As we have noted before, the debate about global warming and economic growth is often phrased in stark terms.  We are told that we need to cut emissions drastically; else there would be an apocalypse. Many well intentioned environmentalists supported the Kyoto protocol probably due to such motives. Then why did Kyoto fail? 

The EU also had a mandate - 20% reduction of emissions by 2020.

But, do either of these proposals pass the smell test? Planned mandates should be examined for the initiative how much warming would have taken place? And, how much warming could have been averted if the Kyoto Protocol was followed in full? 

Unfortunately, Kyoto did not pass the smell test.

The change would have been miniscule. The temperature in 2050 would have been just 0.1 ° F lower, and even by 2100 just 0.3 ° F lower. The expected temperature increase of 4.7 ° F would have been postponed by just 5 years – from 2100 to 2105.

Let us suppose, the average temperature increase in 2100 would have been 50 °Centigrade (fictitious figure just to illustrate the point) without any Kyoto like initiative. 

If Kyoto Protocol was followed in full, the world would have had a temperature of 50 °Centigrade in 2105.

The whole impact of Kyoto – the inevitable would have got delayed by five years.

Understandably, George W Bush government was unenthusiastic about such a program. 

Even the miniscule benefit (delay the inevitable by just five years) would have come at a hefty price.  Let us examine this further.

Salient Points:

1. Kyoto protocol demanded that industrial countries should reduce CO2 emission by 20 percent below the current level between 2008 and 2012.
2. The change would have been miniscule. The temperature in 2050 would have been just 0.1 ° F lower, and even by 2100 just 0.3 ° F lower. The expected temperature increase of 4.7 ° F would have been postponed by just 5 years – from 2100 to 2105.

We know George W Bush government did not participate in Kyoto. But what if it had? With the US participation, the cost for Kyoto protocol would have been $ 5 trillion. The benefit was about 0.3 ° F – the total benefit to the world would have been $ 2 trillion. For every dollar spent, the world would have got a benefit of about 34 cents. The US would have spent about $ 6 trillion, with a trivial benefit. Europe would have paid $1.5 trillion, but would have got half in return.  Understandably, the US was not enthusiastic.

Russia and other transition economies could have sold emission permits for $ 3 trillion. The rest of the world would have received a net benefit of $1.4 trillion. However, the richer north would have paid $ 9 trillion.

With the US departure, Europe, Japan and New Zealand would have paid $ 1.5 trillion, and the temperature shift would have been a negligible 0.07 ° F by 2100.

To be clear, global warming does have a cost to the welfare of the whole world.  The total welfare of the world would definitely be higher if there was no global warming.  But, by how much?

1. If global warming was not happening, the world would be about $14.5 trillion richer. Thus, the cost of global warming can be estimated at $14.5 trillion.
2. As we have seen, the cost of compliance to Kyoto would have been $ 180 billion per year, starting in year 2008. But the inevitable would have been delayed by just 5 years.
3. If the Kyoto Protocol was implemented but that would have made practically no impact on the Himalayan climate by 2050. Glacial accumulation rates have decreased due to a change in the Pacific trade winds, and massive CO2 cuts will change very little.  For countries such as India, It may be better to invest in water infrastructure now, so that India could utilize the extra water now and prepare for when the rivers revert to normal.
4. Stabilizing the temperature rise to 4.5 ° F would reduce temperature rise by 0.86 ° F than it would otherwise have been, but at a cost of $ 15.8 trillion.
5. We have already seen that the total cost of global warming is about $14.5 trillion. If we can cap the temperature rise at 4.5 °F the cost is $15.8 trillion.
6.  Thus, the cost of a partial solution is higher than the cost of the entire problem.
7. Alternative proposals – a carbon tax that starts at $ 2 per ton and gradually rises to $ 27 per ton towards the end of the century. Total climate impact is small – it reduces the temperature increase by 0.2 ° F by the end of the century. It costs about $ 600 billion but creates twice that in benefits.

Just as Kyoto Proposal had poor efficacy, so did the EU proposal to cut emissions within the EU.

If the EU emission is cut by 20% by 2020, the temperature rise that was expected in 2100 would take place in 2102. The EU’s own estimated cost Eur 60 bn or Eur 90 bn. Every dollar we spend in the EU, we help the world by 30 cents.  And, we postpone the inevitable by just two years.  If the EU cuts the emissions by 20% by 2020, the damages are not eradicated. The same damage takes place –the temperature rise is postponed by two years (from 2100 to 2102), the temperature rise is not averted.

Growth

The worst mistake we can potentially make is to cut emissions, and reduce economic growth.  It’s true that economic growth in the present day world is fueled by carbon rich fossil fuels. Thus, there is a cost factor – if we are going for industrial growth, we need to burn more fossil fuels.  On the surface, there seems be a benefit in cutting down emission drastically.

But again, what would be the cost? And what would be the benefit?

If we cut the emissions, we also cut the economic growth.  It ensures vulnerable countries have much less resources to fight natural disasters.

As we have noted, in 2007, the EU members agreed to cut emissions to 20 percent below 1990 level by 2020.  That means a 25% cut in emissions to what would otherwise have been in 2020. But the warming would be postponed by just two years. The cost would be $ 90n billion per year from 2020.  

Let us consider two scenarios:

1. We cut emissions, but in the process, we also reduce economic growth.
2. We do not cut emissions, but economic growth also takes place.

 We have more resources in option B. We can invest a part of the extra resources in smart solutions.

If nothing is done and global warming raises the sea level, Micronesia, a federation of 607 Pacific Islands, would lose 21% of its land in 2100.

If the world follows option A, the sea level does not rise as much. In the process Micronesia would lose 0.6% of its land. Apparently it is a very good deal. But is it? 

For more than 180 of the world’s 192 nations, coastal protection will cost less than 0.1 percent of the GDP and approach total protection. This takes us to option B. We do not cut emissions as much, but we have economic growth. In the process, we have more resources.

So, if we have more economic growth (we are following option B) and invest in coastal protection in Micronesia, the country will lose 0.18% of its land in 2100. If we cut emissions and have less growth, Micronesia loses 0.6% of its land.

Similar pattern can be seen in other poster children of raising sea level as a danger argument. If we do not cut emissions, have economic growth and apply coastal protection – Tuvalu loses 0.03% of its land, Maldives loses 0.0015%, and Bangladesh loses just 0.000034%.

Thus, it makes more sense to invest in economic growth than focusing on cutting emission.

The data points for this article were mostly from Bjorn Lomborg’s Cool It. The data points are available at the website of Copenhagen Consensus Center. Here is the link for the interested reader (http://www.copenhagenconsensus.com/publication/fix-climate-advice-policymakers)