"Cool it!"
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Some general remarks on Lomborg´s book.


    When Lomborg writes about the costs and benefits of climate change, the arguments are centered about certain figures which are crucial for the argumentation. He writes for instance: "Stabilizing the temperature increase to 2.5° C does more good - it reduces temperature by 0.48° C - but at a rather high cost of $15.8 trillion. Actually, the models also give us a cost of the total damage from global warming (i.e. how much better off we would be if global warming wasn´t happening), which is about $14.5 trillion. Thus, from stabilizing at 2.5° C we actually end up paying more for a partial solution than the cost of the entire problem. That is a bad deal." (British version p. 41-42, American version p. 36).
   What Lomborg argues here, is that stabilizing at 2.5° C does not pay, because the costs (15.8 trillion) are larger than the benefits (less than 14.5 trillion). So the whole conclusion rests on the point that 15.8 trillion is more than 14.5 trillion. But are the two figures really significantly different? How large is the uncertainty on each figure? And is it really possible to know the average global temperature as precisely as indicated by the figure 0.48° C? It is hard enough to measure temperature at one site with an exactness of 0.1°. Imagine how hard it would be to estimate the global temperature, with measuring points on land and at sea spread out with uneaqual distances, with a certainty not of one, but of two decimal points.
    By writing 15.8 trillion instead of 16 trillion Lomborg postulates that the figure is known with that degree of precision which is indicated by using three significant digits. If he writes 15.8, then he thereby implies that the figure is larger than 15.7 and smaller than 15.9. That is, he postulates that the uncertainty on the figures is less than 1 percent.
   But how, actually, do you calculate for instance the total damage from global warming with a precision of 1 percent? You need to know, for instance, how much will agricultural output be increased or decreased in every region of the world. So you must know exactly how precipitation will change. You must know exactly how much sea levels will rise, in order to estimate the damages on coastal cities and mangrove swamps. You must know exactly how many people extra will die because of climate change, because one of the largest items in the accounts is the value of human lives lost. So you must of course be able to determine with a precision better than 1 % how much is the value of each human live. This value is set differently in countries with different economic welfare, so you must know exactly how much GDP will grow in each country, and you must be sure that everybody agrees on the values you choose for each life. Maybe all this sounds impossible to some, but not to Lomborg.
   Next, you must be able to calculate the total cost of worldwide mitigation of climate change, again with a precision of less than 1 percent. This means not only that you have to know how high will the sea dikes everywhere in the world have to be. It means also that you must know the price of substituting fossil fuels with renewable energy sources. So you must know the future price development for solar energy and other renewables, and you must know the future price of fossil fuels in order to know the price difference between the two and hence the price of shifting to renewables. So you will have to know how the oil price develops in future. Up to now, Lomborg has not been very successful at that. In The Skeptical Environmentalist from 2001, he wrote on page 122: "Thus, it is also expected that the oil price will once again decline from $27 to the low $20s until 2020." As soon as the printing ink had dried, oil prices started soaring towards a maximum of more than $100. But still, that mistake does not affect Lomborg. He still postulates that such things may be predicted within a precision of 1 percent.
    Furthermore, future costs and benefits are not presented as the directly calculated values, but are modified by discounting. The higher the rate of discount, the smaller are amounts in the far future (see on discount rates here). So you have to decide on a discount rate. There are widely different views as to which rates should be used, but that does not disturb Lomborg. He chooses a rate which, in his opinion, is the correct one, and calculates the discounted value of amounts far into the future. For instance, in his book from 2001 (Figure 166), he estimates the global worth of income over the century 2000-2100 to be $895 trillion. To reach that result, he used a discount rate of 7 %. In "Cool it" from 2007 (Figure 51), he estimates the total worth of income over the century 200-2100 at $3,005 trillion, based on "dynamic discounting", which probably means a discount rate falling gradually over the years from 6% to 3%. So the amount may either be $ 895 trillion or $ 3,005 trillion, but this difference does not disturb him. He still thinks that he can calculate such amounts to a precision of less than 1 %.
    What do other people do? Do they feel able to predict these things?
    For comparison, we may see how IPCC handles these issues in their fourth assessment report from 2007. As to the abatement costs, they present various estimates in their Figure 3.25 in the report of working group 3. For instance, they state that the total abatement costs up to the year 2100 for a certain level of ambition (stabilizing CO2 levels at about 650 ppm) are estimated to be within the range from minus 1.6% of global GDP to plus 5 % of global GDP. This corresponds to an amount ranging from a net benefit up to a cost of more than $5 trillion. And as to global damages due to climate change, the report says (p. 173) that the results depend on a large number of normative and empirical assumptions that are not known with any certainty, and the existing estimates in the literature of the "social cost of carbon" vary by three orders of magnitude. Which of course means that IPCC chooses not present any cost-benefit analysis, considering that the costs and benefits are so uncertain.
    Lomborg, on the other hand, feels no restraints in such matters. He obviously says what politicians and decision makers want to hear, rather than what is known with any certainty. Politicians are used to handle state budgets with figures with many significant digits, and to demand that such budgets are balanced. They cannot handle uncertainties of the type that next years´ total tax revenue may vary by a factor of two, depending on how everything goes. They cannot handle figures with uncertainties attached to them. They want cost-benefit analyses. They put the simple question: Does it, or does it not, pay to mitigate climate change - yes or no? Lomborg gives a clear answer. IPCC does not. So they may prefer to listen to Lomborg.
    And as to lay people, they may admire how much insight Lomborg has. They listen to specialists discussing whether the total cost of adaptation will be $1 trillion or $10 trillions. Obviously, such specialists cannot be very clever, since they are so uncertain. Lomborg, on the other hand, knows the correct answer: The result is $ 15.8 trillion. So he must obviously be much more clever than the specialists. And Lomborg utilises this effect. For instance, when George Monbiot in his book "Heat" says that keeping the CO2 level below 450 ppm will cost the world somewhere between $2.5 trillion and $18 trillion, then Lomborg has the following to say about Monbiot: "He is vague on the total costs". When Monbiot maintains that we cannot put a price on the suffering of the people harmed by hurricane Katrina, cannot capture the value of those drowned, or indeed the value of lost ecosystems, then Lomborg says: "this is a weak argument" (British version p. 192, American version p. 133).
    So, who will you trust most? A person who is vague and has weak arguments, or Lomborg who knows the right answer with three significant digits?


Lomborg presents figures for global costs and benefits in the endeavour against climate change. These figures are not taken from the published literature, and they do not span the range of values that various scientists have arrived at. Instead, the figures are based on just one source, the RICE model, which is an integrated assessment model developed by the climate economist W. Nordhaus. Lomborg does not explain if he had access to computer runs performed by Nordhaus, or if he made model runs himself. So the only guarantee we have that the model runs have been made in a fair way is the guarantee that Lomborg can give us - which is hardly trustworthy.
     When Lomborg alone was responsible for providing these figures, we might have a suspicion that they could be biased. Is there any indication that the costs of mitigation have been inflated, and the benefits of mitigation have shrunk?
    Indeed, there are such indications concerning the mitigation costs. The figures cannot be compared directly with figures produced by others, because different people do not assess the issue in precisely the same way. But we may make informed guesses as to what the figures should approximately be if they were to represent mainstream assertions. Let us look first at the alleged mitigation cost of $15.8 trillion in the example above. This is for a reduction of global temperature by about 0.5° C by 2100. The IPCC report (4th assessment report, workgroup 3, Figure 3.25) is probably the best source available to get an overview of estimates of mitigation costs. From that figure, it may be interfered (see this page in Lomborg-errors) that a reduction from 3.0°C in 2100 to 2.5°C corresponds to a mitigation effort which costs between 0 and 2 trillion dollars (the net present value of cumulative abatement costs). None of the model runs presented by IPCC give values higher than 2 trillion dollars. But Lomborg presents us for a cost of 15.8 trillion. That is much higher than other estimates. We cannot know if this is due to an inherent property of the RICE model, or if it is due to the particular way that Lomborg utilises the model. In any case, we see as expected that Lomborg tends to inflate the costs of mitigation.
    What about the benefits of avoiding global warming? Here, we may utilise that Nordhaus has presented estimates of global climate damages as a function of temperature increases. The curves describing the relationship between temperature and damage are presented by IPCC (4th assessment report, WG 2, chapter 20). Here, we may read the damages at temperature increases of 2.5° C and 3° C respectively, and we find that the difference between them corresponds to a reduction of the damages by about one fourth. From this, we may calculate a rough estimate of the spared damages summed over the century and arrive at a figure of $ 7 trillion (see this page in Lomborg-errors).  Lomborg´s own estimate amounts to about $5 trillion. So it seems that Lomborg has not or nearly not reduced the benefits of mitigation relative to this rough estimate.
    Anyway, Lomborg tips the balance. In his presentation, when we keep the temperature increase by 2100 at no more than 2.5° , the costs of doing so are $15.8 trillion, and the benefits around $5 trillion. Obviously no favourable deal. But if we try to repeat his calculations, with data presented from IPCC, including data from Nordhaus, we arrive at costs of 0 to 2 trillion dollars, and benefits of about 7 trillion dollars. Obviously a fair deal.


    The figures just presented for costs and benefits of climate mitigation are certainly not objective and value-free. This is because they are affected by the rate of discount, and this rate is no objective measure, but due to a subjective choice.
    For instance, we may infer that keeping the global temperature rise by 2100 at no more than 2.5° C saves 0.5 % of the global economic output in that year. Lomborg expects this output to be $529 trillion, so the saving is thus about $2.6 trillion. But this figure is not used directly. It is discounted in order to arrive at a "present value". The higher the rate of discount, and the longer the duration over which we discount, the smaller is the present value. According to Lomborg, the total value of all damages spared over the whole century is just above $5 trillion. Obviously, this fits very badly with the estimate that what is spared in just a single year is $2.6 trillion. Summing up what is spared in each year during a century should yield a much higher sum. But because the sum is discounted back in time to the present, it becomes much smaller. So the figures for the amount saved that are presented to us by Lomborg depend on the choice of discount rate. They are not objective figures. Choosing a slightly different discount rate could easily reduce the sum of spared damages to $1 trillion, or increase it to $ 50 trillion. In the light of this, it is absurd to indicate such discounted sums with three significant digits.
    When different experts arrive at different estimates, the main reason may often be that they use different discount rates. For instance, the difference between the estimates in the Stern Review and the estimates arrived at by W. Nordhaus, are mainly explained by differences in discount rate. Lomborg ought to have explained that. Instead, he writes about the Stern Review that "the damages from climate change . . are vastly inflated" and ". . . the Review has decided to change a key parameter in all cost-benefit analyses to a value that gives huge damage." This allows Lomborg to discard the review as "a radical report". He completely omits any explanation as to what this `key parameter´ is - pretending maybe that this is a technical detail that interests no one. Actually, the key parameter is the discount rate, and within reasonable limits, there is no `wrong´ discount rate. So the Stern Review is not `wrong´ or a radical outlier. It is just as correct as any other report, it just chooses to weigh the future differently from what Lomborg chooses.


In The Skeptical Environmentalist, published in 2001, Lomborg wrote at the end of chapter 24 on global warming (p. 324): "Yet, one could be tempted to suggest that we are actually so rich that we can afford both to pay a partial insurance premium against global warming (at 2-4 percent of GDP), and to help the developing world (a further 2 percent ), because doing so would only offset growth by about 2-3 years. And that is true.  . . . it is correct that we are actually wealthy enough to do so."

Now, only 6 years later, he says approximately the opposite, namely that we are not wealthy enough to do so. He says that the money that we use in our attempts to fight climate change could have been used for some better purpose instead, for instance fighting hiv/AIDS and malaria. So who is right, Lomborg anno 2001 or Lomborg anno 2007? It will be argued here that Lomborg anno 2001 is right.

If the rich countries should use money to fight diseases in poor countries, then the money would have to be public money provided by some kind of tax.

If we want to fight climate change, we will also have to involve some kind of tax. In "Cool it!", Lomborg supports the idea of a sensible, moderate taxation on carbon dioxide emission.  The purpose of such a tax is to reduce unnecessary consumption of fossil fuels.

The point that Lomborg dismisses is that the the two needs can be combined. The carbon tax provides public money, and this money will then be available to be spent on sanitation and disease prevention in poor countries. So the two good purposes do not compete for one lump of money. On the contrary, they can very well be combined.

Once a carbon tax has been introduced, every consumer and every producer will have to evaluate the marginal benefit of reducing or increasing his fuel consumption. There may be some part of the fuel consumption which is not very necessary and which could be cut away without any large loss of benefit. It will pay off to decrease this part of the fuel consumption as long as the sum saved by omitting some of the carbon tax is larger than the value of the lost benefit. When an economic equilibrium has been reached, the two marginal benefits just cancel out, and the tax revenue obtained by the state will be equal to the benefit that people forgo. The net effect will be that society loses no value; all that happens is that the value is shifted from private property to public property. The state income is then made available to be used for good purposes in poor countries.  So, a carbon tax at the right level of taxation will be just the means needed to carry out Lomborg´s idea of giving high priority to better sanitation and the fighting of AIDS and malaria.

This idea to use revenue from carbon taxes in rich countries to pay for improvements in poor countries is close to the concept of "revenue recycling", i.e. the recycling of carbon tax revenue to reduce other taxes such as payroll taxes. This is a controversial issue; some economists claim that such a system will not help the economy, whereas others claim that it will.  The controversy is explained well in the third assessment report of the IPCC working group III (2001). Here one reads for instance in section "While studies conclude that the swap between carbon and payroll taxes . . . does not avoid net welfare losses in the USA . . . , a strong double dividend often occurs in Europe. As suggested by theoretical analyses . .  these differences can be explained by the differences both in the taxation systems and in the rigidites of the labour markets. However, the idea presented here is slightly different: instead of using the carbon tax revenue to reduce payroll taxes, it could be used for investments in Third World countries.

It should be added that considerable amounts of money are used for so-called perverse subsidies, for instance subsidies to support the coal industry and gas firms (see N. Myers & J.Kent (2001): Perverse subsidies). Here at least is some money that could very well be redicted to better purposes.

Yet another possibility is to utilise the system of carbon allowances described by George Monbiot (in his book from 2006: Heat). The global maximally tolerable CO2 emissions are divided equally among all people on earth, whereby the allocation  per person will be 0.33 t of Carbon in 2030. This will be each person´s carbon ration. If people in poor countries use less than their ration (this will mainly be in Africa), they may sell the surplus to rich countries for money. This will mean a cash flow from rich to poor countries, which could be directed at projects of the type that Lomborg favours, e.g. combating HIV.