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Counting the “Arbitrary” Costs of Global Warming

October 13, 2006
Trevor Butterworth
The bill is in on doing nothing about global warming – but how accurate can Tufts' study be?

If a cost of something is “incalculable” or arbitrary, how can you predict that the price tag will be 20 trillion dollars a year by 2100? Isn’t that just a guess?

Therein lies the mystery behind the latest klaxon-sounding research on global warming by two economists at Tufts University Global Development and Environment Institute. Their work was commissioned for The Big Ask, Friends of the Earth's climate campaign. As ABC (via Reuters) reported,

"The study said the cost of inaction by governments and individuals could hit 11 trillion pounds a year by 2100, or six to eight percent of global economic output then.

Most scientists now agree average temperatures will rise by between two and six degrees Celsius by the end of the century, driven by so-called greenhouse gases like carbon dioxide from burning fossil fuels for power and transport.

Already at two degrees they predict a massive upsurge in species loss and extreme weather events like storms, droughts and floods, threatening millions of lives. Polar icecaps will melt, raising sea levels by several meters.

Beyond that, the world enters into the unknown with the possible shutdown of the life-giving Gulf Stream and possibly catastrophic runaway change due to so-called climate feedback."

But according to Britain’s Independent, Frank Ackerman, one of the study’s authors, said,

"In one sense the numbers are arbitrary. What we are really talking about is whether your grandchildren will inherit a degraded world and will they ever know what a polar bear was like. We are on the brink of a catastrophe not recoverable on any human timeframe. How many trillions is that worth?"

According to the newpaper, the Tufts researchers worked,

 “from a model used by the highly respected German Institute for Economic Research. Using the World Integrated Assessment General Equilibrium Model, to give it its full name, they calculate the annual economic damage caused by a 4C rise in temperatures above their preindustrial level to reach $20 trillion. But if the temperature increase were kept to 2C, that cost could be reduced by some $12 trillion. The amount that would need to be spent on climate protection measures to achieve that reduction would be $3 trillion a year.”

The Independent also noted that as,

“opinion is still divided about how violent a change we can expect to the environment… attempting to assess the economic implications is bound to be an inexact science.”

The burning question is “how inexact?” Economics is not called the dismal science for nothing – and none of the news reports explain how the WIAGEM model is created, the assumptions it makes, the variables it accounts for and what relevant factors it doesn’t include, and how it controls for deep macro-economic uncertainties.

Thee should be of particular concern to journalists reporting the story given that Ackerman believes we are on the “brink of a catastrophe not recoverable on any human timeframe.”

On a less dismal note – relative to the report’s conclusion that is – such an economic model cannot account for technological developments over fifty to one hundred years that may offset fossil fuel emissions. The cost of such technological innovation is also impossible to measure.

To say this is not to deny that global warming exists or will not have economic costs, rather it is to call a note of caution on catastrophistomania and the ability to predict so far into the future with the appearance of so much certainty. We struggle, after all, to predict the rate of inflation over far shorter time periods.