Climate 411

The Real Cost of Climate Policy

Jon AndaThis post is by Jon A. Anda, President of the Environmental Markets Network at Environmental Defense. A version of this post was published in the Financial Times on December 4, 2007.

A November 28 column by John Kay in the Financial Times, "Climate Change: the (Groucho) Marxist approach", starts with a quote from Groucho Marx: "Why should I do anything for posterity? What has posterity ever done for me?" Groucho’s position may be morally indefensible, Kay says, but "[t]he problem of weighting the present and the future equally is that there is a lot of future." From an economic standpoint, valuing future people equally would require unrealistically great sacrifices by those living today.

There’s a problem with this argument. It’s based on a rather totalitarian belief in net present value (NPV) as the means to evaluate policy – a simple calculation of the benefits of action (the cost of doing nothing) minus the costs of action. If a 5 percent discount rate applied to base-case cost and damage estimates yields a negative NPV for policy, does that mean we reject it?

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Posted in Economics / Read 4 Responses

Bjorn Lomborg's Fundamental Mistake

Today’s post is by Jon Anda, president of Environmental Markets Network. It’s a response to a column in Tuesday’s New York Times.

The column’s writer, John Tierney, goes along with Bjorn Lomborg, author of the book “Cool It”. Lomborg acknowledges that global warming is happening, but is against “hysteria and headlong spending on extravagant CO2-cutting programs.”

In the world of greenhouse gases, the devil is in the details. Climate policy is not about any specific scenario – like the one-foot sea level rise Lomborg wades us through – but the chance of a catastrophic outcome.

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Posted in Economics / Read 2 Responses

How Not to Manage Risk

Today’s post is by Jon Anda. He is President of the Environmental Markets Network, an organization within Environmental Defense focused on legislation to create an efficient carbon market.

Bjorn Lomborg, who wrote the infamous “The Skeptical Environmentalist,” has a book coming out this fall called “Cool It.” He says we should spend minimal resources to fight global warming.

I wrote a guest post for Grist yesterday about why his approach is wrong. Here’s a key point from it:

Lomborg’s preference is to leave future generations more cash and less technology. Our grandchildren can easily go back to burning coal if climate turns out to be manageable. But how easily can they spend the extra cash if the Greenland ice sheet is irreversibly melting?

And here’s the whole post.

Posted in Economics / Read 3 Responses