IAMS

• Basis of all international negotiations.

• Key Question: Good Tax on tCO~2~.

  • Higher tax → lower emissions.

  • What is the optimal path over time?

    • too fast → economy RIP;

    • too slow → too much warming.

 

Nobel Prize (appropriately so) for Nordhaus (DICE). However, I will later explain why these models are practically not very useful.

Simplified Dice Sketch

Basics

• DICE is simpler than many other models.

• DICE is one big world model.

  • there are also regional versions.

• One benevolent policy maker optimizes tax, for all of us, both now and in the future.

  • over about 200 years; by then,

  • most fossil fuels will be exhausted.

Key Inputs And Outputs

• Policy Inputs:

  • Tax rates on CO~2~ for each of 200 years;

  • no other taxes (e.g., on children).

• Model Outputs:

  • Sum consumption (incl. environmental!?);

  • Incidental: Temp, CO~2~, etc.

• Modeler’s Goal:

  • Set policy inputs to max model outputs.

Trustworthy?

• Of course not!

• But better than all alternatives,

  • which are also models — just terrible thoughtless ones.

Iam Problems

• Unreliable (and difficult):

  • more speculative even than macro models;

  • way longer out in time (100-200 years);

  • with improving sciences and uncertainties;

even Nordhaus himself has only mild intuition.

• Models need some subjective inputs, too.

• Don’t take the models too seriously!

  • They are order-of-magnitude sketch models.

Optimal Co~2~ Tax

Consumption Outcome

Look Careful

• This graph is largely based on the expected scenario.

  • How much will CO2 raise unknown risks?

• Optimal means optimal,

  • even if the change is modest.

  • But understand the relative effects!

• Even the best curbing will gain only a little consumption / benefit:

  • Limit to 2°C may be too aggressive — $$.

  • Limit to 1.5°C would be crazy — \(\).

---

• Yes, it’s optimal to curb CO~2~ via a tax:

  • Bad for us/kids, good for the grandkids.

  • The world will not end w/o intervention.

• Good intervention should not attempt to stop global warming:

  • Curbing 2°C $\neq$ curbing 0.5°C .

  • Optimal choices are about 0.5°C more or less.

  • Going for stopping warming would be crazy.

• Fact: The world will warm greatly!

  • No matter what we can reasonably do.

  • Prescriptive: Don’t bother with > 0.5°C.

Incidental: Co~2~ Emissions

Incidental: Co~2~ In Atmosphere

Incidental: Global Temperature

Adaptation Helps

• Deaths and misery will very probably not be as bad as you think.

  • Except in very unlikely but not entirely impossible scenarios.

  • Life did not evolve on a risk-free planet.

• Innovation will solve many problems.

• See next graph:

  • Blue = Climate

  • Black = Earthquakes etc.

Lomborg Example: Disaster Deaths

Optimal Co~2~ Tax Next Year

• Trump: $5 /tCO~2~ .

• Biden: $50 /tCO~2~ .

• IAWG (US): $50 /tCO~2~ .

• Nordhaus: $50 /tCO~2~ .

• Stern: $80 /tCO~2~ .

• Range: –$15 to $2,500 /tCO~2~ .

All increasing over time. All effectively phase out CO~2~ completely in $\approx$ 50 years.

Meaning Of Co~2~ Tax

$50/tCO~2~ means about:

• 50% increase in gasoline price (like Europe);

  • soon less important anyway.

• 2-5 times increase in coal;

  • RIP economically in most places.

• 2 times increase in gas;

  • deceptive, wrong— pipeline leakage!

• Trees: subsidize by $5-10 each!

Most Important Disagreement

• Nordhaus $50/tCO~2~ .

• Stern $80/tCO~2~ .

 

• Why?

  • Different assessments of science?

  • Different assessments of inputs?

  • Different assessment of objective?

Discount Rate

Biggest Disagreement:

• Quasi-Philosophical:

  • How do we value future generations’ welfare?

• What is $1 today worth in the future?

  • How much should we eat less today to give more to our great-great-grand-kids in the future?

Sensitivity Wrt D.R.

• 5% → $\approx$ $30/tCO~2~ optimal tax now.

• 1% → $\approx$ $500/tCO~2~ optimal tax now.

 

• Stern’s d.r. was lower than Nordhaus’ d.r.:

  • More acrimonious in the past,

  • but converged over time.

  • Useful to have both views.

  • Good scientific disagreement.

Who Is Right On D.R.?

• Economists’ efficiency consensus:

  • 3-5% is more reasonable than 1-2%.

  • Nordhaus higher d.r. was more reasonable on economic grounds,

  • but Stern’s higher tax estimate wins back points when CC uncertainty is added.

What Is More Ethical?

• But what is ethical?

  • Are we not stewards of Earth for the future?

  • Do ethicists pick Stern’s higher estimate?

What Is More Ethical?

• Do we owe the future a better economy or a healthier ecology?

• Would you prefer having been born

  • into the middle ages with a “healthy planet,”

  • or into today’s “unhealthy planet,” based on industrial growth and pollution?

What Is More Ethical?

• Steward for whom?

  • Not for kids. Think great-great-grand-kids.

• Six generations into the future, people will be $\approx$ 30 times wealthier than us.

• How many $$$ should today’s humanity forego so that future humanity is full 30 (not only 20) times wealthier than us?

Stewarding Decision?

Don’t overthink it.

• Humanity is not that logical and deliberate to contemplate such questions.

• How much to great-great-grand-children?

  • Interesting but largely irrelevant.

  • Our generation today makes decisions.

  • Future generations don’t vote!

  • … whether you like it or not

💊

Climate Suffering Of The Poor

• Won’t the poor suffer the brunt of CC?

  • Yes, they will.

  • Draughts, flooding, hurricanes, etc.

  • We rich should/could help them by making them richer and adapt,

  • but probably won’t…it is what it is: 💊.

• We wish poor people mattered more,

  • but they don’t, whether you like it or not 💊.

Is it the ethical choice to fight CC?

Where To Send $$$s To?

If you care for ‘others’:

• Why send to future generations?

• Instead why not send to the poor today?

 

Are not both ‘other people’ on whose behalf we rich people today should be stewards?

Help Today’s Poor People?!

• They don’t get to vote much, either.

• If humanity were more humane, what should it spend $$$s on?

  • 0.1°C less warming in 60 years?

  • Or poverty and misery today:

    • e.g., wipe out Malaria instead?

    • e.g., feed all poor children instead?

 

Read Lomborg’s Copenhagen consensus. You need not agree, but you need to contemplate the tradeoffs.

Cynical View

Just because a view is cynical does not make it wrong.

• Is each an excuse not to spend on other?

  • Though not that deliberate, anyway.

  • I wish less fortunate mattered more 💊

  • You are so blessed. Recognize it!

  • Help poorer others when you can.

  • All of us in Western universities are hugely privileged.

Read Peter Singer.

But, But, But

Don’t trust models too much!

• $50/tCO~2~ is based on expected path.

• What if Earth will suffer worse?

  • What if Permafrost melts catastrophically?

  • What if the Indian monsoon stops?

• Humanity should be very worried about uncertainty, not just expectation.

  • perhaps even if we cannot fix it.

Reasonable Assessment

• The Economist: World GDP: $250 vs. $258 trillion w/o climate impact. then subtract off cost.

• More interesting information: The Economic Costs of Climate Change

Conclusion

• IAMs are sketch models.

  • They are not reliable, and

  • useful for orders of magnitudes only.

• Newer IAMs better about uncertainty.

• $50/tCO~2~ tax immediately would be great,

  • but I would take $30/tCO~2~ or $80/tCO~2~.

• Expected net benefits are ‘modest’.

Instead, the world has a crazy negative CO~2~ tax today!