MELBOURNE, Australia – Even on generously optimistic assumptions, the Sanders/Boxer CO2 tax would be 15 times costlier than letting predicted warming happen and paying to adapt to any damage it might cause.
As an expert reviewer for the forthcoming “Fifth Assessment Report” of the U.N.’s climate panel, the IPCC, I am alarmed at the absence of sound cost-benefit analysis when climate mitigation measures are proposed.
To determine whether it is worthwhile to spend the $1.2 trillion the carbon tax would cost, one must correctly combine the hitherto-unrelated specialisms of climatology and economics. Yet climatologists know no economics, and economists know no climatology.
For the first time, I shall combine the IPCC’s central equations and predictions with a standard inter-temporal investment appraisal to assess the Sanders/Boxer carbon tax.
The two senators have not asked the right question. Is it more cost-effective to try to mitigate global warming at once, or to adapt to its consequences later this century?
In 2006, the Stern Report on climate economics absurdly assumed a 10 percent probability that global warming would bring the world to an end by 2100. Now, after at least 16 years without warming, this assumption looks quaintly overblown.
Even if we were to accept Stern’s fanatical standpoint, no proposal to mitigate global warming would be cost-effective if it were to exceed his central estimate of the undiscounted cost of doing nothing, which is just 1.5 percent of global GDP throughout this century.
On any view, Sanders/Boxer will cost many times that.
In effect, the bill aims to hold U.S. CO2 emissions in 2023 at about their current level – some 89 percent of the 2005 high point. The proposed cut of 10.9 percent compared with the EIA’s latest business-as-usual projection for 2023, multiplied by the United States’ 17 percent of global emissions, would cut worldwide emissions by just 1.9 percent.
CO2 concentration in mid-2013 will be 397 parts per million by volume. After 10 years, without the CO2 tax, it will be 422 ppmv; with the tax, 421.5 ppmv. Based on the IPCC’s official estimates and methods, CO2 forcing abated would thus be an unimpressive 0.007 Watts per square meter.
By 2023, therefore, the tax would abate less than 1/400 degree Celcius of warming, or just 1.3 percent of the 0.18 degree warming predicted for 2014-2023. The cost of this trivial abatement would be a far from trivial $1.2 trillion.
If all measures worldwide to mitigate global warming were as cost-ineffective as Sanders/Boxer, it would cost more than $500 trillion to abate just 1 degree Celsius of global warming and more than $1.5 quadrillion to abate the 3 degrees Celsius warming the IPCC predicts for this century.
If the world adopted Sanders/Boxer, the cost of preventing the 0.2 degree Celsius warming predicted for 2014-2023 would be $92 trillion, or $13,100 from every man, woman and child on Earth, or more than one-ninth of global GDP.
Dividing the stupefying 11.5-percent-of-GDP cost of a global Sanders/Boxer carbon tax by Stern’s 1.5-percent-of-GDP inaction cost, it would be almost eight times more expensive to implement the tax in mitigation of global warming than to do nothing now and adapt later.
However, though Sanders and Boxer said when launching their bill that the rate of global warming has been accelerating, no doubt basing their contention on a notoriously fraudulent graph by the IPCC that has been eagerly peddled by the EPA and other organized-crime syndicates busily profiteering from the global-warming scam, there has been no warming at all for 16 years (all datasets); 18 years (Hadley/CRU); or 23 years (RSS satellite). Since 1990, the world has warmed at a rate below half of the IPCC’s central prediction.
If that real-world halving of the predicted warming rate persists, less than half the benefit of the proposed carbon tax in damage costs averted will be achievable.
In that event, a carbon tax today would be at least 15 times more expensive and less cost-effective than adaptation to any adverse effects of global warming the day after tomorrow.
In reality, the cost-benefit ratio will greatly exceed 15, for many reasons:
First, it is not at all likely that $1.2 trillion will buy as much as a 10.9 percent reduction in currently predicted U.S. business-as-usual CO2 emissions by 2023.
Second, warming may not even reach half of the predicted 3 degrees this century.
Third, Stern’s estimate that the cost of failing to abate 3 degrees of warming would be 1.5 percent of this century’s global GDP is probably a substantial overestimate.
Fourth, the zero discount rate used in this appraisal should really be replaced by at least the minimum commercial discount rate of 5 percent, cutting Stern’s 1.5-percent-of-GDP cost of climate inaction over this century to just 0.25 percent of GDP.
Fifth, exacting four times the carbon price in the European tyranny-by-clerk and in the Socialist People’s Republic of Australia will inflict heavy market-loss costs on the U.S. economy.
Sixth, appraisals of governments’ CO2-mitigation proposals have shown the cost-benefit ratios to be artificially lower than those of real-world measures that have actually been put into effect.
Seventh, Australia’s carbon tax is 36 times more expensive than the damage cost that might arise from doing nothing. As a result, the Labor/Green administration faces electoral defeat later this year. A U.S. carbon tax will not be more cost-effective than Australia’s tax.
Eighth, diverting $1.2 trillion from where it may do some good will cause heavy opportunity losses throughout the U.S. economy. This is one of the most insane proposals I have seen in 40 years working in and with governments.
Congress should kill the bill.