Tuesday, April 13, 2010

Where we sit one third of the way through 2010

I have to say that I am convinced that there is clearly something going with respect to climate, that there is a warming trend happening that is occurring very quickly. I am also convinced that human activity is having an impact on this and that if there were a reduction in green house gases the warming trend would be slowed and the climate would be more stable.

I did not jump on this bandwagon in some sort of fear of an impending Armageddon. What ever happens, the world will survive, it has survived much worse in the past. The issue really is what will it cost to mitigate climate change and is that expense worth it? Can we afford to make changes? Can we afford not to?

Climate change has been in the headlines for two decades now. There is clear evidence of the rising CO2 levels and the source of the CO2. But the world is acting as if it is not happening or freaking out as if the world is going to end. There is very little serious long term thought and planning happening with respect to the issue. The issue has also been high-jacked by the left as a way to attack the capitalist system and by the right as a way to galvanize their supporters against the left.

I am going to look at the social and economic aspects of climate change in the context of where we are now and what is likely to happen. I am not going to focus on the environment as the majority of the public shows over and over again that in financial terms they are unwilling to part with much money for the environment.

So here in early April 2010 where can go?
Do nothing - this would seem to indicate increased temperatures and over time some major economic and social dislocation. It is survivable and ultimately the most dislocation would be felt in regions near the equator. In the case of Northern Europe, Russia and Canada, for generations to come the net impact of global warming will be positive for the economy. Ultimately there is no way this direction will be allowed to happen.

Dramatically restrict parts of the economy - Prying people out their cars is not going to happen. Getting people to own less stuff is not going to happen. Adding large costs to industry is not going to happen. The anti-capitalist left approach to the issue is doomed to failure as an approach and will mean a delay of action of any sort.

Government regulation - This is what we seem to be doing the most of at the moment and the law of unintended consequences is hard at work. Cap and Trade is not having any effective impact on CO2 levels being emitted, in fact I would argue it is slowing the movement in the direction of any success in dealing with CO2 levels. The bio-fuel bonanza caused food prices to skyrocket.

The IPCC - they exist, but they remind me of the worst aspects of committee decision making. The reports they issue leave a lot to desired and take much too long to write, though they have been the source of much good data. There are areas that the IPCC is not looking at that it should be considering, biggest of these is economics. The IPCC needs to have their reports include the economic costs of actions and no action. The central question that no one is answering - is it economically better to act now or in the future?

To date there has been very little done to actually reduce CO2, and other green house gas, emissions. There may have been some slowing, but there is no reduction in green house gases. What we have been doing for the last 20 years has not been working, it has been effectively a waste of time and energy.

In a rational world we would make long term goals and create plans to meet them, but the problem with this is that there is that tendency to put off to tomorrow. Goals are not the right direction, there needs to be some other mechanism. Ideally any mechanism would be a price based mechanism that need little or not government regulatory input. The simplicity of a market based price seems to be the only way something significant could happen.

The goal of cap and trade is to set a price for CO2, but it is much to heavily influenced by government regulatory mechanisms and a lack of ways to monitor if it is really working. The pricing mechanism has to be one that is clearly included early on in the decision making process of any business venture. The simplest method would seem to be a carbon tax.

Carbon taxes are being resisted in many places and the political backlash has been severe enough to make governments think twice before going down that path. A tax the public can see is unpopular even if it is cheaper and better than an alternative pricing mechanism. The problem is how do you get the public to demand a carbon tax?

As we are going at the moment, there is almost zero chance that any concrete reduction of emissions will occur within the next ten to twenty years. Being able to change this is going to hard and is not served at all by people saying we should not drive, we should live in a smaller house, we should not aspire to be wealthy. Change will happen when we can show businesses will make more money through being carbon neutral, that the public will be able to travel more cheaply in the future, and that more goods will be available at a lower cost.

Change is also not served by ignoring the rising emission levels in Asia and Africa. BC could build all of the planned, proposed and possible green energy projects in the province and it would still not equal what China is adding each year in coal power. Why should Canada bother if Asian economies will not reduce their green house gases as well?

I would say the UN needs to deal with the issue, but I have little faith in them being able to do anything quickly or effectively. There needs to be some sort of statement of values from the largest economies with respect to climate change, things like setting a price for emissions through taxes or affirming higher wealth and consumption by the public. They need to be statements that allow the public to understand there are ways to manage climate change and be better off for doing it. The public needs to know that they have a brighter future and are not going to have to do with less and flagellate themselves.