Climate economics

I know I’m meant to be having a break (I plan to continue – also VTG has offered to write a post, so this doesn’t get him off the hook 🙂 ) but I couldn’t resist posting this TED talk by the UK’s leading climate economist. It’s a broadly optimistic talk and discusses how we have the ability to make sensible decisions if we wish to do so. What I liked is that he seems to understand, and discusses, the basics of climate science. Of course, maybe I’m biased as he does say

We couldn’t just turn it off. You can’t make a peace treaty with the planet, you can’t negotiate with the laws of physics,

which is something that many who discuss climate economics appear to fail to acknowledge.

I’m not really wanting to write a lengthy post, but I thought I’d make a broader point. There are some who try to portray themselves as pragmatic realists. This irritates me for a number of reasons. One is simply that this is often framed in a manner that suggests that they understand the realities of the world and know what will work and what won’t, and anyone who disagrees with them has their heads in the clouds and just doesn’t realise that what they’re promoting simply won’t work. What’s particularly galling is when such people gloat when something doesn’t work. It’s a little like someone who says “It won’t work, it won’t work, it won’t work, it won’t work…..see, I told you it wouldn’t work”.

Additionally, as pointed out by the quote above, the physical world doesn’t care about the reality in which we’d like to live. It’s not that I think that everything that these “pragmatic realists” say is necessarily wrong, but if there are factors that could have a major influence on the world in which we live, and which we could choose to do something about if we wished to do so, ignoring these realities just seems remarkably short-sighted.

As I’ve mentioned before, though, I do think that the climate policy aspect of this debate is extremely complex, and is much more difficult than the science itself. I don’t think there are easy solutions or trivial decisions. We do, however, need to be willing to discuss the possible risks and what we should do, given these risks. Burying our heads in the sand, hoping that there won’t be any significant risks associated with climate change, and pretending that – if there are – something magical will happen to save us, is – in my opinion – very definitely not what we should be doing.

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61 Responses to Climate economics

  1. Stern’s talk starts out pretty dry, but that’s quite an ending.

  2. It did start out quite dry. I have a colleague who speaks a little like that. His talks never seem particularly exciting until you realise that you’ve understood everything he’s said and that it all made sense, and that they’ve managed to talk with a sense of understated authority.

    The ending was quite something. I was a little uncertain about that because I sometimes think those kind of things can seem a little overly-dramatic (and I just have a natural aversion to people dragging families into their professional presentations). However, in this case, this really is about our children and grandchildren, so reminding people of that seems like an entirely appropriate way to end such a talk.

  3. Vinny Burgoo says:

    If, like me, you have a shitty internet connection, you might prefer the transcript:

  4. verytallguy says:


    I emailed Rachel. If it didn’t get through let me know how to get it to you

  5. Rachel M says:

    I got it VTG! And I’ve replied to you. Check your email 🙂

  6. Rachel M says:

    Finally watched this and I thought the beginning was great! All those bikes in Beijing and that wonderful lifestyle that they had with the freedom to cycle everywhere and the clean air. Now look what they’ve got. Sad.

  7. Nostalgic to the old style communist Beijing? No thanks. The present Beijing is bad, but so was the earlier.

    I don’t believe that the solution to climate problem is in going back to the “good old times”. Stern doesn’t promote that either. He present a very optimistic view of what can be done. If it really were that easy.

    Speaking of China, read what Chris Buckely writes. China may be number one in implementing new solutions, but that’s not enough.

  8. Pekka,

    Stern doesn’t promote that either. He present a very optimistic view of what can be done. If it really were that easy.

    Not quite sure how else he was meant to present this. Being alarmist and pessimistic is also criticised. To me, his main point was that we can do things that won’t negatively influence our way of life and that will help. The idea that it’s not possible to do anything is wrong. That’s not the same, though, as saying it will be easy. Doing nothing, however, achieves nothing.

  9. Rachel M says:

    Pekka, I am not endorsing old style communist Beijing. My comment was about transport. There are modern cities – non-communist ones – that have transport policies that promote bicycles over cars. I’m thinking of Amsterdam and Copenhagen.

  10. Richard S.J. Tol says:

    On what measure is Nick Stern UK’s leading climate economist?

  11. Richard,
    You’re nothing if not predictable. Seriously, I don’t know if he is or he isn’t, but I did enjoy writing that sentence 🙂 .

  12. BBD says:

    Well, Richard, I wonder how your future will pan out? Will you be eminent, knighted, consulted and respected in your sixties, like Sir Nicholas? Or will you be a footnote or perhaps something worse?

    I wouldn’t be in your shoes for all the world.

  13. > On what measure is Nick Stern UK’s leading climate economist?

    Certainly not the number of Gremlins in his closet:

    [Richard] I agree that the wording could be clearer. The numerical result is from one paper, but ascribed to another.

    [Andrew] I don’t care about the wording, the point is that the claim in the news article falls apart when the data errors are corrected. This is one reason I disagree with your statement that the corrected data do not materially affect the results.


  14. Tom Curtis says:

    I’m sure Richard has in mind a reference to ideas.repec whose list of environmental economists ranks Stern at 28, with Frederick van der Ploeg (16), Anthony Venables (15), and some obscure, gremlin best fellow at 4 all having British affiliations and a higher ranking.

    How you set that against credentials such as being Chief Economist of the World Bank, 2nd Permanent Secretary to HM Treasury, and (now) president of the British Academy I’m not sure. Certainly somebody so busy doing will not have had time to pad their citation index by multiple gremlin infested publications.

    I’m sure Richard will tell us why the later accomplishments pale before his barrage of papers, and why it is so desperately important that he be recognized as the top climate economist in Britain 😉

  15. Andrew Dodds says:

    Pekka –

    Well, it really IS that easy. At least on a physical basis. Just like feeding everyone, housing everyone, giving everyone access to clean water (plus basic healthcare and education) are actually quite easy, generating sufficient non-CO2 energy for all our foreseeable needs is, in fact, easily do-able.

    The problem is that the moment you involve politicians and economists in these problems, they become vastly harder. Sometimes you get the impression that they don’t even want to solve the problems..

  16. Andrew,
    Societies adapt always to unavoidable limitations. They adapt to shortage of resources, and they adapt to changing climate. What the adaptation involves is not always something we like.

  17. Andrew Dodds says:

    Pekka –

    What about avoidable limitations?

    More to the point, you seem to be adopting an attitude of ‘we can’t do anything’ from the start. I assume that you think the only way to deal with an asteroid heading for Earth would be to adapt to the impact..

  18. anoilman says:

    Pekka: The real issue is that we are addicted to cheap dirty fuel, and we don’t want to go to rehab;

  19. anoilman says:

    Andrew Dodds: Saturn Rockets and some big big big nukes;

    At least that was the plan.

  20. Richard S.J. Tol says:

    Seriously. Stern would be your number 1 economist in the UK if you count funds raised or committees sat on, but if you would look at publication record or citation record, Stern would be much further down the list.

    Stern left academia at a relatively young age, only returned in retirement. His first contribution to climate change was when he was 60, as a civil servant working for Gordon Brown.

  21. Andrew,

    I don’t think that we cannot do anything, but I do believe that thinking that we can do anything is likely to lead to very poor choices, where resources are wasted and real progress is made very slow.

  22. anoilman says:

    Richard S.J. Tol: Honestly Richard… Your antics diminish your value immensely. I’d listen to pretty much anyone but you. Your ‘credentials’ don’t carry much weight in my eyes.

    But you are correct, he hasn’t produced any error ridden papers. He also doesn’t seem to be in the thrall of politically motivated deniers, like the GWPF. So that’s a plus.

  23. > Stern would be your number 1 economist in the UK if you count funds raised or committees sat on,

    Speaking of which:

    Scholar most-cited by Stern Review.

    These citations were pre-Gremlins, I believe.

  24. anoilman says:

    Here’s a citation for Richard Tol;

    Hmm… Not a nice one.

    Hey Richard, how do you value a species going extinct? It seems a fair question.

  25. Vinny Burgoo says:

  26. AnOilMan says:

    Good one Vinny!

  27. Richard S.J. Tol says:

    Yes, species extinction is part of our assessment of the economic impact of climate change.

    Citations are holding up very well.

  28. Richard,

    Yes, species extinction is part of our assessment of the economic impact of climate change.

    Yes, but it’s not clear if you regard species extinction as something to avoid or not.

  29. Richard,

    Citations are holding up very well.

    Since you bring it up, why are your WoK citations (~5000) so much smaller than your Google Scholar citations (>18000)? I know Google Scholar gives more, but that’s the biggest ratio I’ve ever seen.

  30. anoilman says:

    Apart from avoiding my question Richard, I’d like to ask another one. Were you going to ask the libertarians to raise taxes to fix stuff in the third world, or should I? Any idea what their answer would be?

    “Poor, marginalized, and rural communities are likely to be hit hardest by climate impacts. For these vulnerable groups, climate change acts as a “risk multiplier” worsening existing social, economic, political, and environmental stresses.”

    With you being chummy with Lord Nigel Lawson and the GWPF, I think it would be a most useful effort.

  31. Richard S.J. Tol says:

    I don’t have lexicographic preferences in the model at the moment. We are trying to raise money to add features like that.

    That quote paraphrases research by Fankhauser and me in the mid 1990s.

  32. Richard,
    I see. So you’re not yet sure if species extinction is economically a good thing or not? I would have thought the answer is obvious, but I guess you feel that you need to rely entirely on models (somewhat ironic that).

  33. Richard,
    Ahh, you shouldn’t assume that my response to you was based on assuming that your comment was serious. I never assume that. My response to you was based on you having not actually answered the question and my assuming that there was a reason for that (i.e., the answer is too inconvenient for you to actually address it seriously).

  34. Richard S.J. Tol says:

    Sorry for being too quick. Species extinction leads to a welfare loss, but there are no lexicographic preferences in the model.

  35. Richard,
    Okay, you seem to be partly trying to be serious. I’m still unsure as to how one quantifies species extinction as a welfare loss (reliably that is) but I am unsure as to the relevance of “lexicographic preferences” (unless, of course, it’s simply that you’re unable to make a fully serious comment).

  36. Andrew Dodds says:

    Pekka –

    The problem is, you seem to be treating this as some sort of idealized economic problem, in which there is a continuous spectrum of solutions that are only discoverable by market forces – and therefore any attempt to pick a solution is by definition going to be inefficient. Feel free to say with examples if this is untrue.

    However, for the issue of energy supply and global warming, this is patently not a good description of the problem. We have constraints on CO2 emissions – no long term solution can include fossil fuels. We have physical constraints on energy sources – there is a limited and known ‘menu’ of solutions; no one is suddenly going to pop up with an unexpected brand new energy source.

    Under these circumstances, it is far more efficient to pick and implement a solution than to try and arrange incentives to solve the problem, especially in the case of global warming where the incentives themselves will have to be extreme to actually solve the problem, and therefore cause inefficiencies of their own.

  37. Andrew,

    I’m not thinking in terms of some idealized model, what I have in mind are the real concrete decisions that can be made.

    Just as an example, we had this morning on Finnish radio a discussion between three people from energy industries, one from industry wide organization, one from bioenergy, and one from wind power producers. All agreed that renewable energy needs support, but all had difficulties in answering more specific questions.

    That’s the situation very widely: It’s easy to present generic statements, but much more difficult to justify concrete real decisions. That has been the case in energy sector since the oil crisis of 1974, i.e. for 40 years. We still lack clear well justified concrete choices, when the goal is to make a real effect in a cost-efficient way. (By cost-efficient I don’t mean commercially fully profitable without subsidies, my threshold is lower than that.)

    It’s necessary to proceed on several fronts, but it’s difficult to foresee, how much each of these fronts can produce. Wasting too much resources in the wrong place leads to less results overall.

  38. Richard S.J. Tol says:

    The methods for estimating the value of non-tradables are well-established. You raised lexicographics, not me.

  39. Richard,

    You raised lexicographics, not me.

    No, at best, you interpreted me as raising lexicographics which doesn’t necessarily mean that I did. This is not a complicated concept.

  40. verytallguy says:

    Mirror, mirror, on the wall… who’s the greatest climate economist of them all?


  41. Richard S.J. Tol says:

    Through your “Yes, but it’s not clear if you regard species extinction as something to avoid or not.” you wondered whether I represented a lexicographic preference in the model.

  42. Richard,
    That was intended to be moral preference, not a lexicographic preference. Personally, I’d prefer to avoid these childish word games, but YMMV.

  43. Marco says:

    ATTP, remember that Richard likes to interpret what others say, and no matter how much they object to Richard’s interpretation, he will never budge (see e.g. Richard’s misrepresentation of what Andy Skuce said on the SkS forum).


  44. Marco,
    Indeed, and it appears consistent with his interpreting of his results with respect to the Cook et al. study. Quantum Mechanically some fraction of all abstracts reject the consensus and hence there are 300 missing reject abstracts in total. Similarly, it is possible that the wave function representing what I’ve said could collapse to be consistent with Richard’s interpretation of what I’ve said. In truth, I’ve always thought that Richard and I occupy different realities/universes, so maybe he has a point.


  45. Andrew Dodds says:

    Pekka –

    That’s reasonable – more of a political argument. I’d bet that none of the guys were engineers or scientists, actually putting realistic numbers to their proposals.

    I do regard lobbyists of all stripes as a problem, because almost by definition they’ll be distorting reality to make their preferred solution look better. Germany is an interesting example; there the renewable lobby ‘won’, but the price of that winning was completely disregarding the engineering impacts of adding huge quantities of renewables without reworking the entire electric grid.

    In the UK, meanwhile, we’ve managed to reach a situation where no one is prepared to build any kind of meaningful electric generation capacity whatsoever. At least without a massive bung.

    In both these cases, though, I see part of the problem being a lack of ambition rather than waiting to find the best solution. Even in the German case, they’ve basically decided on a partial solution. And of course, partial solutions won’t be optimal economically and won’t actually fix the problem. So.. how do you get around that?

  46. Andrew,
    I think you make a good point. Something that frustrates me is that poor policy decisions end up being blamed on, for example, climate change/policies. Well, the decision may well have been poor, but that doesn’t mean that a sensible decision isn’t possible, simply that we currently have policy makers who are either unable to make them or are too heavily influence (as you suggest) by lobbyists and those with agendas to actually make a sensible decision.

  47. Andrew,
    I brought that particular case up only, because it was so recent. Actually I do think that they were all engineers, and only one mainly a lobbyist, but as I wrote this is just a single example.

    My own experience since 1980 has been in the energy sector research. Almost all people I have worked with have been engineers. More than half of the research has been related to renewable energy, most extensively in use of biomass, but also wind. My own contribution has been in economic and system science part, but most of the people I have worked with were in engineering.

  48. anoilman says:

    Richard S.J. Tol: There are effective examples of species extinction (but its not extinction).

    East coast US, and Canada fisheries were devastated by over fishing. This has created considerable job loss, employment migration. Recovery is hampered by Global Warming (North Atlantic Cooling).

    “In November 2006, Fisheries and Oceans Canada released an article suggesting that the unexpectedly slow recovery of the cod stock is due to inadequate food supplies, cooling of the North Atlantic, and a poor genetic stock due to the overfishing of larger cod.”

    There are other examples as well. In the US you have peak wood (Forests were burned for power) and of course peak whale (yup… lantern light).

  49. anoilman says:

    …and Then There’s Physics: Perhaps Google uses Richard Tol’s new math to determine citations.

    Google concluded that there’s no way his citations could be that low, I mean he’s on the Stern Review and all. So they used Tol’s new math to add a few hundred percent more citations. Its not like they actually have to produce them all. Most people won’t look past page 100 or so.

  50. Marco says:

    ATTP, AOM, I would not be surprised if the large difference is at least in part due to the practice in the field of economics to throw out loads of working papers; it also has a larger proportion of books. Neither are not covered in WoK.

    For example, Tol’s 2013 paper “Climate policy under fat-tailed risk: An application of DICE” is cited 8 times according to Google Scholar, and not a single of those citations is in a regular journal. It is possible that several of the citing works later make it into a journal – and then we get possible double counting – but I would guess that WoK puts the number of citations for this article to zero (I haven’t checked, though).

  51. Joseph says:

    I thought this was an interesting article on Effective vs. Equilibrium sensitivity for those not familiar with it.

  52. anoilman says:

    Marco: So Tol’s citations could be inflated by references from, say, the “Union of Concerned Hair Stylists”, and other important branches of the Cato? 🙂

    Its good to know it gets the attention it deserves.

  53. Marco says:

    AOM, this is a common problem with Google Scholar, it also finds netcitations. This indeed means that some of the citing ‘papers’ are very obscure.

    And I hope everyone understood that I meant to say “Neither are covered in WoK”

  54. Michael 2 says:

    “you can’t negotiate with the laws of physics”

    Well, *I* can. The laws of physics said I wasn’t getting out of bed this morning and I said to him (he’s a him by the way) “Oh yeah, watch this!” and I pushed against the law of gravity and got out of bed.

    You see, these laws aren’t all at the same plane of effectiveness, they’re a hierarchy. You invoke a law that is higher than the law that is obstructing you. That’s negotiation.

    The law of gravity is still there but so are laws of force and mass; with sufficient force I can get my mass out of bed despite the law of gravity.

    That’s the problem with alternate energy: The problem of sufficiency.

    Now then, as to why a smart person would say a stupid thing; his vision is perhaps narrow. He is thinking of a *specific* law of physics that cannot be violated. But when I got out of bed this morning, I did not violate any law of physics — I invoked one that took precedence for long enough to accomplish the task. I do this every day and so do you.

  55. M2,

    You see, these laws aren’t all at the same plane of effectiveness, they’re a hierarchy. You invoke a law that is higher than the law that is obstructing you. That’s negotiation.

    No, that really doesn’t work. They’re mutually consistent, which is kind of the point. Energy conservation, momentum conservation, Newton’s laws of motion,… all work together. One doesn’t really supersede another.

  56. Michael 2 says:

    When I took a succession of economics classes in college I noticed that for a while thereafter I thought of pretty much everything in economic terms. In that world morality is irrelevant, the worth of life itself is irrelevant if you cannot put a dollar figure on it. It describes rather than prescribes.

    To be sure, life has value and morality exists, but to discuss such things the forbidden “R” word must be invoked while hinting that other things exist apart from the dollar worth of the cows we eat.

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