# Chapter The Wrong Questions Let's take stock. In previous chapters, we explained most of the contemporary discourse in today's earth sciences and social sciences. A few key observations stand out: * OECD residents consume about three times as much energy and emit about twice as much CO2 per person as non-OECD residents. However, the OECD contains only 18% of the world population today. * The world will soon have more people, use more energy, and emit more CO2 --- though nowadays increasing only in non-OECD countries. * The planet's temperature is rising. Even though the world will not come to an end, climate change will greatly alter our planet. * When individuals' actions incur externalities, economics says that a social dictator should curb free-riding by imposing appropriate taxes. * The integrated assessment models suggest optimal CO2 tax policies, starting somewhere around $50/tCO2 today, rising to about $300/tCO2 by the end of the century. If you think these summarize the world's dilemma completely, we have to disappoint you. You have not even yet confronted the biggest problem! Worse, nearly every scientist, politician, activist, and interested party (including you) is already aware of this problem and will acknowledge it if asked --- but then immediately (un-)merrily go back to ignoring it. The wrong question is ``what *should* the world set as its cost of CO2?'' The right question is ``what *will* the actual decision makers do,'' and ``how can they be influenced, and what will be the result for the world?'' ## Section: Problems, Choices, and Outcomes The first issue to keep in mind is that talking about changing human emissions starts at the wrong point. Emissions are outcomes. They are determined by decisions based on cost-benefit analyses of economic actors and harsh realities. For example, people choose to have children, live their lives, and die. Their emissions are not their primary decision. They are a by-product primarily related to their uses of energy and consumption of food. If we want to influence global emissions, we need to influence whatever goes into their individual decisions. We must analyze and understand choices, not just byproduct outcomes. The second issue to keep in mind is even more important. So far, we have analyzed the following problem: * This requires an economic analysis of what would be the optimal policies from a collective perspective---here what's best for humanity and possibly for the overall biosphere. It is the domain of integrated assessment models. The collective problem is about quantifying the effects of pollution in the context of global warming. It helps answering questions such as: * How quickly should humanity ideally get off fossil fuels? * * What price should humanity pay for the privilege of emitting CO2 (the social cost of CO2)? * How should humanity best transition to clean(er) energy? Many climate scientists have focused their careers on answering these collective-problem questions. When Nordhaus and Stern work out the social cost of carbon-dioxide in their integrated assessment models, they are working out answers to collective problems. When you read in the media about the dire effects of climate change, most articles are written from the point of view of the collective problem. The reason why you purchased our book may well have been because you wanted to find out how much the world should reduce its emissions. Yet, with the exception of the insight that humanity is burning too much fossil fuels, the collective problem is largely just an intellectual exercise. The reason why this is so is comically simple: humanity does not make decisions. We need to analyze a different problem. * This requires an economic analysis of those who make the decisions --- depending on the context, this can be individuals or governments. The collective benefit exceeds the individual benefit, and currently by a lot (to the tune of $50/tCO2). When individual decision-makers choose to reduce their fossil-fuel use, the rest of the world benefits as well. Thus, we know that the world would be much better off with greatly reduced CO2 emissions; and that cheap mitigation actions would be in the global interest. They would make humanity better off. Our book considers the primary discussion focus on the collective-choice problem to be a conceptual mistake. It is a common mistake --- made by natural scientists, social scientists, politicians, activists, and ordinary people alike. Even economists often discuss the individual problems only as an afterthought to the collective problem. Although Nordhaus, Stern, and almost everyone else have thought much about free-riding, even they have almost always ended up going back primarily to arguing about what the world should do and how much it should tax CO2. [ FOOTNOTE: Nordhaus in particular has been trying to offer potential solutions to the global public-goods problem. We will talk about his preferred approach in the next chapter. (Stern has recently focused more on local effects and actions.) ] Many people will now retort to our assessment with ``of course we knew this'' --- and they are correct. The problem has been hiding in plain sight. Yet, the public debates suffer from tunnel vision. They fail to put the horse before the cart. The real problem is not the collective problem but the individual problems. The fact is that the latter (individual) problems largely render discussion of the former (collective) problem moot. Then why are we all spending so much time discussing it? Why are you always instinctively making climate-related arguments that begin with the words *The world should ...*? It's futile. The world is not the Star Trek [Borg](https://en.wikipedia.org/wiki/Borg) . Environmentalists sometimes accuse others of being callous to the misery that climate change will cause. How may millions are non-activists willing to sacrifice? But are the environmentalists themselves callous to the misery that forced energy and development restrictions would cause? How may millions are the environmentalists willing to sacrifice? And what difference would it actually make if we knew the answers? ## Section: Can We Go It Alone? I am a decision-maker. You are a decision-maker. To a more limited degree, so is the United States of America. Its decisions are often the outcome of a political process, which need not produce consistent or rational decisions. But nation states are the largest effective decision-makers on the planet, so we will start with them. In fact, we will start with just us (the USA) alone. For now, assume that the rest of the world will do whatever it will do (hopefully more). We cannot tell them what to do, nor can we take credit for what they will do. And please always keep the following inconvenient fact in mind: ### Can the USA Go It Alone? The crib sheet in the appendix summarizes many important facts in our book. Recall the average energy consumption figures per person per day as of 2022: [insert ctabular here] Now imagine that the USA could reduce energy consumption to the European (and Chinese) standard within one generation. (The Indian standard --- with its large poor rural areas --- seems out of the question.) Multiply the largest imaginable relative reduction by the U.S. population of 330 million. Maybe we could collectively wring out a very, very tough 15 PWh (out of 26 PWh) via forced reductions in our economic activity --- and by this we mean reductions that could leave us behind the Europeans in terms of standard of living and bring us down about to the Chinese standard of living. (No serious economist believes that achieving this large a CO2 reduction within one generation via taxes --- that is, the good old-fashioned IAMs way --- could be achieved without such large economic sacrifices. The idea that speedy drastic reductions in CO2 are cheap is simply absurd. Only small reductions are.) Remember, other nations will do what they will do. With a predicted world energy consumption of 260 PWh by 2050, our 15 PWh reduction would leave 94% of primary energy consumption untouched. It takes approximately [200-250](https://www.nature.com/articles/s43247-020-00064-9) GtCO2 to change Earth's equilibrium temperature by 0.1\dC. If U.S. annual emissions of 5-6 GtCO2e per annum today were curtailed to about 3 GtCO2, it would take about a century to lower the equilibrium temperature by 0.1\dC, from 3.0\dC\ coming to 2.9\dC\ coming. Furthermore, the nature of global warming is such that the beneficial climate effects would take decades to occur and our 6% contribution would be small enough not to cause a noticeable effect in warming. Realistically, our 15 PWh reduction could reduce global warming by about 0.05\dC\ in 2100, out of total global warming of about 3.0\dC. It could be measured with satellites but it would not be noticed by the average American. To implement our American belt-tightening program would also require not just one charismatic politician but a series in succession to cover decades of needed commitment. It is difficult to see how this could plausibly happen in the context of the American political system. Remind us --- why are we even discussing the United States fighting solo against climate change in a painful way? This approach seems to border on the absurd. ### Can Europe Go It Alone? The only countries that have achieved reasonably notable reductions in their CO2 emissions through policy-based belt-tightening interventions are Japan and European Union countries. Although we laud their intent and results, success in these regions is not success in the world (and most of their painful belt-tightening efforts are unlikely to spread to the rest of the world). Japan emitted about [1.0 GtCO2](https://www.macrotrends.net/countries/FRA/france/carbon-co2-emissions) , Germany about [0.7 GtCO2](https://www.macrotrends.net/countries/FRA/france/carbon-co2-emissions) , and France [0.3 GtCO2](https://www.macrotrends.net/countries/FRA/france/carbon-co2-emissions) . The European part of the OECD together emitted \eiabrowser{10-IEO2021}{4.0 GtCO2}. With projected further population declines and more belt-tightening policy changes, the European Union is now expected to wring out a further drop from 4.0 GtCO2 to about 3.7 GtCO2 by 2050e. As welcome as these 0.3 GtCO2\ reductions are --- especially in the context of reducing not only CO2 but also local particle emissions --- they are less than *a drop on hot stone* using the German idiom here (i.e., immaterial) as far as global climate is concerned. ### Can the OECD Go It Alone? What if the OECD were of one mind (and it rarely is)? Could coordinated decisive OECD action based on CO2 taxes directly and effectively shrink world emissions by shrinking their own (OECD) emissions? Still no. The OECD could only slow the growth in emissions. It could not produce a net reduction in world emissions from today's level. Even if the OECD could shut down all economic activities and return to the stone age, and even if the OECD closed-down industries did not simply relocate to Asia to merrily continue operating there, the world could still not maintain today's emissions, much less reach a zero-emissions future by the end of the century through belt-tightening. Instead, the world would be back to today's energy use by around 2060, i.e., roughly within one generation --- and with emissions rising in the following years. We must not ignore the inconvenient truth that *energy use and emissions are no longer primarily a rich-world luxury problem*. The OECD is already responsible for only about one third of the world's energy consumption and this share is declining. Within one generation, it will be less than a quarter. If we want to make a dent in world problems, we ``elitist'' Western environmentalists must lose our ethnocentrism. Regardless of what you consider fair or unfair, the hard fact is that there can no longer be a reduction of global energy use unless non-OECD countries greatly reduce their emissions, too. However, there is one important argument in favor of the effectiveness of a CO2 tax being enacted in OECD countries even if those countries are responsible for only a small share of world emissions. It relates to the more promising way of fighting emissions via clean-energy innovation. In addition to the direct effect that the tax will have on OECD countrys' own emissions, there is an indirect effect. With a greater incentive to reduce emissions, industries in tax-enacting OECD countries will redirect their research and development towards finding cleaner solutions. Arguably, industries in these OECD countries are also best positioned to invent the kinds of solutions that could greatly reduce the cost of clean energy *everywhere*. Industrialized countries could then export such cheaper cleaner technology to non-OECD countries --- and this could make a big difference. We want to emphasize again that we are *not* arguing against the usefulness of painful carbon taxes. We are only arguing that we believe that they will not be enacted by enough of the most important emitters in order to significantly slow the pace of global warming. ### Can't the Non-OECD Join In? Painful forced constraints on growing energy use in non-OECD countries seem even more unrealistic. The residents of these countries want to escape poverty. Their energy consumption is not a luxury problem. Bangladeshis, Indians, and Pakistanis as well as Africans, South-East Asians, and Latin Americans will put great pressures on their leaders to improve their standards of living --- and with it their energy consumption. It seems absurd to imagine that the Indian population would be willing to forego development for the sake of the greater good of the world, much less on behalf of Western climate activists. Climate protests are not likely to meet with great success in India, China, Africa, and beyond --- except when they are about *other* countries. ### Could the OECD cover the Non-OECD Costs? The world emits about 40 GtCO2 per year today. By 2050, it will emit about 45 GtCO2 under RCP 4.5 and 60 GtCO2 under RCP 7. Let's assume that the difference of 20 GtCO2 is the removal target. (Recall from Chapter X that this would reduce global warming by about 0.1\dC\ by 2050 and 0.3\dC\ by 2100.) What if other countries --- like China and India --- are unwilling to participate in the reductions? Could the OECD countries take care of the entire 20 GtCO2\ alone? Could it pay the others? Assume for illustration that it costs \textbf{$50} to remove one ton of CO2. Why $50? This $50/tCO2 is the social cost of CO2 in Nordhaus' integrated assessment model. It is also far below the current industrial sequestration CO2 cost (of $200--$300/tCO2) that some developers are still shooting for --- and that the media are often describing with such ringing endorsements as ``the world needs sequestration to reach its net-zero goal.'' However, $50/tCO2 is also far above the cost of smarter tree-based sequestration (of $10/tCO2). Similarly, simply avoiding CO2 omissions would also be cheaper than sequestration. The sequestration cost further depends on how quickly and how much we want to reduce CO2 emissions. Removing the first gigatonne of CO2 could be dirt-cheap, but removing 20 GtCO2 too soon could drive the cost well above $50/tCO2. For our illustration, we will stick to our $50/tCO2. The total removal cost for 20 GtCO2 would then be about $1 trillion per year or 1.2% of world GDP in 2020. We will need to assess how to cover this 1.2% of world GDP. In purchasing power, world GDP is about [insert ctabular here] % To consider a more local example, the going-it-alone choice for Los Angeles, an area with about $1 trillion in GDP and 50,000 teachers, is roughly doubling every teacher's salary, hiring twice as many teachers, or spending $100,000 per homeless person on the one hand, vs. reducing Earth's warming in 2050 from 2.0\dC\ to 1.995\dC\ on the other hand. What would the average Angelino vote for? We can also calculate per-household equivalents. The CO2 reduction cost would be about the same as [four to six months of rent](https://www.rismedia.com/2021/10/08/us-households-spend-27-income-rent/) for a typical two-income household in the United States. Is this a realistic ask? We will return to how realistic cost sharing among countries is in the next chapter. Let us just close with the observation that China and India are growing rapidly while the OECD is not. Within one generation, the EIA expects the following: [insert ctabular here] By 2050, China and India together will host more economic activity than the OECD. It is true that all countries will be richer and thus that removing 20 GtCO2\ will become relatively more affordable --- but will OECD citizens find it more galling to carry the world cost while China and India will have greater GDP, faster growth, and much higher emissions? If you need further evidence, the [Byrd-Hagel](https://en.wikipedia.org/wiki/Byrd%E2%80%93Hagel\_Resolution) Senate resolution of 1997 passed *unanimously* 95-to-0 in the U.S. Senate --- itself a near-miracle to see so much agreement across the aisle. It stated that the US should not sign a climate treaty that would ``mandate new commitments to limit or reduce greenhouse gas emissions, unless ...[it]... also mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for Developing Country Parties within the same compliance period.'' We are not done yet. Our estimates are in line with the fact that developing nations have recently asked for [$1.3 trillion](https://www.wsj.com/articles/climate-finance-china-india-11636039142) *per year* in climate support at recent climate conferences --- *or else* they plan to ramp up their fossil fuel consumption. We note that many of these countries have notoriously high levels of corruption. Who will vote to send money to Congolese warlords? And even if the OECD were to volunteer to pay, how would donors channel the funds in a way that would accomplish their emissions reduction intent? What if they then asked for more? The key question to us is not whether it would be appropriate or ethical for the OECD to send this much money abroad, but whether it seems plausible to expect it. How realistic would you judge such a transfer? We believe the answer is exceedingly unlikely. There are a lot of things that we think the United States and OECD might do, but ``just say no to fossil fuels,'' pay off poorer countries, and see Earth warm up 2.5\dC\ instead of 3.0\dC\ is not plausibly one of them. Once again, remind us --- why are we even discussing this? This approach --- of the OECD paying non-OECD countries more than token amounts --- seems to border on the absurd. ### Money and Mouths % In October 2021, a small number of [climate activists](https://apnews.com/article/joe-biden-business-environment-and-nature-arrests-environment-52190f9314ae79e96cf12f05668d30d2) held a one-week protest in Washington against fossil fuels. Although we share their goal of reducing emissions, we do not believe that most of them understand what it is that they are [asking](https://www.reuters.com/business/cop/young-activists-take-spotlight-day-un-climate-talks-2021-11-05/) for. If their ideas determined policy, the outcome could be a greatly reduced standard of living with zero noticeable effect on global climate change --- in our opinion the worst of all worlds. Instead, we wished that would be demonstrating for policies that could plausibly reduce global emissions, the CO2\ concentration in the atmosphere, and global warming. % Thus, for readers that have skipped earlier chapters, let us again briefly reiterate the tradeoffs. % The estimated global temperature is expected to rise by about 2-3\dC\ relative to preindustrial times, about 1--2\dC\ more than where it is today. Global climate conferences argue about what has to be done to reduce warming by about [0.3--0.5\dC](https://www.washingtonpost.com/world/2021/11/10/15c-2c-climate-temperature-targets-cop26/) . And make no mistake: 0.5\dC\ would be a big deal with big consequences for the environment. However, for the OECD, radical coordinated decarbonization could at most slow it down by 0.1--0.2\dC. The country with the most concern for climate change and the most public discourse on the subject may well be Germany. In a November 2021 survey, German 14- to 29-year-olds expressed that [climate change](https://www.tagesschau.de/inland/jugend-studie-klima-101.html) was their number one concern. How much skin are they willing to put into the game? Among those surveyed, 60% regularly travel by car and more than 80% cannot imagine life without one. Only 19% are willing to make the sacrifice of life without a car. Only 27% are willing to forego flying --- recall from Chapter X that air travel is the biggest luxury carbon emission that most of us will rack up within our lifetimes. It's easy to protest against *the other bad guy*. But even when it comes to foregoing what can only be described as superfluous luxuries, their own sacrifices become suddenly much more difficult. % Don't shoot the messenger. It's not our fault. We wish it were not so. In Morpheus' words in [The Matrix](https://www.youtube.com/watch?v=zE7PKRjrid4) , all we are offering is the [red pill](https://en.wikipedia.org/wiki/Red_pill_and_blue_pill) --- the unpleasant truth, nothing more. % Let's try another thought experiment. Assume that the benefits of reduced global warming are shared proportionally according to GDP. Again, let's say that the true benefits of eliminating each ton of GtCO2\ are $50/tCO2 worldwide. % If the world can remove one ton of CO2\ for $30, it is better off by $20. What about the U.S. alone? It would gain $20% x $50 = $10$. Its net would be $+$10-$30= -$20$. Unless the benefit of the reduction to the world is $250, it is not in the U.S. self-interest to remove it. For the OECD as a whole, the benefit has to be at least $125. Going smaller, California is about 3% of the world economy. Unless the benefit is more than $1,500/tCO2, reducing its CO2 emissions is shooting itself in the foot on behalf of global altruism. For Los Angeles, the equivalent amount is about $5,000/tCO2. Put differently, even a large and wealthy city like Los Angeles cannot ``fight climate change.'' % The calculations change if the fact that, say, Los Angeles adopting carbon sequestration also make others adopt it. Again, we will come back to this issue. % One could think of even more absurd scenarios. What if California alone were to decide to fight climate-change? With $3 trillion in GDP, it could dedicate its entire public expenditures to reducing global warming by 0.3\dC. % Could it be even faster? Turn off the electricity deliberately for the equivalent of just one week *per year*, and we predict that there will be riots. Turn off electricity just for 6 hours *every day*, prohibit only a quarter of current transportation, and stop a quarter of all industrial production, and we predict that the resulting popular uprising would send the responsible environmentally-conscious government to the guillotine. Forced economic activity reduction to achieve energy savings in the OECD, sufficient to reach meaningful emission cuts, are just not in the cards. Although the emissions that matter are not country emissions but world emissions, the decisions that matter are country choices not world choices. Realistically, this means that 1. Climate-related policies that are *much* too expensive for their local benefits will not be adopted. (These local benefits do include reduced local pollution and more clean energy-related jobs.) 2. Climate-related policies that do not induce growing numbers of actual decision-makers to voluntarily adopt them (such as cheaper clean technology) cannot be trusted to be adopted widely enough to meaningfully reduce emissions, CO2 concentration in the atmosphere, and thus eventually global warming. 3. Climate-related policies that will not be adopted in non-OECD countries will always be very limited in their potential. Real solutions have to be adopted worldwide. Our suggestions are not as passive as those proposed by ardent free-market proponents. There are a lot of steps that countries could take that would not be greatly against their self interests. They could accelerate the transition to clean energy. (There are many market impediments involved in fundamental energy research, development, and deployment.) There are terrible local health effects of particle pollution that could be reduced with modest fossil-fuel taxation. Yet our suggestions are also not as active as those proposed by many climate activists. This is not because we are climate-change deniers or fossil-fuel advocates. (On the contrary!) However, this is not the point. Our suggestions are more limited because we believe that ``the world'' has fewer levers than activists realize. The world is all about the individual problems, not about the collective problem. *Pies in the sky* do not make the air any cleaner. * Bureau, Dominique, Alain Quinet, and Katheline Schubert, 2021, [Benefit-Cost Analysis for Climate Action](doi:10.1017/bca.2021.11) , Journal of Benefit-Cost Analysis. This recent [paper](https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/benefitcost-analysis-for-climate-action/AFAA7A4C26F641C5E9AA917E2589A2CF) describes some of the challenges in accomplishing emission reductions in a cost-efficient way via policy interventions. * [Nordhaus, William](https://en.wikipedia.org/wiki/William_Nordhaus) , 2018, [Nobel-Prize Lecture](https://www.nobelprize.org/prizes/economic-sciences/2018/nordhaus/lecture/) . It describes his proposals of climate compacts to reduce the free-riding individual problems. We will return to this in the next chapter.