With health care reform drawing close to its climax, the debate over global warming legislation is about to heat up. Given the scientific consensus on global warming, the main arguments won’t center as much on the science as on the supposed economic costs of the bill. That’s according to Nobel-winner Paul Krugman in today’s New York Times.
Predictions of economic doom are all wrong, says Krugman. For one thing, we can achieve big greenhouse gas reductions simply by eliminating waste; according to McKinsey, investments in energy efficiency spurred by cap-and-trade will save the US economy $700 billion by 2020 (or about $636 per family per year).
Even once the low-hanging fruit is gone, the costs of fighting global warming will be small – by 2020, about the cost of a postage stamp per day. By 2050, the cost will rise to about 1.2% of income, but we will also be 80% richer by then, so we’ll barely notice the impact; in 2009 terms, that’s about $603 per household – or $1.65 per day. Hardly the predictions of an “economy-crippling tax.”
Now, my general position is that it’s a bad strategy to argue your case using facts and figures. People’s perceptions of whether a number is large or small, expensive or inexpensive, depend on a reference point for evaluation, so it’s easy to manipulate those perceptions by shifting the reference point (for example, restaurants know that adding an expensive menu item will increase profits even if no one buys it, simply because items that were previously the most expensive appear cheaper by comparison, so people by them).
Moreover, for the layperson who hasn’t seen the math behind the figures, it’s impossible to figure out which side’s figures are correct. I say cap-and-trade will cost $160 per year, you say it costs $1,200. The numbers promoted by industry may well be manipulated with faulty assumptions, but unless I check the model, there’s no way to tell; thus, I believe whichever number supports my existing point of view. Throwing facts and figures around reduces the debate to he-said-she-said.
So I’m here to show you why it doesn’t matter which side’s numbers are correct: either way, the costs of fighting global warming are imperceptibly small.
The worst-case scenario is an analysis by the National Association of Manufacturers (
Here’s what the worst-case impact of cap-and-trade on GDP looks like:
I had a hard time labeling the graph because there was so little space between the lines. Business as usual GDP will be $23,802,000,000,000 in 2030. In the worst-case scenario, it’s $23,231,000,000,000. That comes out to a whopping 0.15% reduction in annual GDP growth. Does that really sound like a high price to pay for averting the potential collapse of civilization?
Even that figure is undoubtedly too high. Cost projections for past environmental regulations have always overestimated costs because they can’t predict technological innovations inevitably spurred by the reforms. According to BusinessWeek:
These [cost] estimates are notoriously unreliable, however, because it’s very difficult for economic models to take into account innovations that might occur as the result of a cap on carbon emissions. In fact, the reassuring lesson from history is that new regulations, such as the 1990 rules on acid rain, usually spur enough clear ideas to both reduce costs below predictions and deliver greater benefits.
In this way, making things harder on business in the short-term actually spurs economic growth. For a party that claims to believe in capitalism, Republican opponents of cap-and-trade sure seem pessimistic about American entrepreneurs’ ability to rise to the challenge and innovate as we always have done.
By contrast, climate change models typically underestimate future global warming, for two reasons. First, scientists are continually discovering new positive feedback loops that amplify global warming, which previous models didn’t account for. For example, as CO2 warms the climate, melting permafrost releases methane (an even more powerful greenhouse gas than CO2), causing more warming, causing more permafrost to melt, and so on. Second, most of the figures you see cited in the media are “middle-of-the-road” estimates that assume governments will take action to reduce CO2 emissions; without cap-and-trade, the impacts will be much worse than models project.
In other words, any time you read about global warming, you should assume the damages from global warming will be much greater, and the costs of solutions much less, than whatever the article suggests.
Has anyone estimated Gchat’s effect on GDP? I’m sure it’s much larger.
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Peyton Manning put on a show on Monday Night Football this week, beating the Dolphins despite just 15 minutes of possession, but can he keep it up? The graph below shows Peyton’s touchdown passes from 2004-2008:
Eyeballing the graph, the conclusion seems obvious: Peyton’s skills are in a steady decline. With all the time he spends doing hilarious commercials, his prowess as a quarterback is cooling off.
Of course, the problem with this graph is that it omits the full record of Peyton’s career. Here’s a more accurate graph covering a longer time range:
When you look at Peyton’s full career, it’s clear that the apparent drop off in touchdowns from 2004-2008 does not represent a long-term trend of declining skills. Rather, 2004 was a (then) record-setting aberration from an otherwise steady trend of consistent, excellent performance. If you start with the year before or after 2004, the long-term trend is apparent. But by “cherry-picking” 2004 as the starting point for my analysis of Peyton’s career, I can make it look like he’s on the decline.
I’m writing this because the sleight of hand I pulled in fabricating Peyton Manning’s imminent demise is a standard tactic used to promulgate a common misconception about global warming (most recently appearing in yesterday’s New York Times): that global warming stopped in 1998.
To show how this trickery is done, here’s a graph of global temperatures since 1998, as recorded by NASA:
2005 is slightly warmer than 1998, but it looks as though temperatures are relatively flat. Plus, 2008 is cooler than 1998, so you could conceivably argue that the earth has cooled since 1998. But you’ve seen with Peyton Manning how cherry-picking an outlying year can distort a long-term trend, so let’s see what happens if you start from the years on either side of 1998.
Starting with 1999, the trend looks like this:
Do you see global cooling? Neither do I. Similarly, starting from 1997, you get this:
In both graphs, the warming trend is immediately obvious, and in both cases, 2008 is warmer than the starting year. Go back another ten years to 1988, and the trend is even clearer:
The reason 1998 is a bad year to start any analysis of temperature is that 1998 saw the strongest El Nino on record, which pushed temperatures far above the long-term trend. (El Nino is Spanish for “The Nino.”) Just like Peyton Manning’s touchdown explosion in 2004, 1998 was an exceptionally hot year on top of an existing warming trend. Similarly, 2008 is a bad year to end a climate analysis because it saw a strong La Nina, pushing the annual temperature below the trend. If you start with an aberrationally hot year, and end with an aberrationally cool year, you artificially understate the warming trend.
Global warming hasn’t stopped since 1998. Rather, by choosing your starting and ending years carefully, you can create the appearance of a break in the long-term trend, but it’s only an illusion. To get the full picture, I’ll leave you with an image of temperatures since recordings began in the late 1800s:
The graph is full of periods of steady or cooling temperatures, but they are always followed by even greater warming. Are you really willing to take a chance that 2008 will be any different?
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