Following through from Only in it for the Gold‘s commentary about Bjorn Lomborg’s view of the economics of climate change action, these thoughts have been festering for a while now, so we may as well try them out for size.
Objections to investment in mitigation and adaptation such as Lomborg’s attempt to show that it does not make economic sense; the benefits do not outweigh the costs, especially when other investments can offer a larger return in a shorter time. This is already ‘framing’ the whole issue in economic terms, which in itself raises some questions, as Michael frequently points out. But I believe that it can be shown that the calculation of cost and benefit is, in the case of climate change, not valid.
I am not going to get into the debate about discounting rates and the fine points of economics which followed publication of the Stern report, instead, look at the two notions of ‘cost’ and ‘benefit’ and see how they might be defined.
Taking the argument for or against mitigation (the ’64 dollar question’); the claim goes that the present and near future cost of mitigation is not justified by the future benefits. If ‘future benefits’ are attributed a dollar value, it is necessary to attribute values to future produce. The assumption is that future produce has a value relative to present value and calculable by (admittedly uncertain) reference to present value. Whilst this might plausibly be objectively done for certain types of produce, it doesn’t take into account the significance of potential resource deficiency. Here I am thinking specifically about the two resources without which any life will struggle; food and water.
Reports that the Turkish government are anxious to determine the risk of a future conflict with neighbouring countries over water resources as a possible consequence of changing climate in the Middle-East, and that the UNEP is concerned that there may be widespread social unrest if grain prices continue to rise (which they will), such as was seen in Mexico earlier this year, should point us towards an understanding that the future value of these resources extends far beyond the simple attribution of a dollar value. Should the situation arise that demand for either food staples or water exceeds the supply to the extent that global distribution is no longer viable, the ‘value’ of these resources increases exponentially, as might the ‘cost’ of acquiring or protecting them.
President Putin has already announced that Russia is considering banning grain exports in the near future. Today’s USDA global crop report is likely to make grim reading, in terms of both production and productivity; Australia and Argentina have both had difficult growing seasons, and there is already a predicted shortfall of supply against demand for next year – hence the current spot prices for corn, beans and wheat reaching record levels in recent months.
Even taking action to improve gross production has problems; first, there is the competition for corn between biofuel/ethanol producers and agricultural/feed demands, then there is the critical side-effect of developing land (ie, deforestation) for greater production, especially in the light of lower productivity. All of these problems relate to the weather directly, and, via the wather, in the long-term relate to climate change.
Of course, the same argument can be made for increasing competition for fossil fuels, with market value reflecting the excess of demand over supply. So this leads us to a quandary.
It is not sensible to consider the value, or the benefit of, future resources solely in terms of their market cost, as these can be overwhelmed in significance by their social value and their benefit in terms of political and social stability. In a purely competitive economy, where self-interested nation-states must protect the interest of their own inhabitants first, the consequence of resource scarcity will inevitably be either direct conflict or internal revolution/unrest. What is the ‘cost’ of this? How can we calculate a ‘discount value’?
From this, it should be clear that there is a strong argument for mitigation, on the grounds that the relative costs and benefits accruing from resource availability and scarcity balance the other way to the traditional ‘dollar measure’. It also points me, at least, to the conclusion that what we should be calculating is the value of cheap energy provision from fossil fuels (the energy resource) over the next forty years, compared to the value (and costs) of sufficient food and water to satisfy global demand. Note that I have not even considered the population issue in this, yet, which adds another pressure point.
As things currently stand, the inability of governments to agree on an emissions reduction strategy places energy in direct conflict with food as alternative future resources. We can have the one or the other; it seems increasingly unlikely that we can have both. So, which is it to be; eating, or heating?
As no-brainers go, this one is a doozy. As ever, comments and criticisms are welcomed.