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Monckton Myth #11: Carbon Pricing Costs vs. Benefits

Posted on 14 February 2011 by dana1981

Monckton Myths (200 x 70 pixels)As part of an ongoing series looking at Christopher Monckton’s response to Mike Steketee and as a new addition to the Monckton Myths, this post examines Monckton’s claims about the costs vs. benefits of carbon pricing.  Monckton made the following claim in his comment #24 to Steketee:

Every serious economic analysis...has demonstrated that the costs of waiting and adapting to any adverse consequences that may arise from “global warming”...would be orders of magnitude cheaper and more cost-effective than any Canute-like attempt to prevent any further “global warming” by taxing and regulating CO2 emissions. It follows that adaptation to the consequences of “global warming” will get easier and cheaper the longer we wait: for then we will only have to adapt to the probably few and minor consequences that will eventually occur, and not until they occur, and only where and to the extent that they occur.

The final portion of this argument is entirely nonsensical.  As the planet continues to warm, the adverse consequences of climate change will continue to increase, and thus the costs of adapting to them will continue to rise.  Here Monckton is implicitly assuming that the cost of preventing consequences will be less than or equal to the cost of adapting to consequences.  If this assumption were correct, it would indeed be most cost-effective to wait and simply adapt to the consequences of climate change.  However, as this article will show, Monckton's assumption is incorrect - preventing climate change is significantly cheaper than adapting to it.

Accounting for Benefits 

An unfortunate aspect of economic analyses of the impacts of carbon pricing is that they usually only consider the costs of such legislation, while ignoring the benefits associated with slowing global warming.  The benefits are essentially the damage avoided by preventing a certain amount of climate change from happening (by reducing carbon emissions).  Quite obviously, evaluating the benefits of an action is a key component to any cost-benefit analysis.  By ignoring the benefits, it becomes easier to make an argument like Monckton's that the costs of carbon pricing are excessive.

For example, according to a 2010 United States Office of Budget and Management (OMB) Report, the United States Environmental Protection Agency (EPA) issued 30 major environmental regulations from 1999 to 2009 at an estimated cost of $25.8 billion to $29.2 billion.  Sounds like a lot of money, right? 

Maybe not so much when we also examine the estimated benefits of these regulations, which ranged from $81.9 billion to $533 billion.  Clearly ignoring the benefits can lead to a very skewed evaluation of environmental regulations.  In the case of these other EPA regulations, $29 billion may sound like a high cost, but the benefits outweighed the costs 3 to 20 times over!  The same is true of climate legislation.  Perhaps putting a price on carbon emissions will cost $600 billion, but how do these costs compare to the benefits from reducing carbon emissions?

US Climate Action Analysis

The New York University School of Law's Institute for Policy Integrity (IPI) performed a cost-benefit analysis of H.R. 2454: the American Clean Energy and Security Act of 2009 (a.k.a. Waxman-Markey - the climate legislation passed by the US House of Representatives). The legislation benefits were estimated by multiplying the estimated amount of greenhouse gas emissions avoided by the monetary valuation of incremental damage from each ton of greenhouse gas emissions (the "social cost of carbon"). 

Social Cost of Carbon

The social cost of carbon (SCC) is effectively an estimate of the direct effects of carbon emissions on the economy, and takes into consideration such factors as net agricultural productivity loss, human health effects, property damages from sea level rise, and changes in ecosystem services. It is a difficult number to estimate, but is key to any cost-benefit analysis of climate legislation. 

The US Department of Energy has used an SCC starting value of $19 per ton, which increases to $68 in 2050 using a discount rate of 3 to 5%.  A thorough  2009 inter-agency review of existing estimates SCC puts the starting value at $33 per ton with a 3% discount rate, increasing to $118 in 2050.  The EPA estimates the starting value at $68 per ton with a 2% discount rate, increasing to $242 in 2050.

Discount Rate

The term 'discount rate' used above refers to the time value of money - how much more  a dollar is worth to us today than next year.  A high discount rate means we would much rather have money today than in the future.

In part of Monckton's argument #24 which was omitted from the quote above, he excludes the Stern Review (discussed below) from his category of "serious economic analyses" primarily due to "its absurd near-zero discount rate."  The Stern Review used a discount rate of approximately 1.4%.  Australian Economist John Quiggin has discussed the Stern Review discount rate and its critics, and notes that a much higher rate is tantamount to telling future generations that they "can go to hell for all we care," since high discount rates place much lower weight on the welfare of future generations.

The choice of discount rate is rather subjective, and a case can certainly be made that the 1.4% value used in the Stern Review is reasonable.  However, those who believe a 1.4% discount rate is too low can put more stock in the IPI study, which considered discount rates ranging from 2% to 5%. 3% seems to be the most widely-used value.

Cost-Benefit Analysis

The legislation costs were estimated from analyses performed by the EPA and Congressional Budget Office, as discussed in the "CO2 limits will harm the economy" rebuttal.   The direct benefits were estimated using various SCC values.  Indirect benefits such as slowing of ocean acidification and incidental reduction in co-pollutants were omitted from the analysis; therefore, the benefit estimates are quite conservative.

The IPI illustrates how the costs and benefits of H.R. 2454 compare for two economic models (ADAGE and IGEM) in relation to SCC in Figure 1.

Figure 1: Costs (light blue and red points) and Benefits (dark blue and purple points) vs. SSC values ($ per ton of carbon dioxide) for H.R. 2454 using two economic models (ADAGE and IGEM)

As you can see in Figure 1, for an SCC of just $9 per ton of carbon dioxide, the direct benefits of H.R. 2454 match the costs, and for any higher value of SCC, the benefits outweigh the costs.  Using the DOE SCC of $19, the direct benefits exceed the costs by a factor of 2.3.  Using the inter-agency SCC of $33, the ratio rises to 4.  Using the EPA SCC of $68, direct benefits outweigh costs by a factor of 8.3.  The IPI cost-benefit analysis concluded as follows.

Using conservative assumptions, the benefits of H.R. 2454 could likely exceed the costs by as much as nine‐to‐one, or more.

The estimated benefits do not include a significant number of ancillary and un‐quantified benefits, such as the reduction of co‐pollutants (particularly sulfur dioxide and nitrogen dioxide), the prevention of species extinction, and lower maintenance costs for energy infrastructure. Due to those limitations, the benefits estimates should be considered to be very conservative."

Global Climate Action Cost-Benefit Analysis

The benefits of reducing greenhouse gas emissions can also be viewed as the cost of doing nothing.  The Stern Review on the Economics of Climate Change is perhaps the most well-known evaluation of this cost.  The Stern Review estimated that taking no action to reduce greenhouse gas emissions would cost 5% to 20% of the global Gross Domestic Product (GDP) by 2100.  The Stern Report also estimated that reducing greenhouse gas emissions to avoid the worst impacts of climate change can be limited to around 1% of global GDP each year.  Assessments of proposed climate legislation in the USA have also concluded that they would signigficantly reduce the country's greenhouse gas emissions at a cost on the order of 1% of national GDP.

Another report by the German Institute of Economic Research concluded that "If climate policy measures are not introduced, global climate change damages amounting to up to 20 trillion US dollars can be expected in the year 2100....The costs of an active climate protection policy implemented today would reach globally around 430 billion US dollars in 2050 and around 3 trillion US dollars in 2100." 

A study prepared for the European Commission's Directorate General-Environment evaluated the costs and benefits of various atmospheric carbon dioxide (CO2) concentration scenarios (Watkiss et al. 2005).  The study found that in their 450 parts per million (ppm) atmospheric CO2 concentration scenario (590 ppm by 2200), the total damage caused by climate change would amount to $32 trillion by the year 2200.  In the IPCC A2 scenario (815 ppm by 2100, 1,450 ppm by 2200),  the climate change-caused damage by 2200 is $73 trillion.  In other words, if we achieve the internationally-accepted goal of limiting atmospheric CO2 to approximately 450 ppm this century, the global economic benefit will be approximately $41 trillion by 2200.

In all of these analyses, the benefits of reducing greenhouse gas emissions outweigh the costs by trillions of dollars.  Combining the results of the German Institute for Economic Research and Watkiss et al. studies, we find that the total cost of climate action (cost plus damages) in 2100 is approximately $12 trillion, while the cost of inaction (just damages) is approximately $20 trillion (Figure 2).  This figure is also available in the Skeptical Science Hi Rez Climate Graphics.

Figure 2:  Approximate costs of climate action (green) and inaction (red) in 2100 and 2200. Sources: German Institute for Economic Research and Watkiss et al. 2005

Economists Support Climate Action

Most economists who study the economics of climate change agree that action to reduce greenhouse gas emissions is necessary. As Robert Mendelsohn (professor of forest policy and economics at Yale University) put it, "The [economic] debate is how much and when to start."  Some economists believe that we should immediately put a high price on carbom emissions, while others like Yale's William Nordhaus believe we should start with a low carbon price and gradually ramp it up.

In a recent interview, Nordhaus - whose models project a smaller economic impact than most - said that regardless of whether the models showing larger or smaller economic impacts from climate change are correct, "We’ve got to get together as a community of nations and impose restraints on greenhouse gas emissions and raise carbon prices. If not, we will be in one of those gloomy scenarios."

How Much Are You Worth?

One flaw in these economic studies is that it's very difficult to put a price on things like biodiversity, cultural diversity, human life, etc.  For example, if unabated climate change results in a famine in Kenya, or the Maldives is lost to rising sea levels, the loss of life and culture won't have much impact on the global economy, but I think we can all agree that there is a significant non-economic loss associated with these types of events.  Likewise if a number of species fail to adapt to the rapidly changing climate, the loss associated with this reduction in biodiversity goes beyond whatever small economic impact is modeled in these studies.

Summary

Cost-benefit analyses of proposals to reduce greenhouse gas emissions have consistently concluded that the benefits far outweigh the costs.  In the USA, the direct benefits of the legislation which was passed by the House of Representatives (but later killed by the Senate) would have outweighed the costs by a factor of 2 to 9 (a net savings of at least $1 trillion by 2050), under conservative assumptions (ignoring indirect benefits such as reduction of co-pollutants and ocean acidification). 

Analyses of global carbon emissions reductions scenarios all show that the benefits outweigh the costs by trillions of dollars.  Most economists agree that steps to reduce greenhouse gas emissions are necessary - the debate is not whether we need to put a price on carbon emissions, but how high the price should be. 

Monckton's Point #24 is Wrong

In the studies discussed above, the benefits are effectively equivalent to the costs of adaption if we fail to reduce greenhouse gas emissions.  In all of these analyses, the benefits significantly outweighed the costs of putting a price on carbon emissions.  Therefore, we have here four examples of eceonomic analyses concluding that the costs of pricing carbon are much lower than the costs of adapting to climate change.

Let us once again examine Monckton's assertion #24.

Every serious economic analysis...has demonstrated that the costs of waiting and adapting to any adverse consequences that may arise from “global warming”...would be orders of magnitude cheaper and more cost-effective than any Canute-like attempt to prevent any further “global warming” by taxing and regulating CO2 emissions.

The four economic analyses discussed above are certainly "serious."  It would be difficult to argue otherwise; however, since Monckton has not provided a single example of an economic analysis which concludes that the costs of adaptation will be less than the costs of carbon pricing, it is difficult to ascertain exactly what he considers a "serious economic analysis."

The conclusions of these studies also raise a key question - if economic analyses consistently show that not only will the costs of putting a price on carbon emissions be minimal, but the benefits will significantly outweigh the cost, what exactly are we waiting for?

This post was written by Dana Nuccitelli (dana1981) has been incorporated into the Intermediate version of the skeptic argument "CO2 limits will harm the economy". 

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Comments 1 to 50 out of 52:

  1. Monckton:
    "Every serious economic analysis...has demonstrated that the costs of waiting and adapting to any adverse consequences that may arise from “global warming”...would be orders of magnitude cheaper and more cost-effective than any Canute-like attempt to prevent any further “global warming” by taxing and regulating CO2 emissions."

    Dana:
    "Here Monckton is implicitly assuming that the cost of preventing consequences will be equal to the cost of adapting to consequences."

    How does "orders of magnitude cheaper" become "equal to"?
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  2. BillyJoe - you're quoting a different part than I'm referring to, which is this:
    It follows that adaptation to the consequences of “global warming” will get easier and cheaper the longer we wait: for then we will only have to adapt to the probably few and minor consequences that will eventually occur, and not until they occur, and only where and to the extent that they occur.

    Basically Monckton is saying that adapting to consequence 'x' would be more efficient than reducing carbon, which might prevent consequence 'x' but also 'y' and 'z', while we might not even want or need to prevent 'y' or 'z'.

    So in Monckton world, adapting to 'x' is overall orders of magnitude cheaper than preventing 'x, y, z'. But this only holds true if adapting to 'x' has the same cost as preventing 'x', which it does not.

    My statement that you quote is talking about just the costs of preventing 'x' vs. adapting to 'x'. Monckton's entire argument refers to preventing 'x, y, z' vs. adapting to 'x'.

    Clear as mud, right? To make a long story short, the two statements are not equal, they're just referring to slightly different things.
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  3. For the sake of clarity I've revised the text in question to read "less than or equal to" instead of just "equal to".
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  4. I should also point out that Monckton has it backwards. As noted in the article, 'y' and 'z' are things like ocean acidification, other pollutants, dependence on foreign oil, etc. We basically get the advantage of addressing these other problems for free through carbon pricing.
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  5. I wonder if Monckton would ignore a bulge in the sidewall of one of his tires knowing full well that he can adapt when (x) it goes flat, but ignore the risks involved such as (y) it goes flat and he narrowly misses running into another car, but (z) he slams into a tree.
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  6. "The choice of discount rate is rather subjective, and a case can certainly be made that the 1.4% value used in the Stern Review is reasonable. However, those who believe a 1.4% discount rate is too low can put more stock in the IPI study, which considered discount rates ranging from 2% to 5%. 3% seems to be the most widely-used value."

    The discount rate is not subjective. Nor is it emotional..."future generations" etc. It is the alternative return we give up, when we apply resources to global warming, that could, for example, be applied to expanding food production.

    When we look at the resources applied to ethanol, for example, these expenditures have to be questioned. Forty percent of our corn crop assigned to a fuel, which would be non economic in the absence of subsidies. In the meantime natural gas, which would cut CO2 emissions by 29% versus oil, receives no support. The most practical and effective thing we can do in the USA, is to convert our fleets to natural gas over a 15 year period. Yet that receives almost no support, as gas is a carbon based fuel.

    But there is a limit to the speed we can convert to non carbon forms of energy. And a cost. Make that cost too high and economic activity will be threatened. The complex linkages and dependencies we have in our now global economy, are at least as fragile and delicate as those in our eco system.

    Food shortages and famine are just a perturbation away. We have to be wise about all this.
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  7. $20 trillion in damages by 2100 and $70 trillion by 2200???

    The US GDP is approximately $14 trillion per year and $74 trillion for the entire world. I think AGW is likely to cause a mass deflation in the world's economy in the decades to follow.

    Did this report even try to take positive feedback loops into consideration like the Arctic ice cap collapse and the massive disruptions it will cause? Or were their estimates simplistic projections based on present damage?

    In my opinion we won't even get past 600+ ppm due to economic collapse.

    The US is not likely to have a federal government by 2100 and the world will be lucky to have a feudal fiefdom by 2200.
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  8. but Mozart, ethanol is only one source of CO2 mitigation. An electric powered bus carrying 30 people-even if the electricity were supplied from coal-would generate as little as 1% of the CO2 that would be generated by 30 cars plying the same route-& for a fraction of the cost required to run a car, or diesel fueled bus over the same distance. So whilst there would be an initial upfront cost for the infrastructure needed for a fleet of electric buses, the various savings (both societal & individual) would more than compensate for those costs in the mid-term.
    Also, its been my experience that the free market has done more to promote food shortages & high prices than a pursuit of ethanol (especially as ethanol/bio-diesel can easily be generated from the crop *waste*).
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  9. " then we will only have to adapt to the probably few and minor consequences that will eventually occur, and not until they occur, and only where and to the extent that they occur. "

    Does he know any civil engineers or town planners? What to do about bridges, railway construction, road construction, dams, sewage treatment plants, housing construction standards?

    Many of these things are designed with 60 to 200 year life expectancy. Does Monckton really think that we should blithely go on as though 'very little' will happen, and then relocate or repair or rebuild or abandon these major projects when storms or floods or fires ruin them?

    "Redoing" multi-billion $ infrastructure every few years because we look the other way sounds like the road to bankruptcy to me.
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  10. @Mozart-

    "Food shortages and famine are just a perturbation away. We have to be wise about all this. "

    Why, yes. They are. But I think you have misunderstood what direction this 'perturbation' will come from. It is already quite reasonable to believe that AGW was a major factor in the rise in the price of wheat that has caused a sharp rise in food prices all over Africa and the Middle East. We just saw how drastic the political consequences can be. We are very lucky that so far, it has turned in to the Arab version of 1848.

    But we know, for example, that the drought in Russia was typical of AGW, and that caused the price of wheat to rise. We know to expect much more of this in the near coming decades. It will only be a short time before seafood shortages follow, due to our near total neglect of ocean acidification and the die-off of deep sea phytoplankton. Then the political consequences will not be so benign, famine will be widespread.

    Even if we do raise the price on carbon too steeply, the damage to our food supply system will not be as drastic as that due to the continuing neglect.

    Besides: it really will not take that long for nuclear, solar and (relatively low carbon) natural gas to replace high carbon sources, since we really have made that much progress in recent years. High carbon prices give us strong incentives to close the gap and make these really affordable and widespread.
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  11. @Marcus-

    More importantly, Ethanol is a really poor source of "carbon mitigation". Growing plants to ferment into ethanol is not only a ludicrously inefficient way to convert solar energy into chemical energy, the fermentation releases CO2 into the air, too.

    I don't have a reference to a reliable carbon budget, but as I recall, many have cast reasonable doubt on the carbon footprint of ethanol use.
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  12. #6: "In the meantime natural gas, which would cut CO2 emissions by 29% versus oil, receives no support"

    Ah Mozart, do you not know the inner workings of the oil and gas business? 'Subsidies' start with the percentage depletion allowance. Production tax credits helped kick off the booming shale gas play.

    GWB's Energy Policy Act of 2005 also slipped in clever exemptions to the Clean Air Act, Clean Water Act and Safe Drinking Water Act for oil and gas production - which helped give us the ability to frac just about anything anywhere. Methane in your drinking water? Too bad.

    There's even a field in Canada doing a massive CO2 flood (and pilot sequestration project), with reports of CO2 leaking out of damaged casing and flowing to surface.
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  13. You're absolutely correct MattJ. A far better approach is to use CO2 from power/heat generation to grow algae, then extract the oils from the algae that can be then converted to bio-diesel. The remains can then be gasified & the gas burned for heat/electricity.
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  14. How much money was thrown at the banks and economy as a remedy for the GFC? To replace all the coal-fired power plants with nuclear ones would require 2,000 of the structures at say $5b each. That's $10 trillion, for a 30% reduction in CO2 emmissions. Not a bad investment I would say! [Please refrain from starting a discussion on the cost of nuclear power plants :)]. To cease burning of forests would reduce another 30%, and replace vehicles with electric ones - OK will also need to double the quantity of nuke plants to charge the vehicles - and voila we have a 90% reduction in emissions. The world has the technology, but short-term economic arguments take precedence over the future well-being of the planet.
    On the subject of GDP, be careful. The cost of repairs to disasters and warfare contribute to GDP! They are part of the domestic product.
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  15. Rather than fretting about carbon tax/carbon trading as first off, how about beginning by killing every subsidy on fossil fuel? You would pay more for energy but less for tax. Let some market forces go to work. (Personal political opinion - subsidies have a place in education and health. Nowhere in industry including renewables).
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  16. I am not sure that switching to a carbon free economy has the cost that people assume/impute. Look economies have to DO something. They can efficiently convert food into fuel (efficient here means lots of people make money - it doesn't mean it is efficient in any scientific sense).

    So we can wind our economy up and set it to solving global warming - and people will make money doing that.

    Or we can wind it up to drill/frac/squeeze every bit of fossil fuel out of the earth. The economy cares not one whit.

    And there is a notable argument to be made for using the current abundant fossil fuel to bootstrap ourselves into the carbon free economy. This gets much, much harder when certain rare metals become much rarer, and energy becomes much, much more expensive.
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  17. @John Chapman: You estimate $10 trillion to replace existing coal-fired electricity generation with nuclear. But there are studies out there that show electricity demand can be *halved* or better by implementation of energy efficiency measures (like using more efficient lighting - I replaced 200w of halogen lighting in the kitchen at home with 36w of LEDs, and it's more than enough light for 99% of tasks).
    The monthly magazine of Engineers Australia used to regularly feature articles about energy efficiency measures applied to industry & commercial buildings. In every case, without exception, the investment was paid off inside five years. Even for the cases where the cost was measured in the hundreds of thousands of dollars. Think what that would mean to the bottom line of the average business, if they could, for example, get very low (or even zero) interest finance from the government to fund efficiency measures.
    My point being that many steps that may be taken to reduce fossil fuel demand, and consequently carbon emissions, are net zero cost, or even net negative cost, when measured over periods as short as 3-5 years. What's the longer term benefit to you, personally, if you managed to cut your power & fuel bills in half?
    Case study: we currently pay about $1,200 per year for electricity. At the current level, it's a third lower than before we had our solar hot water installed (which cost us ~$600 more than installing a replacement electric hot water system). So I estimate we're saving about $300-$400 *per year* on electricity costs, for an out-of-pocket cost of $600, which should be good for at least 10-15 years. First estimate, then, is that spending $600 now saves us $3,000 over 10 years, for a five-fold return on investment. And that's assuming the cost of electricity doesn't go up, which is wishful thinking in Australia, irrespective of any price on carbon!
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  18. #16: "a notable argument to be made for using the current abundant fossil fuel to bootstrap ourselves into the carbon free economy."

    Here's a report that suggests there may be less time for that than many believe.

    ... the decline in exports from countries like Saudi Arabia could mean that consumer nations such as the U.S. will be competing for a shrinking pool of available oil.

    For every three barrels of oil that countries excluding China and India imported in 2005, there will be only two by 2015, Brown estimates.

    China and India, meanwhile, will consume about a third of global exports by then to fuel the rapid growth of their expanding economies.


    The combined economic impact of competitive demand on an international scale and declining production will make a 'carbon tax' seem cheap.
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  19. Bern is right conservation is a big part of any energy solution. Simply putting European style petroleum taxes in place in the USA would have a huge effect. Likewise hybrid technology, weight reductions in vehicles etc. And by all means put people in trains, if you can get their acquiesence.

    The other big opportunity is natural gas....a 30% CO2 reduction with Trade Balance benefits, and a reduction in the world's dangerous dependence on the Middle East.

    As Chapman points out nuclear is the other practical answer. But this one is on a longer burn(if you'll excuse the term). Sure we have the capability and the long term uranium supply to build a huge nuclear infrastructure. But even though it's now PC to ignore the risks....it didn't used to be, and for good reason. Care has to be taken, and last I looked opinions still counted for something. People don't want reactors in their backyards. Don't look for the big nuclear step before 2030.

    The other stuff, solar, wind hydropower, biofuels and geothermal are admirable....but small. They can be doubled, trebled....but they wont be a solution, just a contributor.
    And the effects of the vast electical power generation to make transportation non carbon, are daunting. Imagine the impact on copper, already in tight supply.

    You can't wish all the problems away.
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  20. Mozart - I agree that we can't wish our problems away. But a carbon price increases the market for alternative technologies, and potentially creates a revenue stream to fund their R&D (depending on how the government allocates the carbon funds). In short, a carbon price is a proactive step in solving our problems.
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  21. If Brown is correct I can envision a barrel of oil rising to $200 or more. That's plain simple economics, a dwindling supply mixed with growing demand.

    Once alternative energy becomes cheaper than conventional sources there should be a major surge toward investment in alternative energy leading to growth and employment in that sector. So why always apply this short-term economics approach to things which is basically what people like Monckton argue. Long-term economics would tend to indicate that investment today would lead to increased economic benefit in the short-term also while averting some of the increased cost due to future inflation.

    I don't see investment in alternative energy as any potential threat to any countries economy. It is inevitable that at some point in time that there will simply be a transition period where employment in various sectors will shift to other sectors as demand for new technologies increases and older technologies become more expensive to maintain and operate.

    So these arguments that moving forward will cause hardship, job losses, and hurt the economy, is simply a flawed argument.
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  22. "The cost of repairs to disasters and warfare contribute to GDP! They are part of the domestic product. "

    Maybe. But the tax incentives or low-cost loans or direct payments by governments for such major projects take tax revenues away from other worthwhile purposes. Thinking that things will be better because governments will get back 10 or 20 or 30% of their outlays from taxes on wages, profits or goods & services is reassuring - until you start doing it over and over and over again for no net improvement in infrastructure and services.

    It's worthwhile for genuinely longterm investments. Doing it repeatedly without getting *new*, additional bridges or airports or whatever for that cost because the necessary funds are locked in to replacing, repairing or relocating the existing services is financial suicide. If you've not taken future climate problems into account, where will you find appropriate large parcels of land that should have been set aside for such developments 20 or 30 years earlier.

    Genuinely longterm infrastructure investments must take future issues like storms, floods and fires into account. That means effects of climate change. Investment will be a lot more valuable if the airport or sewage treatment plant is still above sea level 60+ years from now. And if dams and bridges can withstand storm levels prevailing 80+ years from completion.
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  23. Muoncounter - given the failure of the political system (in the US at least) to handle global warming - we can only hope that supply will crater compared to demand.

    But then people will feel justified in all kind of environmental sins to chase another barrel of oil (Alaska's ANWR being one obvious choice - fraking the entire Bakken field, etc., etc.).

    Given the failure of our national governments, it is becoming challenging to see this ending well.
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  24. Mozart

    "But there is a limit to the speed we can convert to non carbon forms of energy. And a cost. Make that cost too high and economic activity will be threatened. The complex linkages and dependencies we have in our now global economy, are at least as fragile and delicate as those in our eco system.

    Food shortages and famine are just a perturbation away. We have to be wise about all this."

    Some scary factors:
    - At current rates most of the worlds fisheries will have collapsed by mid-century
    - Soil loss and fertility decline is on a similar trajectory.
    - Peak Oil is either upon us or very soon.
    - How far off is Peak Gas? In addition to their use as fuels they are essential ingredients in fertiliser production.
    - Major aquifers supplying water to grow food for nearly a billion people are in massive decline - in western India, Northern China, The American mid-west. So too Glacial melt and snow pack changes will have similar effects.
    - Population is predicted to hit 9-10 Billion around the same time.
    How far off is the worlds first Billion person famine?
    - As food shortages start to spread widely, how many more nations will be added to the list of 'failed states'?
    - If the failure of states starts to spread, what happens to international law, piracy, warfare, disease control & quarantine, international financial institutions and trade?

    And we haven't even mentioned Global Warming yet. Its impact is not just on the things we normally think of, but as a 'force miltiplier' for all the other threats.

    We are caught by a two edged sword. With our current arrangements for how the worlds economic and political systems work, if we try to change energy systems etc too quickly we seriously risk making these problems worse now. But if we don't act rapidly, AGW a few decades from now will so massively compound these threats that the our civilisation may go into an inexorable slide.

    So worst-case scenario; we don't act on AGW anywhere nearly strongly enough, or not at all, perhaps because we are so bound up just coping with the day to day crises. Then AGW gets into high gear mid-century with a few of the 'tipping point' factors coming into play and our societies really start to implode. And in this hugely traumatised world, as many major nations are under huge pressure, someone pushes the Nuclear Launch button.

    After that, our over-population problems are probably solved. But after perhaps two generations of collapse, how much of our current knowledge and technology will our descendents retain. As a book I read recently on brain neuro-plasticity commented, 'civilisation is only really one generation deep'

    In a world that is much harsher than anything in the last 10,000 years; with the psychic trauma of the collapse affecting everyone left; with the loss of our most precious and fragile resource, our knowledge base; on a world where all the easily extractable resources have already been extracted; Our descendents may by trying to start a viable hunter-gatherer society in a world that looks like something out of Mad Max.

    And the people who may see all this happen are alive today. In schools all over the world.
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  25. The World Bank also do a great job of ignoring the science in their economic analyses:

    The World Bank, droughts, and voodoo economics
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  26. Mozart at #19. Natural gas is touted as a partial solution, but there is a catch. Comparisons tend to only look at the combustion of the gas, not the extraction from a well. Often CO2 is included in the source and it has to be separated. There is a new gas well in Western Australia (Browse)which when it comes on line shortly will produce 5% of the country's CO2 emissions!!! One gas well producing more CO2 than the whole of NZ! An appropriate carbon tax would have ensured that the project wasn't viable.
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  27. A compelling refutation of Monckton (who read Classics at Cambridge, not Economics) and one which concludes with the all important question … what exactly are we waiting for?

    From government, we are waiting for political will and realisation that continued failure to adopt meaningful CO2 reduction targets and introduce an ETS, designed to prevent undermining its purpose (eg through trading in off-sets of little value), is not and never has been an option.

    Prime Minister Gillard appears more resolute than her predecessors. Given the scientific advice she is receiving and pressure from the Greens, she has little option but to seek passage of legislation and its implementation in 2011.

    Opposition insistence that adapting to climate change, paying the business sector to reduce emissions and adoption of a meaningless CO2 reduction target (5% below 2000 levels by 2020) makes them irrelevant. Acceptance of science based advice rather than that provided by climate change deniers (Monckton, Plimer et al) is unlikely.

    The Opposition has yet to explain how we can adapt to increasingly global warming and ocean acidification or pay for their effects. In reality, the attitude of the Opposition towards climate change and its consequences makes them irrelevant.

    Excluding fossil fuel industries, the business sector appears more interested in maintaining its competitiveness in domestic and international markets. It is likely to oppose an ETS or Carbon Tax which does not give them comfort in this regard, largely because it is ill-informed, particularly about new commercial opportunities

    The fossil fuel and coal fired energy industries faced with reduced domestic use of their products by 2020 and significant fall in exports by 2050 will not support measures hastening decline of very lucrative markets.

    In summary, the Australian government will act to abate CO2 emissions in 2011 and assist development of alternative energy sources, gas and geothermal, to replace fossil fuels. Transition to a low (then no) carbon economy will pose challenges for both government and industries dependent on fossil fuel use. They can and will be met with in-depth planning, so far not evident. Is Minister Combet the man for the job?
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  28. Dana,

    "Clear as mud, right?"

    Thanks for your, actually, very clear explanation. :)
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  29. @Glenn Tamblyn: that's not a very cheery thought to end on, though I fully understand where you're coming from. Given the advances in medical science we've seen over the past few decades, there's a distinct possibly some of us typing here today will live to see some of the consequences of global warming.
    When I think about the "head in the sand" attitude of many deniers & political conservatives, though, I sometimes despair for my baby daughter's future, and wonder if my grandchildren will have a habitable world to grow up in... one thing's for sure - it's not gonna be the same world I grew up in.
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  30. My problem with any economic analysis is just how you quantify the negative effects of warming. I can imagine doing this if you say, "we'll have 10% more droughts", and then calculate the rise in the price of food. But what if the rise in the price of food leads to starvation, riots and civil war? Is that factored into the costs? If Queensland floods more often, how do you calculate the cost of broken hearted farmers having to walk off the land?

    On the other hand, when you look at the cost of cutting CO2 emissions, how do we factor in human ingenuity? Its a bit like someone in 1950 trying to quantify the influence of the computer - very hard to do accurately, with a tendency to be too conservative about our ability to make things better and better.
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  31. @Tamblyn: you touch on two related problems, that are ultimately just as challenging as climate...population growth and resource depletion. The happy clappy thought that science is going to find ways to replace scarce metals and energy sources for future generations, is incredibly optimistic.

    Malthus will ultimately be proven correct.
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  32. On the Australian ABC's 7:30 report tonight they talked to someone from Munich Re, who are especially interested in disasters because they are re-insurers. The Munich Re person explained how weather related disasters in Australia were increasing rapidly, and that Munich Re attributed some of them to climate change.

    Yet the skeptics keep insisting that you can't blame AGW for any weather events, and they keep saying that there is no evidence for increased extreme weather events.
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  33. Brookes: Ever heard about the Dust Bowl? These things happen, and unless you can statisticaly prove the floods, droughts etc are increasing in frequency, they are just the tail of the probability curve.

    One thing that would be hard to deal with now though, with huge population dependency on the global growing regions,is another mini Ice Age.

    There were three minima with major agricultural declines, 1650, 1770, and 1850.....extrapolate.
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    Moderator Response: We are not going to have another mini ice age anytime soon. See (and comment on) the Post "What would happen if the sun fell to Maunder Minimum levels?." For more detail about the causes of the last mini ice age, see (and comment on) the Post "A detailed look at the Little Ice Age."
  34. John Brookes - no question, these sorts of economic analyses are very difficult, which is why many don't even attempt to quantify the benefits from avoiding climate change.

    But I think the key is that despite these difficulties, economic analyses constistently show both that the costs of carbon pricing are minimal, and that the benefits outweigh the costs by a significant margin. How much of a margin is a difficult question to answer because of the issues you raise and many others, but I think we can say with good confidence that with carbon pricing, benefits > costs.
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  35. Mozart @ 33

    Ah! But now we have CO2 to keep us warm.

    Should we not be more concerned about the prospect of the sun emerging from its present minima?
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  36. Here in British Columbia we currently pay a carbon tax of $20/tonne CO2 equivalent. This will escalate to $30/tonne in 2012. Oddly, the tax was introduced in 2008 by a right-of-centre political party (confusingly known as the BC Liberals). The tax is revenue-neutral, meaning that most taxpayers pay lower income taxes than elsewhere in Canada, including in oil-rich Alberta. The economy has not ground to a halt here; in fact the province has weathered the recession relatively well. I would invite DViscount Monckton to come and see for himself; but really I would prefer him to stay away.

    One unexpected consequence of a revenue-neutral carbon tax is that is hard to repeal, since abandoning it would entail raising income taxes. Hardly a populist move.

    Martin Weitzman of Harvard University argues that most cost-benefit analyses don't properly factor in the low possibility of the disastrous outcomes that lurk in the fat tails of climate forecasts. It's worth noting that most probability distributions related to climate are skewed to the high (bad) side and while truly bad outcomes (let's say higher than 6 degrees Celsius by the end of the century) are improbable, they are often given chances of happening of about 3%. With appreciable possibilities like this of truly dire outcomes, it may make little sense to sweat the economics about whether action is needed or not. Perhaps if we had 30 planets it might be interesting to run experiments to see which course of action yielded the highest return on investment. But we don't, of course, even though people like Monckton do seem to inhabit an alternative reality.
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  37. I've read most of the working links above. Do the background documents take in any of the positive effects global warming: longer growing seasons, increased crop productivity, lower heating costs in winter, etc...
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  38. Pirate,

    Longer growing seasons don't help if the productive agricultural zones move into areas where agriculture cannot take place.
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    Moderator Response: ... and more info is in "It’s not bad" and "CO2 is not a pollutant."
  39. From a carbon taxing proposal I've seen in the US:

    1. Tax carbon at it's source.
    2. The tax will rise at a set rate over a 10 year period.
    3. Costs of goods and services will necessarily rise.
    4. To offset those costs - 100% of the tax revenue will be distributed to the public as "dividends".
    5. There will be no administrative costs.

    Without getting into a discussion of the validity of a carbon tax, can this really be handled without creating a bureaucracy?
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  40. Harry S., I'm hoping Obama's budget request is not killed by congress, but my hopes are not that high. I think that in the US, the people that get elected are more often the ones who spend more on their campaigns. That means accepting donations from people with money, and the fossil fuel industry has more money than any other industry I know. And let's not kid ourselves; solving the climate change problem means putting them out of business, and they know it. I'm not saying that politicians necessarily change their opinions based on the donations they receive, but if you are in danger of being put out of business, you are going to support those who see things your way.

    All that means is that it is difficult to overcome the status quo, but it's not like everyone here didn't already know that. Already there are Republicans in congress who are saying that the $4 billion per year loss of fossil fuel tax subsidies would cost the US to loose jobs. Yeah, no kidding, shifting off of fossil fuels will cost jobs in that sector.

    The local Republican governor has stated that one of his main goals is to see a new coal plant built, because Kansas needs the energy. Why would a political figure feel the need to push forward a project in private industry? And the vast majority of the energy produced is contractually bound to Colorado; the energy left over is a few windmills worth; so, why does the governor feel that Kansas needs the plant?

    Pirate,
    Open up Google Earth and zoom in on an industrial agricultural area. You see roads, train tracks, and about every 20-40 km a town. That town will have a school, a hospital, and other infrastructure. Shift poleward and what do you see; none of that. In the case of southern Australia, you see ocean. You are supposing that shifting where we grow food will have no cost, even if we can grow food there. What if where you can grow food crosses national boundaries? Hadley cells will shift toward the poles and push the rain ahead of them.

    Thanks Glenn T, you have just repeated the all things that make me wonder why I bother to get out of bed in the morning. But, no matter what happens, my kids will be better off if I give them a good start in life.

    IMHO, I don't think we'll ever see 9 billion people on this planet. The world's resources are finite; there is a limit to the earth's carrying capacity; Malthus will be proven right in time. I just hope that we reach that limit softly. If the environment is seriously degraded, the earth's carrying capacity will be on a decline when our increasing population hits it, and that is a recipe for a major over-correction. There is a possibility that we will have a revisit of Easter Island on a global scale.

    In the local newspaper, there was a comment that might as well have said, "I don't want to have to give up luxury items; therefore, AGW is just a government conspiracy." and he had supporters. My hope is not high.

    I can't comprehend people who argue about the cost of repairing the electrical wires when their house is in danger of catching fire.

    Sorry, this is getting way to long, but weather has always introduced a certain amount of variability in food production, but we've optimized to certain means and variations about those means. and now we are changing them. Why would anyone think production will not be adversely affected?
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  41. Harry@39. ".... can this really be handled without creating a bureaucracy?"

    Well, it can be handled without creating an entirely new bureaucracy. There are 2 functions of government that modern societies have really got under control. One is administering taxes, the other is distributing benefits. (Leave aside my personal views about the efficiency of various systems in different countries.)

    A carbon tax differs very little from alcohol excises or customs duties or sales taxes. Name the taxable item, set the rate, impose the levy / tax / duty / excise. Every industrialised country has one or more established bureaucracies that could simply add this item to the other imposts they collect.

    A universal carbon payment looks a great deal like other near-universal payments. Child benefits, pensions, you name it. All you need to do is to get the recipients on the system, set the rate, choose the payment intervals, send cheques / transfer funds to bank accounts. The only complications will be those that already affect existing payments - nursing home residents, homeless people and all the similar bureaucratic headaches. But they're the same bureaucratic headaches, nothing new.
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  42. Come to think of it, such a payment system would be larger but much, much easier than other systems. There are no eligibility requirements apart from existence.

    No means tests or rate changes or age limits or income adjustments or interactions with the tax system as there are with all other benefits.
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  43. IMHO, I don't think we'll ever see 9 billion people on this planet. The world's resources are finite; there is a limit to the earth's carrying capacity; Malthus will be proven right in time. I just hope that we reach that limit softly.

    The world population, when it grew at it’s fasted rate, increased with 2% each year. Now we are down to 1% per year but compared with the rest of human history it is still a very fast relative growth rate. In the past decade the world population has increased with one billion people. Going from 6 billion to 7 billion (give or take a few …) The fastest addition of one billion people to the world population yet. I think it’s terrifying.

    The scenarios of the IPCC project a moderate population growth, to even a stabilization of the world population after 2200 (a stabilization will supposedly not be caused by lack of resources, but by improving living standards around the globe which will cause families to have less children). This assumption is taken as is from a study by the International Institute for Applied Systems Analysis in Austria and no further dependencies between population/global warming/resources/etc. are taken into account in the IPCC scenarios.

    I wonder how well founded this assumption is, because so much is dependent on it. Is it just an extrapolation of the demographic evolution in the developed countries ? This would be insufficient evidence for me. Cultures differ, for instance in muslim countries no decrease of the average number of children per family is observed. The only conclusion you can come to when looking at the current graph is that the global population is still rising steeply.

    But even if the assumption is correct (which basically means: in a world with endless resources the human population would spontaneously stabilize after reaching a certain level of development), will the world population stabilize in time before resources run out ? If not, the world population will stabilize or even decrease by lack of resources e.g. famines.
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  44. Ann
    different cultures respond differently, true; but the governing factor is welfare. Indeed, population growth rate has peaked even in the least developed countries. Take a look at this UN database.
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  45. Resources running out? Long before they 'run out' there would be clear signals of problems. All you need to do is look at birthrate changes during the great depression. The birthrate dropped below replacement rate in the USA and several other developed countries.

    I'm very much afraid that my preferred population strategy - education of girls and women - may well be overtaken by events. The nastier economic and social issues, the famines that Ann referred to combined with the dislocations from advancing high tides and salinity of groundwaters will severely impact family formation and birthrates. Education of women and girls is still a good strategy, but it may not be the peaceful, gradual effect that I'd prefer on population numbers.
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  46. Hello! I have been reading this site for some time and decided to ask the opinion of the commentators here on Monckton's "Regulation Without Reason" http://jonova.s3.amazonaws.com/monckton/canada-coal-2011.pdf

    I've found that it has one obvious problem in that it purposefully excludes the co-benefits of the regulations being assailed. The math appears fuzzy as well but I'm not a math wiz so I was hoping to get some insight into that portion of it. Thank you!
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  47. Waldo @46, Monckton made a similar effort against Australia's Carbon Tax which was demolished in analysis, but unfortunately I cannot lay my hands on the analysis at present. Looking briefly over his Canadian effort I have already detected one error in which he under estimates the temperature effect by a factor of 14, even granting his numbers for change in CO2 concentration (which I have not checked).

    If you want good information on the Canadian Scheme, probably this is your best bet. It claims a 1.5 billion dollar net current benefit assuming a 3% discount rate; which compares to Monckton's claim of a net 6.4 Billion dollar cost. Given that the gross cost is estimated at $8.2 Billion, with a benefit of $6.7 Billion dollar Gross benefit excluding the benefits from reduced greenhouse emissions, Monckton's claim is unlikely to stand up to analysis.
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  48. Tom @ 47, Thanks for the reply! I have read Environment Canada's economic impact analysis. It appears to be much more grounded than Monckton's attempt to question it. Monckton tries to scale up the cost to be the cost per 1 deg C avoided. That sounds like a rather naive metric to me. Can you give me more detail on the math showing how Monckton underestimates the temp effect? That would basically blow his other estimates of the cost/benefit of the mitigated CO2 out of the water!
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  49. There are a bunch of factual and logical errors in Monckton's piece. There's the Tragedy of the Commons, for starters. That may be the post Tom is referring to. There's the fact that Monckton makes assertions about the costs of the legislation while mostly ignoring its benefits (as discussed in the post above). That's really his main error, as you noted in #46, Waldo. He does cite a bit of literature from Tol and Lomborg, which are basically the only two economists who think the costs of climate inaction will be relatively small.

    Monckton also makes a claim about CO2 concentrations being doubled in 2100. They'll be doubled decades before that unless we take major action to reduce our emissions, which is exactly what he's opposing in this article. That completely screws up his 'warming by 2100' calculation. What he's actually calculating is the immediate warming when CO2 doubles, which yes, will be somewhere close to 2°C. His claim that this is lower than IPCC values is total BS, it's actually right in the middle of the IPCC range (which is basically 1 to 3°C transient climate sensitivity). His other calculations are equally screwed up.
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  50. Waldo @48, looking a little closer, Environment Canada estimates the measures will result in a reduction of 175 MtCO2 equivalent over the period 2015 to 2030. That equates to 0.022 ppmv, or 0.012 ppmv after the typical 45% absorption by the deep ocean/biosphere and natural sequestration is accounted for. That is in agreement with Monckton.

    Monckton estimates the CO2 concentration would rise to 437.676 without the regulations. Therefore, the difference in equilibrium temperature ignoring long term feedbacks as a result of these measures ignoring all else would be ln(437.676/437.664) * 5.35 * (3/3.7) where the last term is the feedback factor for scaling a forcing to temperature. It assumes the IPCC sensitivity for doubled CO2 is of 3 degrees is correct. Ergo, the temperature effect (at equilibrium) is 0.00012 C if only Canada implements measures to reduce CO2 emissions, and this is the only measure Canada implements. This compares to the 0.00007 C reduction calculated by Monckton.

    The first thing I should note is that clearly I made an error last night, for which I apologize. The difference between my figure and Monktons' figure is just 42% which can be ascribed entirely to the fact that he only estimates the transient climate response. We are, of course, far more interested in the equilibrium climate response.

    The second thing to note is that Monckton's calculation depends on the assumption that nothing else is done about CO2 emissions. If other measures are taken, the 0.012 ppmv will represent a greater percentage of the atmospheric concentration in 2030, and hence be more effective in reducing temperature. If emissions are halved relative to the A2 scenario, for example, the Canadian measure would be 6% more effective at reducing CO2 emissions.

    More importantly, we need to see past Monckton's dishonest approach of determining effects based solely on the Canadian contribution, while showing costs for a global application of the scheme. In fact, based on Monckton's own figures we can determine that applied globally, this scheme wold reduce transient climate response in 2030 by 0.35 degrees C. That is 55% of the expected transient climate response for the interval 2011-2030 on the A2 scenario (multi-model mean).

    That the Canadian measure by itself has limited effect is because Canada has a relatively small population, and correspondingly low absolute emissions. That is not a reason for Canada to do nothing, and this evidently is a cost effective measure proportional to Canada's expected contribution to solving the global problem. (Well, it's half of the expected contribution, in any event.)

    The question then resolves to cost effectiveness, on which I am no expert, but would trust environment Canada over a self promoting conspiracy theorist any day, even if I did not know Monckton's personal record for honesty and accuracy.
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