetuity, which implies that he is also assuming that developing countries will never undertake any emissions reductions. Surely he doesn't expect us to believe that. And even if we did, energy technologies of the future will be less carbon-intensive, so poor countries' emissions would decrease even if they made no effort to lower emissions.

Suppose for the sake of argument we take Lomborg's $50 trillion in trade losses at face value. His numbers still don't add up. He doesn't specify whether the $50 trillion is a cumulative number through 2100, or a cost in 2100, but it doesn't matter. If it is cumulative, $50 trillion would represent .07% of cumulative world GDP by 2100. If it's for 2100 alone, we still only get 1.5%. Therefore, even with Lomborg's numbers we find that the cost of addressing climate change, 1.2% of world GDP from direct mitigation (as discussed above) plus 1.5% from trade losses, would still be cheaper than Lomborg's choice of the cost of inaction (Nordhaus's 3%), as outdated as that estimate is.

And if you're concerned about Lomborg's claim that poor countries "would suffer most" from the cost of climate mitigation and border tariffs, keep in mind that Lomborg has turned the equality debate on its head. It is well-known that industrialized countries would foot most of the bill for fighting climate (according to the principle of common but differentiated responsibilities), but that the world's poor would be overwhelmingly affected by the costs of doing nothing. If Lomborg genuinely cared about the world's poor, as he professes in this article, he should be more partial to Stern's higher end estimates. Those estimates weighed damages in poor countries more heavily than those in wealthy countries, to account for developing countries' very limited ability to pay for mitigation and adaptation.

Japan:

If Lomborg wants to make the case that Japan is a good example of how unaffordable a clean energy transition is, he picked a bad country. Japan's choice to set aggressive emission standards is almost certainly due to an assessment of the costs of inaction, which could be enormous for Japan:

• Japan imports more than 80% of its energy, making threats to national security from climate change a top concern.
• So much of Japan's land is coastal, making it far more vulnerable than other countries to rising sea levels.

Setting Japan aside, what should we make of Lomborg's larger point that clean energy is astronomically unaffordable? Analyses of the costs of climate legislation (done largely in America, whose reluctance to fully acknowledge the dangers of climate change contrast sharply with the rest of the world, and virtually all climate scientists) definitively disagree. Regardless of whether the analysis is done by the opposition or advocates for climate legislation, they all find strong growth in GDP and income under climate policy, growth so high it completely swamps modest investment costs (roughly a postage stamp per day for the average American household).

Conclusion:

Let's stop all the nonsense and scaremongering. Lomborg's arguments are, using one of his favorite terms, nothing but "hot air." His math doesn't add up, he hasn't caught up with the science, and his logic contradicts established economic theory.

We need to get busy leading the world in clean energy technology, and fast. By doing so, we can create millions of clean energy jobs (click here and here), reduce threats to our national security, protect ourselves from oil price volatility and, most importantly, reduce our vulnerability to the most dangerous impacts of climate change.

[1] Solomon, S., et al. (Eds.) (2007) Climate Change 2007: The Scientific Basis, Contribution of Working Group I to the Fourth Assessment Report of the IPCC, Cambridge University Press, Cambridge, England;

Raupach, M. R., et al. (2007) Global and regional drivers of accelerating CO2 emissions, Proceedings of the National Academy of Sciences of the United States of America, 104(24), 10288-10293; Canadell, J. G., et al. (2007) Contributions to accelerating atmospheric CO2 growth from economic activity, carbon intensity, and efficiency of natural sinks, Proceedings of the National Academy of Sciences of the United States of America, 104(47), 18866-18870.

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