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Money Is Not the Measure of All Things


I think there is a compelling case that if we were to use the best estimates from the IPCC and similar technical bodies for the most likely impacts of Anthropogenic Global Warming (AGW) on average global GDP over the next century, then proposed programs of emissions mitigation are not economically justified. Many very smart bloggers have made the point that that using average global GDP as our only metric to evaluate the relative attractiveness of potential future outcomes misses a lot of what should be important to us.

I believe that there at least two intertwined strands to these objections:

1. Average GDP misses a lot. We could wipe out the GDP of many poor countries, and still only have a small impact on global GDP, and it doesn’t seem fair to consider lowering U.S. GDP by a fraction of 1% on one hand, and entirely eliminating the country of, say, Bangladesh on the other, as equally bad in some important moral sense.

2. GDP misses a lot. There are many things that we care about that are not captured in GDP statistics, such as human health or suffering, maintaining traditional ways of life, aesthetic beauty and so on.

I’ll try to address these one at a time. I’ll rely heavily on papers by Indur Goklany in which he integrates multiple analyses, predominantly from the IPCC and the U.K. government.

1. Relative economic impacts on the developing vs. the developed world

There is some trade-off between economic growth and mitigation of AGW damages, at least in the short-term. Mitigation advocates often correctly point out that the global poor will be disproportionately affected by AGW damages, but it is also the case that they will be disproportionately affected by reductions in global economic growth. An empirical question is the relative size of these two effects.

Consider Goklany’s review of research that compares the change in climate and wealth under various U.N. IPCC scenarios for development over this century. I’ll show the two extreme scenarios to make a point: A1F1 (the IPCC scenario for global development that is most heavily dependent on fossil fuels, and has a projected increase in global temperature of about 4C by the end of the century), and B1 (the scenario that assumes greatest deployment of alternative technologies, and has a projected increase in global temperature of about 2C by the end of the century). Here are the projections for each scenario for the developed then the developing worlds:

Developed Countries Projected GDP / Capita in 2100:

A1F1: $107,300 B1: $72,800

Developing Countries Projected GDP / Capita in 2100:

A1F1: $66,500 B1: $40,200

In other words, at least through the next hundred years, the average person living in the developing world is better off in money terms with more economic development and more AGW damage, on net. A lot better off in fact: $66,500 is more than 65% higher than $40,200.

I’ll note in passing that by 2100 the average person in the developing world is projected be at a level of income comparable to the U.S. in 2009.

2. Impacts not directly captured by GDP

I’ll focus first on two items which any reasonable analyst would consider to be important, and for which we have some projections: hunger and water.

Goklany has collated detailed projections for the projected change in various metrics between a baseline year of 1990 and a projection year of 2085 from the U.K. Government’s Fast-Track Assessment of global climate change (FTA). This is a 95-year projection, and as there should be some acceleration of warming effects this should be a tolerable estimate for impacts for the highly-overlapped 91-year period from 2009 to 2100.

Here are the results for projected humans at risk from hunger under the A1F1 versus B1 scenarios:

Under either scenario, the world should be able to push those at risk for hunger down to 1% – 2% of the world’s population by the end of this century, at any projected level of warming. The realistic risks to this are war, other political action, or threats to a world of interdependent trade and economic growth. The impact of global temperature change is rounding error in comparison.

Here are the results for humans at risk of water stress:

Because wealth allows us to insulate ourselves from environmental risks, a warmer but richer world is projected to be better off on this metric.

Here are some other metrics. The percentage of the world’s population that is at risk for coastal flooding is well under 1% in the baseline, and is not projected to rise close to 1% in any scenario within the 95-year forecast. Malaria deaths have historically been in effect eliminated by societies that achieve several thousand dollars per year of per capita income — the key risk here is once again slower economic growth that keeps parts of the developing world poorer longer.

Again and again, we see the same pattern: At least for the next century, changes in human welfare, even on metrics that are not purely economic, are fundamentally driven by changes in economic development, not AGW damages. This is why it makes sense to be focused acutely on risks to economic growth when considering the overall effects of any emissions-mitigation program.