The Cost of Climate Change

Andrew Burton/Getty Images A coal-burning energy plant in Bismarck, N.D. How hard to fight greenhouse gas releases depends on one’s investment outlook.

How much will climate change cost?

Later this week the Intergovernmental Panel on Climate Change will issue its fourth report, aggregating what the latest science tells us about how man-made greenhouse-gas emissions are warming the environment.

It is likely to present a dire picture. “The scientific evidence for anthropogenic climate change has strengthened year by year,” said Qin Dahe, a climatologist at the Chinese Academy of Sciences who is co-chairman of the working group preparing the panel’s report. The accumulating evidence, he said, leaves “fewer uncertainties about the serious consequences of inaction.”

Nonetheless, the report will probably do little to address the most fundamental question: how much should we spend on prevention? The best answer, still, is that nobody has any idea. What’s more, science and economics may have no better answer to provide.

Consider my recent column about the Obama administration’s estimates of how much we should pay to slow global warming. It ran into a storm of criticism.

The column focused mostly on different assumptions of how much current spending was needed to pay for environmental damage in the distant future. The critique, however, zeroed in on the estimates of such future costs.

Such estimates, my critics said, were meaningless.

William Nordhaus of Yale, to cite one estimate, wrote recently that allowing uncontrolled carbon emissions would raise the world’s temperature 3.4 degrees Celsius (6.1 degrees Fahrenheit) above that of the preindustrial era by the end of the century and cost the world a fairly modest 2.8 percent of economic output.

An influential group of scholars argue that the climate is too complex to be modeled so neatly. Assuming that growing concentrations of carbon in the air will gradually heat the atmosphere and produce a gradual accumulation of economic losses, they say, ignores all the ways in which the environment could suddenly go haywire.

“The models create the illusion of sureness,” said Martin Weitzman of Harvard, one of the first economists to look into low-probability “tail events” omitted by most forecasters.

At concentrations of 450 parts per million of CO2-equivalent greenhouse gases in the atmosphere, roughly today’s level, models may produce a decent estimate of the consequences. But at 700 parts per million â€" which the world may hit in the not-distant future â€" “you have a real lot of unknown unknowns,” Professor Weitzman said.

For instance, standard models used by scientists suggest that if the concentration of CO2 in the atmosphere were to rise to 700 parts per million, temperatures would rise some 3.5 degrees Celsius above that of the preindustrial era in subsequent decades.

But there is enormous uncertainty about this. At that level, Professor Weitzman estimates there is an 11 percent chance that the temperature increase would reach or top 6 degrees Celsius. “That would melt west Antarctica and Greenland,” Professor Weitzman said. “It’s pretty scary.”

There is no real precedent for this kind of climate change. The closest occurred in the Eocene era, more than 30 million years ago, when the earth was some 10 degrees hotter than it is today. Then alligators roamed near the North Pole.

This is all to say that my critics have a point.

There is nonetheless a shortcoming to this analysis. It does little to suggest a way forward. Positing that there are modest odds that the earth might hit a tipping point and suffer potentially catastrophic and irreversible damages far in the future might justify a more forceful effort to reduce carbon emissions than the modest estimates from standard models used today. But it says little about how much more forceful.

For instance, Professor Weitzman argues that the typical estimates from standard economic models of the damage caused by a 6-degree warming â€" about 8 percent of the consumption of a much richer world than ours far in the future â€" are nuts. But his estimate of 50 percent of future consumption is just a guesstimate, meant to stand in for Very Big Damages. “I just pulled 50 percent out of the air,” he concedes. “It seemed closer to the truth than 8 percent, but it has no claim to being objectively based.”

Moreover, as my column suggested, preventing even big damages far-off in the future can be worth very little investment in the present â€" depending on our assumptions about the returns to this investment compared to other worthwhile projects.

Even Professor Weitzman has changed his mind about that. In an article published last year, he estimated that it was worth spending 40 percent of the world’s consumption to keep a CO2 concentration of 550 parts per million from rising to 750.

Today, he is not so sure. “I would not now stand by some of those previous conclusions,” he told me. If one considers that temperature change will take a very long time to materialize, one could reach a different judgment.

Should we do absolutely everything we can to stop greenhouse gas emissions? Who knows? Professor Weitzman’s point is that doing little, on the grounds that we can wait and see what happens before taking more forceful action, amounts to entrusting our future to a high-risk crapshoot. “I would now just leave a reader to contemplate about the risks of a 6-degree-plus world, even if it materializes a century or two from now.”

That’s about as precise as the analysis can be.