When the U.N. doesn't even try to estimate how expensive its latest climate proposal would be, that should be a red flag that most of the public would flatly reject it.

United Nations IPCC Climate Agenda Ignores Cost

By —— Bio and Archives--October 27, 2018

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United Nations IPCC Climate Agenda Ignores Cost
In a previous IER post, I explained the enormous disconnect between the work of newly-anointed Nobel laureate William Nordhaus, and the United Nations’ new “special report” calling for drastic government measures to limit global warming to 1.5°C. Specifically, Nordhaus’ “DICE” model—which was chosen by the Obama Administration as a state-of-the-art pioneer in the field—showed that doing nothing at all was a better policy than what the U.N. is currently demanding.

In the present article, I’ll use the U.N. Intergovernmental Panel on Climate Change’s (IPCC’s) own published reports—which ostensibly codify the peer-reviewed literature in several fields, in order to show policymakers and the public what the “settled science” is—in order to show that the latest calls for a 1.5°C target would be ludicrously expensive. And this is why the latest IPCC report does not present the actual cost of its proposals. It simply takes the 1.5°C ceiling as a given. There is literally no attempt to use the existing body of literature to show that the benefits of the proposals outweigh their costs.


In any other field, be it health care, retirement planning, space exploration, or even the military, the public is given some indication of how expensive the proposed policies will be. The benefits may not accrue in terms of dollars and cents; how do you put a price tag on going to the moon or fending off invaders? But the public can at least get a sense of how much they will pay for the various programs and their claimed benefits.

Yet when it comes to the UN’s latest call for transforming the global financial system and energy infrastructure, one has to scour the document to find even offhand remarks about the cost implications. There is not even a guess provided as to how expensive this program will be.

The reason, I submit, is that any plausible answer would be staggeringly high, such that any normal person would immediately conclude that the 1.5°C target was ludicrously aggressive. This is why, after all, William Nordhaus’ own work estimates that an optimal policy balancing benefits and costs would allow for warming of 3.5°C.

Two Different Approaches to Picking a Climate Policy

To reiterate, the latest pronouncement from the UN’s IPCC doesn’t really try to justify its proposals as measures that are worth the cost. Rather, it presents various considerations from the physical sciences about the bad things that could happen if global warming continues. The report then simply takes it as a given that humanity really ought to do whatever it takes to contain warming to 1.5°C because of these various threats, and discusses the feasibility and other attributes of various possible mechanisms for achieving the objective.

To illustrate the difference between this approach and how economists normally evaluate government policy, consider the following quotation from Cross-Box 5, in chapter 2 (page 2-76) of the latest IPCC report:

Cross-Chapter Box 5: Economics of 1.5°C Pathways and the Social Cost of Carbon

Two approaches have been commonly used to assess alternative emissions pathways: cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA). CEA aims at identifying emissions pathways minimising the total mitigation costs of achieving a given warming or GHG limit… CBA has the goal to identify the optimal emissions trajectory minimising the discounted flows of abatement expenditures and monetised climate change damages… A third concept, the Social Cost of Carbon (SCC) measures the total net damages of an extra metric ton of CO2 emissions due to the associated climate change…

In CEA [cost-effectiveness analysis], the marginal abatement cost of carbon is determined by the climate goal under consideration. It equals the shadow price of carbon associated with the goal which in turn can be interpreted as the willingness to pay for imposing the goal as a political constraint. Emissions prices are usually expressed in carbon (equivalent) prices… Since policy goals like the goals of limiting warming to 1.5°C or well below 2°C do not directly result from a money metric trade-off between mitigation and damages, associated shadow prices can differ from the SCC [social cost of carbon] in a CBA [cost-benefit analysis]. In CEA, value judgments are to a large extent concentrated in the choice of climate goal and related implications, while more explicit assumptions about social values are required to perform CBA. [UN IPCC Special Report, pp. 2-76 and 2-77, citations removed, bold added.]

I realize the above quotation will be opaque to the non-economist, so let me translate into plainer English: In a standard cost-benefit analysis, experts look at a proposal and try to quantify the good things it will do, as well as the bad things it will do. These benefits and costs don’t have to be narrowly economic; they can include things like “improved quality of life” and the value of having national parks. People can quibble about putting a value on subjective items, but the process can still try to quantify the pros and cons so that policymakers and the public can make a more informed decision.

When it comes to climate change policy, there have been numerous computer models and peer-reviewed papers seeking to quantify the so-called “Social Cost of Carbon” (SCC). Indeed, the Obama Administration established an Interagency Working Group that spent much manpower using three leading computer models to give estimates of the social cost of carbon, in order to guide cost-benefit analyses of proposal federal policies. By quantifying the harm of an additional ton of CO2 emissions (in a particular year), the concept of the social cost of carbon would allow policymakers to gauge the value of measures (such as a carbon tax) that would reduce emissions.

Using the cost-benefit approach, economists would say the “optimal” policy for climate change would reduce emissions until the point at which the “marginal benefit” (in the form of avoiding one more ton of emissions and not suffering the ensuing climate damages) is just equal to the “marginal cost” (in the form of reduced economic growth, coming from the political constraint on industry or households). This framework explains why so many economists favor a carbon tax set at the estimated SCC, because then businesses and households will adjust their behavior automatically until the point at which this optimum is achieved. People will reduce their emissions but only to the point at which it makes economic sense to do so. (Please note, I am very critical of this entire framework, but I’m explaining it so we can see the contrast with the latest U.N. proposals.)

However, the latest IPCC document, calling for a 1.5°C ceiling on global warming, does not adhere to this approach. Instead, it takes it as a given that governments will pursue the policy goal. There is no attempt to show that the goal makes sense. Cost considerations only come into play in the sense that some mechanisms for achieving the policy goal will be preferred to others, if the former cost less than the latter. But there is no exercise in which the IPCC tries to show that even the “least cost” methods of achieving the 1.5°C goal would deliver benefits greater than the costs.


Just How Expensive Will the 1.5°C Target Be?

We can see just how outrageously expensive the UN’s proposals are, by looking at its own assessment of what the “social cost of carbon” would have to be, in order to justify the proposals in a standard cost-benefit framework. As a (sympathetic) Resources for the Future analysis reports:

By design, the IPCC report is not policy-prescriptive. However, it does present a range of carbon prices necessary to keep emissions on track to meet the 1.5¬∫C target. The level and significant range of prices—from $135 to $5,500 per ton of carbon dioxide emissions in 2030—have caught our¬†attention…

Yes, those numbers should catch everyone’s attention. The Obama Administration’s Working Group on the Social Cost of Carbon, in its most final (Jan. 2017) update, estimated that the SCC in the year 2030 would be $50 per ton (using a 3% discount rate). Contrast that with the UN’s estimates that imply society would pay anywhere from $135 to $5,500 per ton of avoided carbon dioxide emissions. Considerations such as these are why I have been arguing that this enterprise is a farce; those pushing for aggressive government intervention in the name of climate change don’t even bother trying to adhere to their own framework. According to the Obama-era EPA’s own numbers, the latest U.N. proposals are ludicrously expensive, and will cause far more economic damage than they will avert in climate change harms.

We can use another route to get a ballpark estimate—again, I’m using the UN’s own numbers, not relying on the Heritage Foundation or other skeptical organizations here—of the total economic cost of the 1.5°C target. There have been several studies (for example summarized here and here) estimating that it will cost at least three times as much to hit the 1.5°C target compared to hitting a looser 2.0°C target.

So what does that mean, in terms of the absolute (not relative) cost? Well, relying on the most recent IPCC Assessment Report (the AR5, released in 2014), we can use the UN’s synthesis of the literature to conclude that limiting global warming to 2.0°C would hurt conventional economic growth and reduce global consumption (relative to its baseline) by between 2 percent and 6 percent by the year 2050; the median estimate they gave was 3.4 percent.


Now then, if instead governments pursued a much more aggressive policy to constrain warming to 1.5°C, then the economic fallout would be triple that figure. That means we’re looking instead at a hit to global output more on the order of 10 percent by the year 2050.

To get an idea of how expensive that is, consider: Right now U.S. GDP is some $19 trillion. A 10% hit would therefore mean a loss of $1.9 trillion just this year alone, accruing just to Americans. Now does the reader see why the most recent U.N. document doesn’t perform a standard cost-benefit analysis?


There are many problems with placing a “dollar figure” on abstract benefits such as “maintaining coral reefs.” However, it is more straightforward to place a dollar figure on the economic costs of limiting carbon dioxide emissions. Although the UN’s latest calls for aggressive climate intervention do not come with an explicit estimate of the price, the UN’s other published materials allow us to conclude that it would make Americans lose more than a trillion dollars’ worth of potential output annually.

When the U.N. doesn’t even try to estimate how expensive its latest climate proposal would be, that should be a red flag that most of the public would flatly reject it.

The post United Nations IPCC Climate Agenda Ignores Cost appeared first on IER.


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