I'm aware that this isn't what you usually hear about climate change but it is nevertheless true. That the scientific consensus over what we should do about climate change is that we're doing too much, not too little. Agreed, this is the consensus from the economists who study the economics of climate change but that's fine. The economists are indeed the correct experts to be consulting on the economics of what we should be doing about climate change. And it is again the mainstream scientific consensus as well: here's Richard Tol explaining matters and Tol was the co-lead author on the economics part of the most recent IPCC report. It's not possible to get any more mainstream than that.
There is another, perhaps more serious problem with cost-benefit analysis – the optimum target is set under the assumption that it is met at the lowest possible cost. That implies a uniform carbon price – for all emissions from all sectors in all countries – that rises over time at the appropriate rate. It is highly questionable that actual climate policy will be anywhere near its cost-effective implementation. For example, there are five markets for carbon dioxide emission permits, covering part of the emissions in the EU, the US, and some developing countries. These permit markets operate on top of other regulations to reduce emissions, such as the renewables target in the EU. Elsewhere, there is a jumble of standards, subsidies, taxes, tax breaks, mandates, and so on. The actual costs of emission reduction are therefore much higher than those estimated by the IPCC.
To make the underlying point clear. Leave aside all that stuff about whether climate change is happening, whether we ought to do something, and let's just take that IPCC report as being the truth. Great, now we want to know what we should do about it. And underlying that is the following calculation. Climate change will cause some damage in the future: and trying to prevent climate change will have some costs now. Given that our overall aim is to maximise the lifestyle of the maximum possible number of people over time we have to try and decide how much cost we're willing to bear now to reduce those costs in the future. The obvious answer (and we can make it more complex with discount rates, uncertainty and so on) is that we want to only spend as much now to reduce climate change as that spending will save in the future.
If we carry heavier costs now than the benefits those costs will provide in the future then that is making us poorer now than we need be. And if we're not willing to bear the costs now that are smaller than the benefits in the future then that makes the future poorer than it need be. This is, absolutely, the standard analysis of this problem, this is the mainstream scientific consensus on this point.
It's the implication of this that so few people are grasping. It means that we don't set a limit to whatever temperature, or level of emissions, we think would be a good idea. It means that we set a level of costs that we're willing to carry and that's what determines what the temperature change will be in the future. This, in turn, means that if we are preventing future temperature rises in an inefficient manner then, given that we're using cost as our constraint, then temperatures in the future will be higher than if we used more efficient methods of averting climate change.
And that's the point that Tol is making there. The more inefficient the way we try to prevent climate change then the worse we should logically allow climate change to become. Thus, if you're worried about climate change itself you should be arguing for the most efficient methods of constraining it: that carbon tax. As that isn't what is happening, instead we have a plethora of wildly inefficient plans to try to deal with it, therefore climate change will be worse in the future than it need be.
That is, we're doing too much about climate change, not too little.
Source : http://www.forbes.com/sites/timworstall/2014/04/25/the-scientific-consensus-is-that-were-doing-too-much-about-climate-change-not-too-little/
