Iain Murray

This fellow from New Zealand appears to think that Climategate proves that the big money is in climate skepticism. How does that work?

Here’s my attempt to follow his argument: The US Government has spent $79 billion in the past two decades on climate science. But Big Oil and Big Coal want a piece of this. They spend heavily on lobbyists to get it. They would be well served by certain provisions in bills and international treaties. [I agree with this so far…] But “the aims of the climate change lobby groups and the large industries they represent dovetail quite nicely with the arguments put forward by the sceptics.” So [he implies] therefore the skeptics have all the money.

Huh?

Global warming skeptics don’t want carbon capture and storage. They don’t want targets for emissions reduction. They don’t want international treaties and thousand page bills that take money out of the productive class and spend it on vastly expensive ways of doing things we know how to do already. Global warming skeptics do not want “a seat at the table.” They don’t think there should be a table in the first place.

Our science blogger friend has confused skeptic with rent-seeker. We skeptics have a grudging respect for our ‘alarmist’ opponents. In most cases they have a sincere belief that there is a serious problem and want to solve it. (Part of the problem revealed by climategate was that many of them, however, want to solve the problem by any means necessary and are insincere in their methods). Rent-seekers, on the other hand, want to exploit such beliefs for personal/corporate gain*, at the expense of the rest of us. Therefore rent-seekers are a bigger problem than alarmists, because they do indeed bring the big bucks. That’s why rent-seeking businesses want carbon capture and storage, which they will be paid handsomely for. They want international treaties and thousand page bills that contains nice incentives for them, their executives and their shareholders. They want the free market distorted to their benefit. The ends they desire, however, are completely different from those desired by the skeptics. Their aims do not dovetail with the ends of the skeptics in the slightest.

That’s why the big money is with those looking to establish a regime for emissions reduction. Now those thieves have certainly fallen out, and there are still some honorable types who want no handouts to big energy companies at all, but the money is certainly on that side of the aisle.

If genuinely skeptical groups have gotten as much as $790 million total worldwide for global warming efforts since 1989 – 1 percent of that devoted to climate science – I’d be extremely surprised. A tenth of that amount is more likely in the right ballpark. You can’t change that by lumping rent-seeking industries in with skeptics. Rent-seekers really do follow the money.

* Rent-seekers are also only too happy to exploit belief in the free market, arguing for free enterprise up until they can see a benefit from government restricting market entry, and so on.

Certain influential forces in the environmental movement – most notably James Hansen of NASA – have expressed disquiet with the inability of democracies to deal with their imagined “climate crisis,” leading to sentiments like this one from Australian authors David Shearman and Joseph Wayne Smith:

We need an authoritarian form of government in order to implement the scientific consensus on greenhouse gas emissions

Climatologists Nico Stehr and Hans von Storch discuss this argument at Roger Pielke Jr’s blog.  Thankfully, the demands for an “Ecologocracy,” for want of a better term, are not yet universal in the environmental movement.  They conclude:

Finally, the growing impatience of prominent climate researchers constitutes an implicit embrace of now popular social theories. We think in this context especially of Jared Diamond’s theories on the fate of human societies. Diamond argues that only those societies have a chance of survival which practice sustainable lifestyles. Climate researchers have evidently been impressed by Diamond’s deterministic social theory. However, they have drawn the wrong conclusion, namely that only authoritarian political states guided by scientists make effective and correct decisions on the climate issue. History teaches us that the opposite is the case.

Therefore, today’s China cannot serve as a model. Climate policy must be compatible with democracy, otherwise the threat to civilization will be much more than just changes to our physical environment.

Indeed.  In fact, there may be another reason for those who despise greenhouse gas emissions also to despise democracy. and it is precisely linked to the threat to civilization.  We know that the best indicator of low greenhouse gas emissions is poverty.  As Daron Acemoglu shows, rejecting Diamond, poverty is strongly linked to the lack of market institutions that democracy protects:

People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate. That’s what determines the haves from the have-nots — not geography or weather or technology or disease or ethnicity.
Put simply: Fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments.

To put it another way, the authoritarian solution to the global warming problem, in so far as it exists, is the imposition of poverty, for that is the inevitable result of the restriction of energy use that is the authoritarians’ sine qua non. Those of us who are trying to think of alternative solutions to the problem, however, are convinced that it is the same institutions that have delivered us from poverty that will deliver us from whatever ills a warmer world might impose. To see more on this, check out Marlo Lewis’ film Policy Peril, in particular this segment.

In today’s New York Times, Nobel Laureate Paul Krugman preens about intellectual dishonesty while presenting the most intellectually dishonest case about the cost of climate change policies I have seen this side of Joe Romm.  It moved me to do something I have not done for some time, and Fisk the entire article.  Krugman’s words are in italics.

So, have you enjoyed the debate over health care reform? Have you been impressed by the civility of the discussion and the intellectual honesty of reform opponents?

If so, you’ll love the next big debate: the fight over climate change.

And Mr Krugman is about to demonstrate his level of civility and intellectual honesty in what only can be described as a pre-emptive strike.  Is this the Krugman Doctrine?

The House has already passed a fairly strong cap-and-trade climate bill, the Waxman-Markey act, which if it becomes law would eventually lead to sharp reductions in greenhouse gas emissions.

Sharp reductions? The Breakthrough Institute, which strongly champions action on global warming, says that the way the bill is structured “U.S. emissions in capped sectors could rise for much–if not all–of the next two decades.” Krugman protects himself against the accusation of outright lies by using the word “eventually,” but without disclosing the ineffectiveness of the bill over the next 20 years, Krugman is already being intellectually dishonest.

But on climate change, as on health care, the sticking point will be the Senate. And the usual suspects are doing their best to prevent action.

Some of them still claim that there’s no such thing as global warming, or at least that the evidence isn’t yet conclusive. But that argument is wearing thin – as thin as the Arctic pack ice, which has now diminished to the point that shipping companies are opening up new routes through the formerly impassable seas north of Siberia.

Krugman condenses a very complex argument over the nature of global warming into one statement and then dismisses it out of hand.  There are very few who deny the heat-trapping properties of greenhouse gases.  There are many who suggest that the influence of these gases on the climate as a whole has been significantly exaggerated.  For instance, I wonder what Mr. Krugman thinks of the recent research of Lindzen and Choi, published in August, which uses actual observations to find that climate sensitivity to greenhouse gases has been overestimated by a factor of six.

As for the Arctic, it has been melting since the end of the Little Ice Age two hundred years ago.  In fact, The Washington Post published a story on a government report that described “a radical change in climatic conditions,” “unheard-of temperatures in the Arctic zone,” and the melting of ice as long ago as November 2, 1922.  The fact that the North-East Passage, a holy grail for traders for hundreds of years, is now open might also warrant some balancing mention of its benefits.

Even corporations are losing patience with the deniers: earlier this week Pacific Gas and Electric canceled its membership in the U.S. Chamber of Commerce in protest over the chamber’s “disingenuous attempts to diminish or distort the reality” of climate change.

PG&E made an odd member of the Chamber of Commerce to begin with, as its profits come about not by commerce but by government regulation.  PG&E’s profits are “decoupled” from the amount of energy it sells.  There are suggestions, by the way, that companies are coming under pressure in the way of threats of activism directed against them if they continue to support the Chamber’s efforts to protect the interests of its members.

So the main argument against climate action probably won’t be the claim that global warming is a myth. It will, instead, be the argument that doing anything to limit global warming would destroy the economy. As the blog Climate Progress puts it, opponents of climate change legislation “keep raising their estimated cost of the clean energy and global warming pollution reduction programs like some out of control auctioneer.”

If the estimated costs rise, that is because people like the bloggers at Climate Progress keep persuading politicians to go for more ambitious programs, which of course cost more. Auctioneers only respond to bids, and it is the bidders who are out of control.

It’s important, then, to understand that claims of immense economic damage from climate legislation are as bogus, in their own way, as climate-change denial. Saving the planet won’t come free (although the early stages of conservation actually might). But it won’t cost all that much either.

Here we are getting to the nub.  Having succeeded in chilling the speech of those who are doubtful about the effect of greenhouse gases on the climate, Mr. Krugman now wants to make it unacceptable to say that policies designed to raise the cost of energy will have any detriment to the economy.

How do we know this? First, the evidence suggests that we’re wasting a lot of energy right now. That is, we’re burning large amounts of coal, oil and gas in ways that don’t actually enhance our standard of living – a phenomenon known in the research literature as the “energy-efficiency gap.” The existence of this gap suggests that policies promoting energy conservation could, up to a point, actually make consumers richer.

Well of course there is waste involved in generating energy.  If there wasn’t so much regulation of energy generation right now, which has the perverse effect of locking in old technology, then we’d actually be a lot more efficient than we are.  However, being more energy efficient does not mean we use less energy.  Mr. Krugman’s own newspaper just recently published an excellent story about the Jevons Paradox, first formulated in 1865, which states, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth.”  This really is Energy 101.

Second, the best available economic analyses suggest that even deep cuts in greenhouse gas emissions would impose only modest costs on the average family. Earlier this month, the Congressional Budget Office released an analysis of the effects of Waxman-Markey, concluding that in 2020 the bill would cost the average family only $160 a year, or 0.2 percent of income. That’s roughly the cost of a postage stamp a day.

Once again, Mr. Krugman is being economical with the truth.  The government studies most emphatically did not find that the bill will cost a postage stamp a day in 2020.  They can only arrive at that figure of $160 a year by discounting twice.  They took the nominal cost – the actual out-of-pocket cost – of the increases in energy prices and worked out what that would be in today’s dollars.  Then they discounted back to find the present value of that figure.  In other words, $160 a year is what you’d have to lock away in a bank account with a guaranteed interest rate today in order to pay your bills in 2020.  If you didn’t do that, the figure from the EPA’s study in today’s dollars (ie not accounting for inflation) is above $2700 a year for a family of four.  The CBO study, meanwhile, admits that it did not attempt a comprehensive study of lost income.

Mr. Krugman also ignores polling evidence that finds that only 10 percent of respondents would be willing to pay more than $100 a year to achieve the supposed benefits of the Waxman-Markey bill.  So even if the cost was just a postage stamp a day, people would still find that cost expensive.

By 2050, when the emissions limit would be much tighter, the burden would rise to 1.2 percent of income. But the budget office also predicts that real G.D.P. will be about two-and-a-half times larger in 2050 than it is today, so that G.D.P. per person will rise by about 80 percent. The cost of climate protection would barely make a dent in that growth. And all of this, of course, ignores the benefits of limiting global warming.

The same argument can be made about global warming itself.  Even with all the supposed dramatic effects of global warming, the United Nations Intergovernmental Panel on Climate Change finds that people all over the world – even in the poorest countries – will be many times richer than they are today as a result of the economic activity sustained by fossil fuels. This demonstrates that a warmer-but-richer world is better off than a cooler-but-poorer world, and we will in fact be best off in the warmest world.  Krugman’s argument here in fact suggests that we shouldn’t do anything about emissions at all.

So where do the apocalyptic warnings about the cost of climate-change policy come from?

Are the opponents of cap-and-trade relying on different studies that reach fundamentally different conclusions? No, not really. It’s true that last spring the Heritage Foundation put out a report claiming that Waxman-Markey would lead to huge job losses, but the study seems to have been so obviously absurd that I’ve hardly seen anyone cite it.

The Heritage Foundation has updated its report and recently defended its methodology in a panel of other modelers, who did not raise significant objections to it (so much for its obvious absurdity).  If Mr Krugman hasn’t seen it cited it is the same way that Pauline Kael didn’t know anyone who voted for Nixon.  But the Heritage Report is not the only one.  The American Council on Capital Formation found job losses of 1.8 to 2.4 million in 2030.  The research of the left-leaning Brookings Institution has found that “Achieving reductions in greenhouse gas emissions is a costly endeavor.”  Once one strips away the discounting tricks, even the government studies demonstrate the truth of this statement.

Instead, the campaign against saving the planet rests mainly on lies.

Thus, last week Glenn Beck – who seems to be challenging Rush Limbaugh for the role of de facto leader of the G.O.P. – informed his audience of a “buried” Obama administration study showing that Waxman-Markey would actually cost the average family $1,787 per year. Needless to say, no such study exists.

Once again, Mr. Krugman is being economical with the truth.  He is correct only in so far as the recently revealed documents simply summarize the real effects of the other studies that have been disguised using economic trickery.  Here is what the Treasury documents say will be the effect of the President’s policies:

Given the administration’s proposal to auction all emission allowances …a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually. … Economic costs will likely be on the order of 1% of GDP, making them equal in scale to all existing environmental regulation. …One advantage of auctioning allowances is the potential for generating large revenues (perhaps $300 billion annually). … Domestic policies to address climate change and the related issues of energy security and affordability will involve significant costs and potential revenues, possibly up to several percentage points of annual GDP (i.e., equal in size to the corporate income tax).

These documents are available for viewing here.  The fact that the Treasury initially redacted the most embarrassing sentences suggests strongly that they wanted to hide this.  That sounds like burying the truth to me.

But we shouldn’t be too hard on Mr. Beck. Similar – and similarly false – claims about the cost of Waxman-Markey have been circulated by many supposed experts.

The claims are the claims of the US Treasury Department, available now for all to see.  We show, while Mr. Krugman tells.

A year ago I would have been shocked by this behavior. But as we’ve already seen in the health care debate, the polarization of our political discourse has forced self-proclaimed “centrists” to choose sides – and many of them have apparently decided that partisan opposition to President Obama trumps any concerns about intellectual honesty.

So here’s the bottom line: The claim that climate legislation will kill the economy deserves the same disdain as the claim that global warming is a hoax. The truth about the economics of climate change is that it’s relatively easy being green.

Mr. Krugman is hoist by his own petard.

Myron has already pointed out how most of what the President claimed were the threats from global warming are exaggerated.  Here’s the data to back that up.

“…[T]he threat from climate change is serious, it is urgent, and it is growing.”  Reality: global mean temperatures increased slightly from 1977 to 2000.  Temperatures have been flat since then.

“Rising sea levels threaten every coastline.”  Reality: sea levels have been rising on and off since the end of the last ice age 13,000 years ago.  The rate of sea level rise has not increased in recent decades over the nineteenth and twentieth century average.

“More powerful storms and floods threaten every continent.”  Reality: there is no upward global trend in storms or floods.

“More frequent drought and crop failures breed hunger and conflict in places where hunger and conflict already thrive.”  Reality: there is no upward global trend in major droughts.  Reversals in large-scale cycles have meant that the southward march of the Sahara Desert into the Sahel has been reversed in recent years and the Sahara is now shrinking.

“On shrinking islands, families are already being forced to flee their homes as climate refugees.”  Reality: some Pacific islanders may want to emigrate to New Zealand or Australia and are claiming that their islands are disappearing as the reason, but shrinkage has been minimal in recent decades because sea level rise has been minimal.

Charts from SPPI’s Monthly CO2 Reports and from Indur Goklany, “Death and Death Rates Due to Extreme Weather Events: Global and U.S. Trends, 1900–2006,” 2007.

While this speech is mostly hogwash, I am surprised and delighted to be able to find one thing to praise in it:

Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge

This is the right thing to do, for reasons I explained in my recent paper co-written with Sterling Burnett of NCPA (extract follows jump).

While many governments of developed nations argue for a worldwide reduction in fossil fuel use in order to combat climate change, those same governments also subsidize energy use and production.

In 2001, the countries of the EU-15 (the “old Europe” nations in the European Union) spent $16.77 billion (in 2009 dollars) subsidizing coal and $11.23 billion subsidizing oil and gas.

The International Energy Agency (IEA) estimates that developing countries spend around $220 billion annually on subsidies for energy production and consumption, of which $170 billion subsidizes fossil fuels [see Figure I]. Including developed countries, subsidies for energy production and consumption worldwide amount to around $300 billion, the majority of which are for fossil fuels.

Such subsidies reduce energy prices below what the market would set, encouraging greater use and raising emissions levels. Direct subsidies include grants to producers and consumers, government investment in research or infrastructure and preferential loans or tax treatment. Indirect subsidies include trade restrictions, price caps and market regulations that guarantee sales volume and restrict competition.

Many signatories to Kyoto subsidize carbon-based fuel use and production. Such subsidies “tilt the playing field,” discouraging research expenditures by private energy companies in developing alternative energy sources. Producers and consumers of other energy sources then demand subsidies to “level the playing field.” Thus, government intervention causes significant distortions in energy markets.

British Petroleum estimates that countries that subsidize transportation fuel use accounted for 96 percent of the increase in oil demand in 2007.13 Many of them are less-developed nations that subsidize both production and consumption of fuels. The IEA estimates that removing domestic price subsidies in China, India, Indonesia, Iran, Russia, Kazakhstan, South Africa and Venezuela would reduce global energy use 3.5 percent and reduce global CO2 emissions 4.6 percent.

U.S. Energy Subsidies.

The U.S. Energy Information Administration (EIA) calculates that federal energy subsidies amount to $16 billion annually [see Table II]:

In 2007, the federal government spent approximately $5.5 billion on subsidies for the coal, oil and natural gas industries— principally tax breaks for investment — including $3 billion for coal and natural gas, and more than $2 billion for research and development of clean-coal technology to reduce greenhouse gas emissions from coal.

The government spent an additional $1.2 billion for electricity production and use (not fuel specific), and $2.8 billion to increase the energy efficiency of homes and businesses.

It spent an additional $5 billion for renewable energy production and use, mostly in the form of tax breaks.

Finally, $1.2 billion went to the nuclear industry.

The EIA found that subsidies doubled from 1999 to 2007, due mainly to expanded subsidies for renewable energy and clean-coal technology.

Policy Recommendations. There are a number of neutral energy policies that could be implemented at the national or international level to reduce subsidized production and use:

International trade talks should include eliminating subsidies for fossil fuel production and consumption.

National budgets should be reviewed with the goal of eliminating programs that encourage energy use.

Subsidies and tax breaks, or tax penalties, for specific energy technologies should be eliminated to remove price distortions in energy markets.

A neutral energy tax policy, for example, would include replacing the federal tax-depreciation schedule for investment in new capital stock with immediate expensing. New equipment almost always produces fewer emissions per unit of output than older equipment.

Changing the depreciation schedule so that new investments could be written off immediately would make it profitable to replace old equipment at a much quicker pace. This simple change could do more to increase energy efficiency throughout the economy than the current complicated expensing regime.

Unfortunately, given the President’s praise for loan guarantees and tax credits elsewhere in the speech, he is failing to pursue a neutral energy tax policy, but I’ll give him due credit for at least addressing half of the market distortion.