Insurance for our planet

Spending money now to slow global warming can ensure that ruinous catastrophe never happens

Oliver Tickell
guardian.co.uk,
Thursday August 21 2008 11:00 BST

Björn Lomborg accuses me of scare tactics in my article on the catastrophic consequences of a 4C temperature rise. But his confidence that global warming on this scale would have only moderate impacts, knocking global GDP by a mere 3.5% by 2300, is dangerously misplaced. Against Lomborg's outdated econometric models stands something infinitely more dependable and less reassuring: the geological record.
The Earth has in the past undergone rapid and dramatic climate change. It is quite capable of maintaining a "hothouse" state as much as 10C warmer than today with ice-free poles and sea levels up to 100m higher - as it did between 100 and 40 million years ago. And an initial warming pulse of 5C or less - caused perhaps by an asteroid strike on limestone or coal deposits releasing thousands of gigatonnes of carbon to the atmosphere, or by volcanic eruptions - can trigger further warming processes that can multiply the intial temperature rise.
It has happened before, and it could happen again. In geological terms there is little to choose between an a carbon release caused by an asteroid strike, and one caused by our burning fossil fuels. Already we are witnessing positive feedback processes in the climate system that threaten to amplify the warming pulse of just under 1C that humans have already delivered. If we ever reach 4C of warming there are likely to be many more such feedbacks, perhaps enough to flip the climate system into "hothouse" mode.
If this should ever happen, the elaborate cost-benefit analyses of Lomborg and colleagues at his Copenhagen Consensus will be so much waste paper. But that is not to dismiss economics as a whole - on the contrary. Nicholas Stern's famous 2006 review marked a major step forward in applying economics to climate change and yielded many useful findings - not least that swift and decisive action to mitigate climate change is the "pro-growth strategy for the longer term", and the sooner we do it the less it will cost us.
But Stern's analysis, though powerful, is incomplete and understates the case for action. In particular it does not adequately encompass the risks of truly catastrophic change, as opposed to modulations applied to a business-as-usual scenario. A small perturbation - a temperature rise of 1C, for example, and a sea level rise of 0.1m - can fairly be considered in conventional terms. There will be both costs and benefits, but on the whole the world will carry on much as before.
But the conventional approach breaks down entirely in the face of a very large change - such as a warming of 10C and a long-term 100m sea level rise. We need not lose any sleep over whether our descendants in 2100 might be a few percentage points richer or poorer than otherwise - after all, Lomborg assures us, they will be 1,700% richer on average. But we should be deeply concerned that we may leave them a seriously damaged world, incapable of supporting life - including human life - on anything like the scale and diversity we presently enjoy. It is hard, and arguably impossible, to put a figure on the economic cost of such an outcome, but it is certainly enormous.
And as Martin Weitzman, professor of economics at Harvard University, points out in his widely-acclaimed paper On Modeling and Interpreting the Economics of Catastrophic Climate Change (pdf), very high-cost, low-probability outcomes are systematically ignored by current economic methods, when they should be placed at centre-stage. In Weitzman's own words, spending money now to slow global warming is not about "optimal consumption smoothing" (as Lomborg would have it), but about "how much insurance to buy to offset the small chance of a ruinous catastrophe that is difficult to compensate by ordinary savings".
Taking out Weitzman's climate insurance means spending now to ensure that the "ruinous catastrophe" never happens. And to achieve this aim by investing $1 trillion per year (about 2% of World Product) as proposed in Kyoto2 is positively good value - all the more so as all the investments would bring about important additional human, economic and environmental benefits. Even without the threat of global warming the world would be better off by shifting towards renewable energy, raising energy efficiency, reversing deforestation, and ensuring the long term productivity of the world's farmland. Kyoto2 is the "best solution" that Lomborg is searching for.