Good morning, my name is Fred Smith. As President of the Competitive Enterprise Institute, I welcome your invitation to discuss climate change policy. CEI is a public interest group established in 1984 with a current staff of 35 and an annual budget of about $2.5 million. Located in Washington, D.C., CEI works to educate and inform policy makers, journalists, and other opinion leaders on market-based alternatives to political programs and regulations. CEI also engages in public interest litigation to protect property rights and economic liberty. CEI is supported by the voluntary contributions of foundations, corporations and individuals. We accept no grants from any government agency, nor do we accept grants from any other party that would compromise the principled positions we espouse.
CEI is heavily involved in energy, science, and environmental policy — the primary areas of responsibility of this subcommittee. I co-authored the energy and environment chapter of the book, Market Liberalism: A Paradigm for the 21st Century, and I am the coeditor of the book, Environmental Politics: Public Costs, Private Rewards, which addresses ways in which special interests have used environmental issues to advance their own agenda. CEI also published a book, The True State of the Planet, a positive antidote to the doomsayer volume by Lester Brown and the Worldwatch Institute, The State of the World.
Climate change policy is a major focus of the Competitive Enterprise Institute. Indeed, we have been active in the global warming debate ever since the issue first gained national prominence in the late 1980s. Former CEI environmental studies director Kent Jeffreys published a major monograph on the issue, titled "Why Worry About Global Warming," in February 1991. In 1992, along with the late Dixie Lee Ray, I attended the 1992 Rio Conference as an observer and commentator. Our aim was to give intellectual aid and comfort to greenhouse skeptics in the U.S. and other delegations. Needless to say, our efforts to dissuade the Bush Administration from signing the Framework Convention on Climate Change were less than spectacularly successful. But I remain hopeful that cooler heads will yet prevail in this round. In the past several months CEI has held a full-day conference, conducted a half-day Congressional staff briefing, published nearly a score of op-eds and columns, and participated in numerous media interviews, press conferences, educational symposia, and rallies to challenge the greenhouse orthodoxy embraced by the Clinton Administration. CEI is a member of the National Consumers Coalition, an ongoing coalition of groups organized by Consumer Alert, addressing public policy issues affecting consumers. CEI heads up the Cooler Heads Coalition, a subgroup of the National Consumers Coalition. The Cooler Heads group was formed in May of 1997 to dispel the myths of global warming by exposing flawed economic, scientific, and risk analysis. (See www.globalwarming.org) The proceedings from our day-long conference will soon be published as a book, titled The Costs of Kyoto: Implications of Global Climate Change Policy. Highlights from that conference will also be released as a one-hour video documentary. On October 5, the day before the White House climate change conference at Georgetown University, CEI ran an advertisement on global warming in the Washington Post. (Attached) We anticipate running radio ads over the next few weeks, and plan to attend the Kyoto conference as an officially-registered non-governmental organization (NGO).
Mr. Chairman, I commend you for holding this hearing. The Clinton Administration is making ambitious plans to restructure the energy economies of America and the world without benefit of the full and candid discussion that ought to precede such visionary proposals. There are risks of global warming, but there are also risks of such global warming policies which we believe are much greater.
Former Environmental Protection Agency Administrator William Reilly once quipped that his agency had a "Ready! Fire! Aim!" approach to policy. The global warming debate, alas, provides ample evidence that this tendency is alive and well. Political activists and media spokesmen reinforce this act first, think later bias by emphasizing the possible risks of global warming, while giving little attention to the risks of energy curtailment policies, especially the impacts of such policies on the poor in America and the Third World. Before making any decisions at Kyoto, we should examine these neglected arguments; otherwise, we risk adopting policies which will prove costly, ineffective and unfair.
In December 1997, the nations of the world will meet in Kyoto to seek agreement on a global treaty to withdraw carbon dioxide from the atmosphere by reducing emissions of greenhouse gases. If agreement is reached — and all indications are that Kyoto will produce some form of "binding" commitment, albeit a "small," "modest," "first stop" based on "market mechanisms" — then the environmental establishment, will have achieved its first major victory. Modern Malthuseans have long sought to classify all environmental problems as resulting from a "terrible toos" problem — too many people consuming too many goods and relying too heavily on technology which is too poorly understood. From this diagnosis, the environmental establishment has long argued for curbs on economic and technological growth. Yet these are the very forces which have made possible the major environmental gains of the last century, such as sanitation and the expansion of clean water supplies. Global warming provides the ideal pretext to promote such anti-progress policies. Thus, while global warming itself may or may not pose a threat, global warming policies pose very real threats to our civilization.
Global warming is a possible catastrophe that might befall our planet. But there are others. Only two decades ago, many in the environmental establishment were concerned about global cooling. More recently, astronomers have pointed out the non-negligible risks that an errant asteroid might collide with the earth. And mankind still faces the more prosaic risks of heightened tectonic activity or a new virulent plague. All of these risks are potential; action to fend off any or all of them would be expensive. How then should our democratic society go about allocating resources among these potentially catastrophic risks?
The global warming issue is itself highly complex with major scientific, economic and political uncertainties. Information on all aspects of the topic exists and is gradually improving; still, today, much of this information remains partial and conflicting. What decision procedure should we use in reviewing the conflicting evidence and deciding an appropriate course of action?
Advocates of an international treaty find this an easy question. They invoke the "Precautionary Principle" — any change that might create any risk should be prevented. The use of energy might be warming the earth. That warming might produce catastrophic results. The speed of this change might require immediate action. Governments might be able to prevent that warming by an aggressive global carbon withdrawal policy. That is, the evidence might demonstrate the validity of the global warming hypothesis.
But, of course, one or more of these statements might not be true. Further scientific analysis might find that mankind’s energy use patterns have little impact on the climate and that solar activity or some other factor dominates climate. On balance, we might find that the impacts of warming are positive, that there might be little need for haste, and that the proposed global conservation policies might fail. That is, the evidence might demonstrate that the global warming hypothesis is wrong.
Sequential decision theory suggests one way of addressing such complex policy questions. One begins with an hypothesis — the world is warming — and one collects data and conducts analysis over time (sequentially) to test out that hypothesis. There are two possible choices, either to accept or reject the hypothesis, and thus two possible errors: A Type I error occurs when we reject a correct hypothesis (the global warming advocates have it right and society ignores their advice), and a Type II error occurs when we accept an incorrect hypothesis (the global warming advocates are wrong and we impose needless costs on the world economy). Our challenge is to assess the costs of both error types and weigh each of them. We compare the expected costs and select accordingly. As information is derived on both the likelihood and consequences of the various errors, we are able to make a better decision.
Our decision, of course, depends in part upon what we believe to be the best way to insure ourselves against probabilistic risks. In the global warming area two broad types of insurance have been proposed: a Prevention Strategy and a Resiliency Strategy. The first is the conventional prescription of the Precautionary Principle and is championed by the environmental establishment and its political allies. It would seek to restrict fossil energy use and therefore seek to stabilize anthroprogenic greenhouse gas emissions. Change is the culprit; stop change and we reduce the risk. The second strategy argues that change is best managed by encouraging economic and technological growth. Adaptation or resiliency would best improve the ability of mankind to surmount increased risks. Change is inevitable and rarely predictable; a wealthier more advanced society reduces the risks of unforeseen changes.
To address this issue via sequential decision theory, we first estimate the probability that the global warming hypothesis is or is not true. Probabilities, however, are not certainties and, therefore, we must estimate the consequences of error under both insurance responses. What are the expected costs of a Type I error under both a prevention and resiliency strategy; similarly, what are the expected costs of a Type II error under the two possible responses. Statistical decision theory combines both the likelihood and the consequences of such errors to estimate the expected costs of Type I and Type II error and decides accordingly. If the results are unclear — if our knowledge of either probabilities or consequences is weak — we may wish to defer action while we gain additional knowledge. That delay decision depends, of course, on the costs of acquiring additional information versus the costs of delay itself. In summary, therefore, society has three choices: Accept the global warming hypothesis, reject the global warming hypothesis, or suspend judgment pending better information. This sequential decision process has long been the basis of scientific progress.
The Precautionary Principle can be viewed as a truncated subset of this decision framework. To the Precautionists, the Earth is delicately balanced at the brink of disaster. Any disturbance, always possible given man’s capricious and non-sustainable ways, risks the destruction of our planet, an infinite loss. Thus, Precautionary Principle advocates urge immediate action now. Additional carbon dioxide emissions might be causing adverse climatic change. Therefore, we must reduce these emissions. Only a prevention strategy should be entertained. Whatever costs might be incurred in delaying or blocking economic and technological change may safely be ignored. With great firmness, but little theoretical or empirical basis, they argue that the risks of innovation and economic growth will always outweigh the risks of stagnation. Precautionists have a strong, if reactionary, preference for the status quo.
A more balanced view would first note that the global warming hypothesis is actually a compound hypothesis. For the global warming advocates to be correct, a series of linked hypotheses must all be true. First, man’s increased use of fossil energy must be warming the earth significantly. Second, the impact of such warming must be catastrophic and rapid. Third, energy use reductions must be the sure and certain means of reducing such warming. Finally, for the global warming proponents to be right, the scheme to coordinate global energy use reductions across the world must prove effective. Note that the mere fact that the Earth may be warming or that mankind might be causing this warming resolves little. We would also need to consider whether this warming was imminent and, on net, whether such warming might be harmful or beneficial. Finally, we would need evidence that the global energy reduction strategies now being contemplated would actually prove effective. Clearly, the global warming proponents face a major challenge.
So far, they have not been forced to meet that challenge. Instead of the balanced risk/risk sequential decision theory approach outlined above, we have largely adopted the act first, think later policy mentioned at the outset. Admittedly, politics makes it hard to adopt a balanced and formal approach; still a structured approach is essential if our solutions are not to prove more costly than the problem itself. And that need for balance is even more obvious when both the science and the economics remain uncertain, the need for haste remains unproved. We’re not sure whether carbon dioxide concentration increases or even warming itself would have negative consequences. Nor have we shown that the global warming threat would best be addressed by a prevention rather than a resiliency. Nonetheless, global warming advocates seem eager to rush to judgment — to act rather than to think. Any evidence of change is a clear indication of imminent disaster, which can best be addressed by steep restrictions on energy use.
Precautionists see only one side of the issue. Vice President Gore, environmental activist groups and the renewable energy industry have effectively highlighted the likelihood and potential consequences of a Type I error (the world is facing catastrophic risk and we fail to act). Indeed, in his widely publicized book, Earth In the Balance, Vice President Gore argued that western society’s greenhouse gas emissions constituted an "ecological Kristallnacht" — a clear signal that mankind was destabilizing the planet and that we must move rapidly to curtail fossil fuel consumption. Gore argued passionately that those critical of global warming policies, those urging that we learn more before rushing to judgment, are morally akin to those who remained passive as the Nazis seized power throughout Europe.1 More recently, Interior Secretary Bruce Babbitt suggested that anyone dissenting from the global warming agenda was "un-American."2 The popular culture has reinforced this bias, as illustrated by the dramatic portrayal of the potential consequences of a Type I error presented in Kevin Costner’s multi-million-dollar flop "Waterworld." Many scientists have emphasized the losses that might occur if the earth were to warm quickly and, more recently, several thousand economists cited Type I risks in calling for urgent action on climate change. Type I concerns have also been cited by those business leaders who have climbed on the global warming bandwagon.
There has been far less attention given to the likelihood and consequences of Type II errors (the losses incurred if the global warming hypothesis proves false and we have foolishly slashed fossil fuel use). In many respects, the science, economics, and politics of this issue have all been neglected by the global warming advocates. Over the last decade, much knowledge has been gained about climate, the influence of human activity upon it, and the extent and speed of any induced shifts. We’ve also learned much about the possible consequences of global warming and, at long last, have given some attention to the question as to whether a carbon withdrawal policy would prove effective. The results have generally been reassuring. We’ve become more aware that carbon dioxide increases and temperature increases have beneficial as well as negative impacts. The impacts of global warming, were it to occur, seem now to be less severe and more gradual than once feared. We’ve also gained greater understanding of the difficulty of implementing any carbon withdrawal policy — and the costs, burdens and inequities that such restrictive policies might entail.
Given these trends, the current rush to judgment is especially unfortunate. Our people deserve better. In a world in which information is never perfect, but opportunity costs are inescapable , environmental policy should be determined in the sequential risk-risk framework outlined above. We must consider the likelihood and consequences of Type II as well as Type I errors to decide whether prevention or adaptation offers the superior path. Exhibit I illustrates the sequence of possible outcomes that must be considered. First, there are the science questions: Are man’s activities significantly warming the planet? Second, there are the socio-economic questions: Would such warming be on net catastrophic, neutral or beneficial, and would it be abrupt or gradual? Finally, would the carbon withdrawal strategy proposed by global warming advocates prove effective or not? There are four possible outcomes: Outcome A, the global warming hypothesis is correct; Outcome B, the global warming fears are correct but the carbon withdrawal option fails; Outcome C, man is affecting the climate but the results are slow and/or benign; and Outcome D, mankind is not affecting significantly the climate at all.
The impact of each outcome depends upon the insurance option we have selected. Exhibit 2 summarizes the consequences under each outcome of either a prevention or a resiliency strategy. Note that the prevention strategy favored by the environmental establishment is never an obvious best strategy, even when the global warming hypothesis is right. Even a feasible carbon withdrawal policy might prove a more costly way of addressing the more adverse weather brought about by man’s activities. In the other three possible outcomes, the prevention strategy is clearly inferior to the resiliency insurance strategy. Thus, in summary, while we should be concerned about the risks of global warming, we must also be concerned about the risks of global warming policy!
The Science of Global Warming: Is it Happening?
The first stage of the decision process is to review the science of global warming. As noted in the earlier chapters, in climate science, some facts are agreed upon. The climate of the earth depends upon the energy received largely from the sun via radiation, the amount of that heat retained by the earth because of the greenhouse effect, and the extent to which that heat is distributed vertically and horizontally around the world by air and water currents. Were radiation the only impact on our planet, the earth would be too cold for life. Were radiation and the greenhouse effect the only influences, the planet would be too hot. Additional impacts include convection which moves heat from the earth’s surface to the troposphere where it is radiated into space (via outward long wave radiation). This latter effect reduces the "raw" greenhouse effect and makes our planet habitable.
Most also agree that the concentrations of carbon dioxide and other greenhouse gas levels in the atmosphere have increased significantly over the last century. (Water vapor which constitutes the vast bulk of all greenhouse gases at 90 plus percent is assumed to be constant, although little data exists on this topic.) Carbon dioxide has increased by 28 percent over this period, mostly in the last few decades; other greenhouse gas concentrations have increased as well. Concurrently, most scientists believe there has been a real, but slight (0.5 degrees C), increase in global temperature. However, human-induced increases in carbon dioxide levels cannot easily be linked to this temperature increase. Most of the observed warming (approximately 70 percent) occurred before 1940, while most of the greenhouse gas buildup occurred after 1940. Other trends, of course, may have obscured the warming impact, but the issue remains unsettled. Many temperature measurements are from urban areas that were once rural, biasing the temperature records upward. The less biased and more accurate source of temperature data, the satellite record, available since 1979, shows no temperature increase in recent years. Efforts to relate model predictions to empirical measurements continue but the situation remains unclear.
The computer models which suggest serious temperature changes are evolving rapidly, but still remain crude approximations of the complexities of the energy and material transfer systems that determine weather. Current computing capacity limits the "unit" of analysis to a very large volume of the atmosphere, rendering the models less useful for regional weather analysis. Moreover, the treatment of factors known to be key to climate remains weak. For example, the variability of solar radiation which some believe may well explain (without recourse to any greenhouse theory) most of the temperature variation of the last century is largely ignored. Water, which scientists increasingly recognize as the critical variable in the climate determination game, is handled unimaginatively. Dynamic interaction effects such as how warming might impact upon the amount, distribution and state (liquid, gaseous, solid) of water in the atmosphere are also addressed in rather rigid ways. Some have argued that the additional surface warming suggested by carbon dioxide increases would increase ground-level moisture levels and increase the strength of convection currents which move heat from the surface to the troposphere. The efficiency of out-radiation of heat there is influenced strongly by the dryness of the tropospheric air masses. If the overall impact of surface level warming is a less moist troposphere, then much of any initial greenhouse warming impact might be offset; if the effect is a moister upper atmosphere, then we might anticipate greater warming. Current models simulate these critical relations only imperfectly. For such reasons, Option D (mankind is not significantly affecting global climate) seems highly likely. And, if so, there is little reason to engage in any further discourse.
The Economic Impacts of Global Warming: Should We Worry?
The second phase of the decision process addresses the "so what" question. Even if the scientific evidence were to suggest that man-induced global warming were a certainty, this would decide little. It is not temperature change per se that triggers the global warming concern, but rather views as to how such changes will affect our planet. Warmer weather will certainly have benefits — lower heating bills in the winter and greater agricultural productivity — but some argue it will also increase the frequency and/or severity of hurricanes or floods. Hurricane Andrew and the Mississippi-Missouri floods were disasters of unanticipated magnitude, and we should clearly be concerned if the frequency of such disasters is likely to increase. Here, however, the evidence remains so inconclusive that even the report of the UN Intergovernmental Panel on Climate Change stated, "Overall, there is no evidence that extreme weather events, or climate variability, has increased, in a global sense, through the 20th century, although data and analyses are poor and not comprehensive."3
In fact, warmer weather may well be better weather. Evidence for this may be found in the terminology used by the English climatologist Hubert H. Lamb to label the two warmest periods of the last ten thousand years — the Climate Optimum around 5000 to 1000 B.C. and the Little Climate Optimum around 800 to 1200 A.D.4 Recent historical research by Dr. Thomas Gale Moore provides further evidence that warmer weather correlates well with better times.5 Such findings are compatible with current climate change theories, which suggest that if warming occurs, it will largely occur at night, in the winter, and at higher latitudes. Such a warming pattern would likely lengthen growing seasons and, by reducing temperature variations over time, tend to reduce extreme weather events. Furthermore, higher levels of carbon dioxide increase plant growth and thus increase agricultural output.6 Thus, it is not clear that global warming is something that should be prevented, even if it were easy and cost little. Spending money to avoid better weather makes little sense.
In any event, the existing computer models (the basis of most global warming claims) suggest slow response rates to any changes in carbon dioxide levels, which implies that quick action now would have little impact on climate for many decades. One recent study suggested that delays on the order of a decade or so would have little impact on the temperatures that might be expected in the late 21st century. Since discontinuing any political program is extremely difficult, we should be very careful about locking ourselves into what may well be an unnecessary program. Science provides little support for the view that global warming is clearly upon us, that global warming will prove decisively harmful, or that urgent action is required. That is, the answer to the phase two question, "should we worry?" is "probably not." Outcome C (mankind is affecting the climate but the results are slow or benign) appears more likely than Outcome A (global warming is rapid and catastrophic).
The Politics of Global Warming: Would Carbon Withdrawal Policies Work?
The final decision process issue deals with political feasibility. Even if global warming were to occur and it were to be harmful to the United States, the question remains as to whether any viable political strategy exists to prevent it. Greenhouse gases are linked closely to the use of fossil fuels. For the foreseeable future, fossil fuel represents the only form of energy useful for mobile sources. Electricity, in principle, could be produced via nuclear plants, but the environmental establishment would vigorously oppose any move toward greater reliance on nuclear energy. Moreover, even if the U.S. were to somehow reduce fossil energy use, it would do little good unless most other nations do likewise. Is this likely? Is it feasible? First, note that no agreement in history approximates the complexity of the proposed Kyoto arrangement. Nations would have to control the household energy budgets of their citizens, monitor all industrial and agricultural activities, and restrict mobility. America has been very reluctant to penalize energy consumption via gas taxes. Why will the global warming proposals face an easier time?
Moreover, the United States and the rest of the developed world are projected to comprise an ever smaller fraction of the greenhouse gas emission budget of the world. If we are to reduce greenhouse gases, the Third World must also reduce its projected use of energy. For such reasons, great pressures are being placed upon Third World nations to sign a global warming treaty at Kyoto this December. Developing countries, which view energy-use restrictions as harmful to their national interests, are likely to find themselves threatened by the prospect of trade sanctions or reduced foreign aid. Kyoto negotiators, of course, are promising technological and economic aid to offset the costs of reduced energy use; however, the amounts required to improve living standards in a world of suppressed economic growth seem unattainable. Indeed, a world made poorer by restrictive energy policies seems far more likely to be less generous than the world of today. Certainly, private capital flows (the dominant source of international aid today) will decline as world economic growth contracts.
Nonetheless, given current geopolitical realities, poorer nations may well sign some version of a global warming treaty at Kyoto. Yet while it is easy to sign a treaty, it is far harder to monitor its compliance. Developing countries have little ability or reason to comply with complex carbon reduction policies. The sophisticated regulatory and tax arrangements that enable energy regulators in the U.S. and Europe to monitor and enforce current anti-energy-use laws are weak to non-existent in the Third World. Efforts there to raise the market price of energy might simply lead to increased reliance on non-market derived fuels such as wood and dung. These fuels would be even more difficult to monitor and could produce even more carbon dioxide than the coal, oil, or natural gas displaced. Such traditional "renewable" fuels also contribute to other environmental problems, such as indoor air pollution, a real concern in the developing world. The argument that such problems could be offset by economic aid or transfers of "environmentally friendly" technologies from developed to developing countries is naive. The world is today far too poor to offset any slowdown in growth by income transfers.
Foreign aid, in any event, has largely been a failure. Too often, it has merely shifted funds from the poor in the developed world to the rich in the developing world. Too often, such political wealth transfers are wasted in symbolic or pork barrel projects, reducing rather than enhancing the wealth of these nations. Much of the environmental arguments for wealth transfers today are little more than a recycling of arguments raised years ago. Then it was argued the south was poor because the north was rich; the solution was to transfer wealth from the North to the South. The global warming debate now incorporates a green version of that same idea.
The dismal history of international agreements suggests that rhetorical treaties rarely ensure realistic results. Note that any global energy reduction treaty would be akin to a super-OPEC, which in its own way for its own purposes has long sought to moderate energy use. From time to time, largely when war or national policy has disrupted energy markets, OPEC has approximated this energy restriction role. Mostly, however, OPEC has failed. Although the OPEC members would all have benefited from actual curtailment of energy output, their self-interest encouraged each of them to produce more energy. The result was that while all OPEC members expressed support for the energy curtailment program, most simultaneously expanded output. The reasons for cooperative energy reduction policies are far less compelling for non-OPEC countries; non-OPEC nations have no common interest in energy use reduction; thus, one would expect even less success with a Kyoto style agreement.
This may be a good thing; people may be much better off if a Kyoto agreement fails than if it succeeds. After all, any Third World nation able to exercise effective control over the household energy budgets of its citizenry would have massive coercive power indeed. Many nations in the world are just emerging from decades of government abuse — especially abuse to those sub-populations not represented in the ruling class. Have the risks of granting politicians a renewed license to control the livelihoods and living standards of their citizenry been considered? Would one really wish to grant one ruling minority in a balkanized nation life-and-death power over energy use by their historic rivals?
These thoughts aside, it remains the case that an agreement that omits the Third World will do little to stem the growth in greenhouse gases and thus to address the perceived threat of global warming. Most of the greenhouse gases produced to date have come from developed nations. But energy use in the developed world has plateaued. All projections indicate that in the 21st century, the major increases in these gases will come from the developing world. And, while we in the developed world might, at high cost, adapt to a virtual reality world of minimal increased energy use, we start from a very real level of comfort. The peoples of the developing world do not. If they are to improve their standard of living, they must consume far more energy than they do today; that increase for the foreseeable future will rely heavily on fossil fuels. For such reasons, the developing world has been excluded from the first round of Kyoto. This exclusion is understandable and justifiable; yet it makes meaningless the sacrifices urged upon the United States and the other developed nations.
Under current conditions, any Kyoto agreement would most resemble an All Pain, No Gain energy diet. Even if all the fears of the global warming advocates are conceded, it remains doubtful that a carbon withdrawal policy would make sense. Outcome B remains far more likely than Outcome A.
The Insurance Options: A Prevention vs. an Adaptation (Resiliency) Approach
Regardless of whether global warming is real or not, whether its impact would be positive or negative, and whether proposed control policies would prove effective, it remains understandable why many would fear climate change and, thus, endorse some form of global warming insurance. Insurance measures — steps to reduce the impacts of risky events — are a logical response to uncertainty and one that we should explore. The question is whether the better insurance option is prevention or adaptation. Most global warming advocates see prevention as obviously better. Action is needed now. The longer we delay, the more costly action will eventually become. The Precautionists endorse the old saying, "An ounce of prevention is worth a pound of cure." But there are also costs of locking society into a political energy allocation program. Few government programs are easily dismantled, even when their original purpose has disappeared. That the Corporate Average Fuel Economy Program (which forces Americans into smaller, less-safe cars) has yet to be seriously challenged, should make us very cautious about imposing any new energy restrictions. Why should a Kyoto decision be any less reversible, any less permanent?
The case for a carbon withdrawal policy is further weakened when one seriously considers the likely costs of proposed anti-energy use policies. The Administration pledged to review the economic consequences of a Kyoto treaty but has yet to do so. But computer models suggest that the fossil fuel restrictions required to stabilize concentrations of greenhouse gases would have to be massive – restrictions on the order of those experienced by nations blockaded during wartime. The United States, for example, would have to reduce carbon dioxide emissions by 60 to 80 percent to stabilize atmospheric CO2 concentrations, necessitating severe rationing and/or high energy taxes. Recent efforts to raise gasoline taxes and to impose BTU taxes have fared badly. This suggests that any U.S. action in this area would be indirect and regulatory in nature — more restrictive Corporate Average Fuel Economy standards program, for example, or a further slowdown in new power plant permitting. Such approaches are less effective and more costly than the measures made unfeasible by political reality.
The domestic economic repercussions of Kyoto would likely be severe. Even more worrisome, however, are the potential impacts on the world trading system. As the Department of Energy’s Argonne National Laboratory study concluded, the global warming policies under discussion would dramatically redistribute comparative economic advantages around the world. Protectionist pressures are already significant. The flight of capital and jobs from Annex I to non-Annex I countries – the so-called carbon leakage effect – would almost certainly inflame these sentiments. Were Kyoto to lead to a new era of protectionism, the consequences of global warming policies would be far worse.
The Superiority of Resiliency
Those favoring expanded political control of the world economy ignore such risks, arguing that only a political approach and then only one focused on stopping change, not adapting to it, offers a true "solution." Disingenuously, greenhouse lobbyists often argue that, minimally, we should adopt a "no regrets" policy — do those things that should be done in any event. What they have in mind, of course, are coercive conservation policies to reduce America’s allegedly "wasteful" use of energy and materials. But a true "no regrets" policy would emphasize reforming the political process, freeing up industry to play a more effective role in improving our ability to address whatever risks the future may bring.
A thoughtful policy would rely on improving society’s generalized abilities to address disaster, not to seek to prevent the one possible disaster focused upon by the environmental establishment. Consider the way in which storms affect various nations. Violent tropical storms occur in both America and Asia. When a hurricane occurs in Florida, people are alerted early and move out of the path of the storm. Our nation’s sophisticated communication and technological infrastructure make possible such targeted and timely warnings. The widespread availability of private automobiles gives people the mobility to act accordingly. The wealth of our society makes it possible for our people to incur the expenses of such temporary relocation, and funds rapid clean-up, restoration, and recovery.
The storms in Bangladesh are not dissimilar. Yet Bangladesh lacks the wealth, the communication technology infrastructure, and the mobility needed to respond to such risks. The risks are the same, but the resiliency of our two countries is very different. The results reflect this. In the United States, very few people die from climatic disturbances. In Bangladesh and the poorer areas of the world, the fatality lists are tragically long. Is it better to divert wealth to reduce an already low likelihood that current fossil fuel might increase the severity and/or frequency of storms, or would we achieve more by assisting these poorer nations to gain the greater wealth and technological skills which make such climatic disturbances less risky to our own societies? This is the question on which the global warming debate should focus.
A true "no regrets" policy would improve our resiliency and capacity for adaptation. This would involve a series of initiatives like deregulation, elimination of government subsidy programs, and privatization of government enterprises. We should eliminate the political preferences and subsidies that encourage certain fuels (coal, ethanol, solar) to be used rather than others that are more efficient. We should deregulate electricity generation and transmission to allow the most efficient (and typically least-polluting) firms to expand output. We should remove all regulatory barriers that now limit our ability to innovate (for example, government restrictions on biotechnology pose major threats to our ability to produce more weather-robust crops and to fend off future insect infestations). We should encourage such free-market reforms throughout the world (by, for example, eliminating World Bank and other foreign aid programs that shore up oppressive regimes). Finally, we should encourage free trade to strengthen domestic pressures for sensible fiscal and regulatory policies. This would accelerate a shift away from wasteful material and energy policies, lightening mankind’s footprint on the planet.
Evidence for the superiority of the Resiliency strategy is suggested by the fact that while in 1992 all the developed countries agreed to voluntary reductions of greenhouse gas emissions, only Germany and Great Britain were successful. It is ironic that these two countries, who most avidly support stringent international political controls over the world’s energy consumption, achieved their reductions by liberalizing and de-politicizing their energy markets. Germany ended support for the inefficient East German energy sector, and Great Britain stopped subsidizing her coal industry.
Whether the future will be warmer or colder, wetter or drier, stormier or more tranquil, some risks will increase and others will decline. Hampering the ability of private markets to respond to changing conditions serves no bona fide public interest. Indeed, it can be destructive. Stanford University’s Stephen Schneider suggests that those who oppose precipitous action to avert global climate change are willing to run an uncontrolled experiment on the only planet we’ve got. Yet Schneider and those who join him in calling for dramatic emission reductions are all too willing to run an uncontrolled experiment on the only civilization we’ve got.
The proper question to ask is: Should we seek to eliminate change or should we improve our abilities to adapt to an ever-changing world? America and the world will certainly face severe risks in the future; whether these will be climatic, tectonic, biological, or political is unclear. Since we cannot be sure which risks will prove dominant, we ought to improve our generic ability to survive and recover from whatever shocks and surprises the future may hold. Rather than herd America’s entrepreneurs, inventors, and workers into some elite’s politically-correct industrial policy scheme, we should remove political impediments to production, market-driven innovation, and intelligent adaptation.
The greatest risk of current carbon withdrawal policies is that they will fail to achieve any useful result while imposing major costs on the world’s economy. The economic repercussions will fall most heavily on the poor at home and abroad. Starving the world of energy is all too likely to produce a world of starving people. The risks of climate change are speculative; those of climate change policy are all too real. Once this is realized, it is likely that few policymakers here or abroad will rush to join the global warming bandwagon. At Kyoto, the U.S. should advocate and promote the Adaptation Policy, thus encouraging greater resiliency throughout the world, not endorse an anti-energy Malthusian policy. The road to Hell, we all realize, is often paved with good intentions. The global warming debate illustrates that symbolic principle very well; even a baby step on this destructive path should be avoided.
1 Al Gore, Earth in the Balance: Ecology and the Human Spirit (New York: Houghton Mifflin Company, 1992), pp. 177.
2 Dianne Rehm Show, July 21, 1997.
3 N. Nichols, G.V. Gruza, J. Jouzel, T.R. Karl, L.A. Ogallo, D.E. Parker, "Observed Climate Variability and Change," Climate Change 1995, The Science of Climate Change: Contribution of Working Group I to the Second Assessment Report of the Intergovernmental Panel on Climate Change, J.T. Houghton, L.G. Meira Filho, B.A. Callander, N. Harris, A. Kattenberg and K. Maskell, eds. (Cambridge: Cambridge University Press, 1996), p. 173.
4 Hubert H. Lamb, The Changing Climate (London: Methuen,1968).
5 Thomas Gale Moore, "Why Global Warming would be Good for You," Public Interest, Winter 1995.
6 Sherwood Idso, "Plant Responses to Rising Levels of Atmospheric Carbon Dioxide," The Global Warming Debate: The Report of the European Science and Environment Forum, John Emsley, ed. (London: Bourne Press Limited, 1996).