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Friday, April 5, 2019

Rep. Alexandria Ocasio-Cortez Is Wrong: There Is No Looming Climate Change 'Expiration Date'

By Ronald Bailey - April 05, 2019 at 02:35PM

AOCMSNBC"Climate change is different because we have an expiration date. And the IPCC report says that we've got 12 years to turn it around, " asserted Rep. Alexandria Ocasio-Cortez (D–N.Y.) during a recent MSNBC town hall. "So my concern is that we are going to be the frog in the pot of boiling water and we're going to debate and debate and debate and debate and then when we finally pass something it is a wimpy carbon tax and our kids are doomed."

The "IPCC" that the congresswoman mentioned is the Intergovernmental Panel on Climate Change, and the report is its Special Report: Global Warming of 1.5ÂșC, issued last October. This document evidently alarmed Ocasio-Cortez into introducing her ambitious Green New Deal plan, which aims to beat that 12-year expiration date by "meeting 100 percent of the power demand in the United States through clean, renewable, and zero-emission energy sources" by 2030.

Does the report really conclude that "our kids are doomed" if such steep cuts are not mandated? Hardly.

The IPCC asked a group of climate scientists to evaluate how it might be possible to keep the global mean surface temperature from rising 1.5°C above the average temperature of the late 19th century. (This is a more stringent target than that set under the Paris Agreement on climate change, which aims to keep global average surface temperatures to below 2°C by 2100.) The report's authors calculated that in order to have a significant chance of remaining below the 1.5°C threshold, the world would have to cut its carbon dioxide emissions by 40 to 50 percent by 2030 and entirely eliminate such emissions by 2050. So yes, the report says there's an expiration date if humanity decides to aim for that temperature target. But is it an expiration date for doom? Not so much.

According the report: "Under the no-policy baseline scenario, temperature rises by 3.66°C by 2100, resulting in a global gross domestic product (GDP) loss of 2.6%," as opposed to 0.3 percent under the 1.5°C scenario and 0.5 percent under the 2°C scenario. In the baseline 3.66°C projection, the estimate of future GDP losses ranged from a low of 0.5 percent to a high of 8.2 percent. In other words, if humanity does nothing whatsoever to abate greenhouse gas emissions, the worst-case scenario is that global GDP in 2100 would be 8.2 percent lower than it would otherwise be.

Let's make those GDP percentages concrete. Assuming no climate change and an global real growth rate of 3 percent per year for the next 81 years, today's $80 trillion economy would grow to just under $880 trillion by 2100. World population is likely to peak at around 9 billion, so divvying up that GDP suggests that global average income would come to about $98,000 per person. Under the worst-case scenario, global GDP would only be $810 trillion and average income would only be $90,000 per person. Doom?

It should be noted that if global average temperature can be held to below 1.5°C or 2°C, the worse-case projections for those thresholds suggest that global GDP would be $875 trillion or $870 trillion, respectively; per capita incomes would be $97,500 or $97,000. By the way, average global GDP is now $10,500 per person.

Two other recent reviews of climate change econometric projections basically confirm the IPCC report's findings in this area. A recent report by the highly respected independent think tank Resources for the Future finds that the best-performing combined climate and econometric models "imply global GDP losses of 1–2 percent by 2100." The authors note, "While these impacts may appear modest, even a 1 percent loss to global GDP is equal to $800 billion today and could be 5-12 times greater by 2100 assuming 2-3 percent annual economic growth." In other words: Due to climate change, global GDP in 2100 would be about $10 trillion lower than it would otherwise have been.

A 2018 review by the Sussex economist Richard Tol examined the 27 currently published estimates of the total economic impact of climate change. He concluded that "a global mean temperature increase of 2.5°C would make the average person feel as if she had lost 1.3 percent of her income." Certainly a loss, but not doom.

This is not to say that will not be significant changes for the worse in a hotter world. Coral reefs will likely be badly damaged by warmer seawater; storms may be worse; Arctic sea ice would disappear in the summers, possibly making northern hemisphere weather more erratic. And the summer temperatures in most American cities will resemble those that are currently several hundred miles further south and west of them.

The congresswoman is right that most carbon taxes that have so far been enacted around the world are "wimpy." Nevetheless, most economists favor carbon taxes as the way to steer the economy toward lower carbon energy sources and spur technological innovation. One Swiss study calculated that a carbon tax rebated to taxpayers would abate a given amount of carbon dioxide emissions at about one-fifth the cost of the command-and-control regulations and subsidies favored in Ocasio-Cortez's Green New Deal.

As I have reported earlier:

There is no denying that man-made global warming could become a significant problem for humanity over the course of this century. In addition, the projections of the climate and econometric models could be way underestimated. Consequently, hedge fund manager Bob Litterman sensibly argues that climate change is an undiversifiable risk that would command a higher risk premium. Litterman likens climate change risk to the systemic risk that investors face in the stock market. It is hard to hedge when unknown unknowns can cause the prices of all assets to decline at once. While Litterman's analysis strongly suggests that some investments toward mitigating climate risk should be made, it is not unreasonable to question the expensive and rushed decarbonization schemes proposed in the IPCC report.

In any case, if the worst-case projections of the IPCC report are even approximately correct, Rep. Ocasio-Cortez is wrong—our kids will not be doomed in 12 years, or even in 81.


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