by Judith Curry

Because there is no good, cheap green energy, the almost universal political choices have been expensive policies that do very little. There is much greater scope for climate policies to make the total climate cost greater through the 21st century. – Bjorn Lomborg

Yesterday the U.S. Senate Committee on Environment and Public Works Subcommittee on Clean Air and Nuclear Safety convened a Hearing on Examining the Threats Posed by Climate Change. The Hearing website is [here].

There is no majority or minority statements or opening remarks on the web page. Six individuals presented testimony, five of whom I am unfamiliar with. I’ve read all the testimonies. They’re all interesting, but I think Lomborg’s testimony is important. I had the priviledge of testifying with Lomborg previously this year at this Hearing.

Lomborg’s testimony can be found [here]. From the Summary:

Global warming is real, but a problem, not the end of the world. Claims of “catastrophic” costs are ill founded. Inaction has costs, but so does action. It is likely that climate action will lead to higher total costs in this century. Climate action through increased energy costs will likely harm the poor the most, both in rich and poor countries.

The cumulative cost of inaction towards the end of the century is about 1.8% of GDP

While this is not trivial, it by no means supports the often apocalyptic conversation on climate change.

The cost of inaction by the end of the century is equivalent to losing one year’s growth, or a moderate, one year recession.

The cost of inaction by the end of the century is equivalent to an annual loss of GDP growth on the order of 0.02%.

However, policy action as opposed to inaction, also has costs, and will still incur a significant part of the climate damage. Thus, with extremely unrealistically optimistic assumptions, it is possible that the total cost of climate action will be reduced slightly to 1.5% of GDP by the end of the century.

It is more likely that the cost of climate action will end up costing upwards of twice as much as climate inaction in this century – a reasonable estimate could be 2.8% of GDP towards the end of the century.

Climate action will harm mostly the poor. Examples from Germany and the UK are given.

To tackle global warming, it is much more important to dramatically increase funding for R&D of green energy to make future green energy much cheaper. This will make everyone switch when green is cheap enough, instead of focusing on inefficient subsidies and second best policies that easily end up costing much more.

The part of Lomborg’s testimony that I found particularly compelling was the text related to energy poverty. Excerpts:

The first realization needs to be that the current, old fashioned approach to tackling global warming has failed. The current approach, which has been attempted for almost 20 years since the 1992 Earth Summit in Rio, is to agree on large carbon cuts in the immediate future. Only one real agreement, the Kyoto Protocol, has resulted from 20 years of attempts, with the 2009 Copenhagen meeting turning into a spectacular failure.

The Kyoto approach is not working for three reasons. First, cutting CO2 is costly. Second, the approach won’t solve the problem. Even if everyone had implemented Kyoto, temperatures would have dropped by the end of the century by a miniscule 0.004C or 0.007F. Third, green energy is not ready to take over from fossil fuels.

Current global warming policies make energy much more costly. This negative impact is often much larger, harms the world’s poor much more, and is much more immediate.

Solar and wind power was subsidized by $60 billion in 2012, despite their paltry climate benefit of $1.4 billion. Essentially, $58.6 billion were wasted. Depending on political viewpoint, that money could have been used to get better health care, more teachers, better roads, or lower taxes. Moreover, forcing everyone to buy more expensive, less reliable energy pushes higher costs throughout the economy, leaving less for welfare.

The burdens from these climate policies fall overwhelmingly on the world’s poor. This is because rich people can easily afford to pay more for their energy, whereas the poor will be struggling. It is surprising to hear that well meaning and economically comfortable greens often suggest that gasoline prices should be doubled or electricity exclusively sourced from high cost green sources.

Take Pakistan and South Africa. With too little generating power both nations experience recurrent blackouts that cost jobs and wreck the economy. Muhammad Ashraf, who worked 30 years at a textile plant in central Pakistan, was laid off last year because of these energy shortages. Being too old to get another job, he has returned to his village to eke out a living growing wheat on a tiny plot of land. Instead of $120 a month, he now makes just $25. Yet, the funding of new coal fired power plants in both Pakistan and South Africa has been widely opposed by well meaning Westerners and climate concerned Western governments. They instead urge these countries to get more energy from renewables.

But this is cruelly hypocritical. The rich world generates just 0.76% of its energy from solar and wind, far from meeting even minimal demand. In fact, Germany will build ten new coal fired power plants over the next two years to keep its own lights on.

A recent analysis from the Center for Global Development shows that $10 billion invested in renewables will help lift 20 million people in Africa out of poverty. But the same $10 billion spent on gas electrification will lift 90 million people out of poverty. $10 billion can help just 20 million people. Using renewables, we deliberately end up choosing to leave more than 70 million people – more than 3 out of 4 – in darkness and poverty.

The other thing that struck me in particular was the following text:

The only way to move towards a long term reduction in emissions is if green energy becomes much cheaper. If green energy was cheaper than fossil fuels, everyone would switch. This requires breakthroughs in the current green technologies, which means focusing much more on innovating smarter, cheaper, more effective green energy.

The metaphor here is the computer in the 1950s. We did not obtain better computers by mass producing them to get cheaper vacuum tubes. We did not provide heavy subsidies so that every Westerner could have one in their home in 1960. Nor did we tax alternatives like typewriters. The breakthroughs were achieved by a dramatic ramping up of R&D, leading to multiple innovations, which enabled companies like IBM and Apple to eventually produce computers that consumers wanted to buy.

This is what the US has done with fracking. The US has spent about $10bn in subsidies over the past three decades to get fracking innovation, which has opened up large new resources of previously inaccessible shale gas. Despite some legitimate concerns about safety, it is hard to overstate the overwhelming benefits. Fracking has caused gas prices to drop dramatically and changed the US electricity generation from 50% coal and 20% gas to about 40% coal and 30% gas.

This means that the US has reduced its annual CO₂ emissions by about 300Mt CO₂ in 2012. This is about twice the total reduction over the past twenty years of the Kyoto Protocol from the rest of the world, including the European Union. At the same time, the EU climate policy will cost about $280 billion per year, whereas the US fracking is estimated to increase US GDP by $283 billion per year.

JC reflections

Read the entire testimony, well worth reading and pondering.

I take such economic projections with a grain of salt (where are the uncertainty estimates?), but Lomborg’s point that the cure is likely worse than the disease is compelling.

Of particular concern is the impact of these energy policies on the poor. Lomborg makes this argument extremely effectively, and I can’t believe that more people don’t get this. Last April I gave a climate change presentation to a group of Georgia Tech alumni. Someone in the audience asked: “What did you do for Earth day?” I said Nothing. I think turning out the lights sends the wrong message. I want to see the lights go on in Africa.

We clearly need clean green energy, if not now then in the future. Lomborg argues that our current strategies may be be slowing down the development of these technologies.

I have to say, after reading Lomborg’s testimony, current climate/energy policies have never made less sense.