False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet

by Bjørn Lomborg

Whereas the cheapest emission reduction, just like in Europe, will often be a switch from coal to gas, relying on renewables at least doubles the cost for states.

The Paris Agreement is unlikely to be an exception to the rule that politicians do things less efficiently and less effectively than they could.

Thus, without hyperbole we can say that the Paris Agreement will easily set the world back by at least $1 trillion annually by 2030—and more plausibly, with less efficient policies, the cost could climb to somewhere close to $2 trillion annually.

No matter which way you look at it, the Paris Agreement is by far the most expensive pact in history. At $2 trillion, it is at par with the entire expenditure on the world’s military each year.

BY THIS POINT, you’ll probably not be surprised to learn that there is no official estimate of what the Paris Agreement will actually achieve.

The total number of tons we emit is directly connected to average, global temperature rises. The UN estimates that an extra 1,000 Gt of carbon dioxide emitted will result in a 0.8°F increase over the long run. That means that an extra 6,000 Gt over the century will result in a temperature rise of about 5.7°F or so. Since we’re already almost 2°F above preindustrial levels, that means that the twenty-first century will see the planet get roughly 7.5°F hotter if we do nothing,

happen, then, if nations meet their promises under Paris? The United Nations organizers of the Paris Agreement once in 2015 (and never since) released an estimate of the total maximum impact of all carbon dioxide cuts promised by all nations. It provides the absolutely best-case scenario that we can hope for. This estimates a total reduction of 64 Gt carbon dioxide through to 2030. According to the UN’s estimate of 0.8°F per 1,000 Gt carbon dioxide, this translates to a reduction in temperature by the end of the century of about 0.05°F. What this tells us is that even in an optimistic scenario, the Paris Agreement isn’t going to come anywhere close to solving global warming. It will have a miniscule impact on the temperature by 2100.11

The third bar shows how much its popular claims suggest it will achieve: fifty times more than the actual Paris Agreement. For comparison, we see the cuts needed to limit temperature rises to 3.6°F (2°C) and 2.7°F (1.5°C). All these numbers have large uncertainties and should be used for comparison of relative size.

A 2017 landmark article in Nature puts it bluntly: “All major industrialized countries are failing to meet the pledges they made to cut greenhouse-gas emissions.”

President Obama promised in Paris to cut emissions by 18 percent below 1990 levels by 2025, but never backed this with sufficient legislation. Based on Obama-era policies (and not taking account of Trump’s reversal of them), President Obama was on track to achieve, at most, a 7 percent reduction.

To justify their support for the Paris Agreement, some backers assume not only that all of today’s promises will be delivered, but that future climate conferences will lead to global pacts with ever larger carbon-cutting promises. They assume all of those promises will also be delivered. And then they attribute all of those imaginary, future reductions to the Paris Agreement. The global warming policy campaigners who run the influential Climate Action Tracker website make all these assumptions, and as a result they conjure fifty times more reductions from the Paris Agreement than were actually promised in Paris.18 This approach is astonishingly misleading.

Promising to take a first step is important but it isn’t the same thing as starting, and it certainly isn’t the same as finishing the entire journey.

At the Paris climate summit, politicians also promised to keep global temperature from ever rising beyond 3.6°F (the so-called 2°C limit). Accomplishing this would mean cutting eighty times more carbon emissions than were actually promised (and remember, they are not on track to achieve even that much). To achieve the 3.6°F target, we would literally need new and additional carbon cuts of the same size as those in the Paris Agreement every single year from 2020 to 2100 (and we would need them to be actually delivered, not just promised). The politicians even went so far as to declare in their agreement that they wanted to limit the global temperature increase to below 2.7°F (1.5°C), which would mean cutting one hundred times more than what was promised in Paris. It is therefore accurate to say that the Paris Agreement—even if actually achieved—provides us with only one percent of what politicians are promising.

Currently we have promised to spend $1–$2 trillion every year, and we won’t be able to tell the difference in tem...

Indeed, it turns out that if we measure all the benefits of reduced climate damage in monetary terms, every dollar the Paris Agreement costs will avoid just 11¢ worth of...

SO OFTEN TODAY we hear campaigners and politicians say the real problem is simply that promises have not gone far enough. Indeed, since the signing of the Paris Agreement it has become more and more fashionable to suggest that entire nations should go net-zero; that is, stop contributing carbon dioxide to the atmosphere by 2050 or sooner. More than sixty countries have promised to achieve carbon neutrality within the next thirty years. The biggest emitters—China, the United States, and India—are not among them. The biggest nations that have made the pledge are the UK, France, and Germany.

All this is far easier said than done. It is going to be very expensive. And, in every case, the promise is likely to be broken. It is instructive to look at the case of New Zealand. It was actually the first country in the world to promise to go carbon neutral. It is also the first country to have spectacularly failed, and the first to promise for a second time to achieve the same thing. In 2007, Prime Minister Helen Clark declared her vision was that the small nation would become carbon neutral by 2020. She was celebrated by the United Nations as a “Champion of the Earth.” If only cutting carbon was as simple as winning attention. New Zealand not only failed to achieve the vision, but also failed even to reduce any emissions. The latest 2019 official statistics show that the country’s total emissions will be higher in 2020 than they were when Ms. Clark’s ambition was declared.

New Zealand is a fascinating case study because, to its credit, Ardern’s government actually asked its leading economic authority to estimate the cost of her promise. Thus, we have what is likely the only official, academically credible estimate of what it will cost to achieve carbon neutrality. This research, undertaken by the leading independent economic think tank in New Zealand, shows that just getting halfway to the target—cutting 50 percent of New Zealand’s emissions by 2050—would cost at least $19 billion annually by 2050. For a small country with a population similar to that of the Republic of Ireland or the state of South Carolina, that’s a big deal, about what the government spends now on its entire education and health care system.22 And it is only the cheapest cost of getting halfway to Ardern’s target. Getting all the way will likely amount to more than $61 billion annually, or 16 percent of GDP by 2050. That is more than New Zealand today spends on social security, welfare, health, education, police, courts, defense, environment, and every other part of government combined.

As a back-of-the-envelope exercise, if we took the percentage cost of going carbon neutral in New Zealand by 2050 and applied it to the United States, that would imply a cost of at least $5 trillion in today’s money. Not just once, but every single year. That is higher than the entire current federal spending of $4.5 trillion. And again, under realistic assumptions the amount could be closer to $10 trillion a year.

THERE HAS NEVER been an official estimate of the cost of the Paris Agreement, nor has there been one that gives a meaningful evaluation of its impact. Looking at the numbers, it is obvious why. The Paris Agreement will be the costliest pact ever agreed to, by far. It will cost us $1–$2 trillion per year from 2030 onward, if actually fully implemented. Yet the agreement will do almost nothing for the climate: all of its promises will reduce the temperature rise by the end of the century by an almost imperceptible 0.05°F. And none of the big emitting countries are anywhere close to actually delivering on their promises.

But let’s drill down into the differences between the two, because there is a huge disparity in outcomes. Going down the “green” pathway, the average person in the world will be six times as rich in 2100 compared to 2020 (see figure 9.2). Average income in 2100 will be an astounding $106,000 in today’s currency. That is a great achievement. Remember, being better off correlates to better health outcomes and greater life satisfaction. More prosperity means more overall welfare: a general improvement in well-being and satisfaction. So we can reasonably say that overall global welfare is six times higher in 2100 under the “green” pathway. That’s a great scenario.

The scenarios tell us how much warmer it will be: the green pathway takes us to a moderate temperature rise of 5.8°F by the end of the century, and the “fossil fuel” pathway leads us to a much warmer rise of 8.7°F.

“THE RICH POLLUTE, the Poor Suffer” runs a headline from the Economist. It’s true: one of the insidious aspects of climate change is that although it mostly wasn’t caused by the world’s poor, it will hurt poorer countries more than richer countries. This is partly because the economies of poorer countries are more reliant on industries like agriculture that are vulnerable to climactic changes; it is partly because they tend to be in already warmer climates; and it is mostly because being poor means having less capacity to adapt.

But the reality is that today’s climate policy does little to tackle the climate-related problems of the world’s poor.2 And it does virtually nothing to help with the vast array of nonclimate issues that the world’s poor struggle with every day. In fact, climate policies often make life worse specifically for the poor. This is true both in rich countries like the United States and the United Kingdom, and in the poorest countries, especially those in Africa and Asia. Today’s blinkered climate policies are in fact putting the world’s worst-off countries on a slower path to progress and prosperity. What are we doing in the name of climate?

One 2016 study shows that when income doubles for the average person in a poor community, fatalities from natural disasters will be cut by more than a quarter. What this tells us is that increasing incomes builds resilience.

Putting it bluntly, choosing climate policies over growth policies doesn’t just do nothing. It means more people die avoidable deaths.

Unfortunately, as we have seen, aggressive action to reduce climate change is not costless. One of the biggest impacts is on energy prices, which hurt the poor the most. Indeed, the climate policy costs hitting not just households but also agricultural producers, food manufacturers, and the transport sector mean that food prices are predicted to climb by 110 percent by 2050. And that would have the total effect of forcing seventy-eight million people into starvation.

Using a regionally defined climate cost model by William Nordhaus, we can roughly identify the total, negative impact from climate change on Africa. It is clear that Africa will be hurt the most of any region with global warming, and it will lose even more when temperatures go higher under the fossil fuel scenario.

A study shows that when the average GDP per person reaches $3,100 per year, individuals have enough resources that most can afford to buy drugs to cure malaria, essentially ridding society of the disease altogether.14 Nonetheless, campaigners for carbon cuts continue to claim that the Paris Agreement is an important way to help tackle health issues like malaria.

We have been here before, implementing policies that do a huge amount of harm in the name of climate change. Twenty years ago, a craze for biofuels swept rich countries, with global production quintupling in the first decade of this century. Biofuels are created with crops rather than fossil fuels, so in principle they do not increase carbon dioxide emissions. Rich countries hurried to institute targets to promote more biofuel use to help cut carbon emissions. The European Union led the way, stipulating member states in 2003 pass legislation aimed at replacing 5.75 percent of all transport fossil fuels with biofuels by 2010. Developing nations, even those in the grip of famine, were pushed to grow crops for ethanol instead of for food.16 This movement originally had the full-throated support of many green groups that hailed the shift away from fossil fuels. Yet, the negative impacts were much greater than most had anticipated. The charity ActionAid calculated that the amount of crops needed to fill an SUV’s fuel tank with biofuel would feed a child for an entire year, and every gallon of biofuel wiped out forty meals.

Many environmental groups began to soften their support for biofuels or backtrack. Campaigners for stringent climate action were increasingly appalled. Guardian columnist and strong climate campaigner George Monbiot called the subsidies driving the biofuel industry’s growth “a crime against humanity.” Yet, by the point of the backtrack, vested agricultural interests had made the bad policies almost impossible to overturn.

THE TRUTH IS that climate policies hurt the poor everywhere, even in countries like the United States, because higher energy prices have a disproportionate negative impact on the poor.

Across the United States, many people are still struggling to pay their energy bills. The International Energy Agency estimates that 9 percent of Americans, or twenty-nine million, are “energy poor,” spending more than 10 percent of their income on energy. This means poor Americans often literally have to forgo other basics in order to heat (or cool) their homes sufficiently.

The International Energy Agency expects that 195 million people will have access to energy for the first time in the next decade. That is great. But they will get very little power, mostly because the focus is on getting them off-grid solar rather than on-grid, mostly fossil-fuel-based energy. Indeed, they will on average get just 170 kilowatt-hours per year. That is half of what one US flat-screen TV uses in a year. Consider what your life would be like with access to nothing but 170 kilowatt-hours. It is not enough to power a factory or a farm, so it cannot reduce poverty or create jobs. It won’t even be enough to hook up a stove and heater to combat the fire-created smoke and pollution that claims 1.6 million lives annually. It’s not even enough to keep a refrigerator running. For the world’s poor, this level of energy access is hardly transformational.

In one 2016 study looking at energy options for Bangladesh, researchers found that building more coal-fired power plants would generate global climate damage costing around $592 million over the next fifteen years, but the benefits from electrification would be almost five hundred times greater at $258 billion, equivalent to more than an entire year of the nation’s GDP. By 2030, the average Bangladeshi would be 16 percent better off.

It is perverse to hear rich people piously claim that we should help the world’s poor by cutting carbon dioxide to make their future slightly less worse, when we have huge opportunities to make their lives much better, much more quickly, and much more effectively.

Today there are about 650 million extremely poor people in the world. As a thought experiment, let’s consider what it would cost to lift all these people out of poverty. (As a caveat, let’s just remember that lifting people from, say, 90¢ a day to just above $1.90 is great, but they are still pretty darn poor—and actually distributing the money would be fantastically expensive.) It turns out that the theoretical cost to lift everyone on the planet out of extreme poverty would be less than $100 billion per year.33 Compare this to our current trajectory: we’ve committed to spending $1 trillion to $2 trillion a year just on the almost entirely ineffective Paris Agreement.

CLIMATE ALARMISM TOO often leads us to policies that while well intentioned, crowd out much more effective ways of helping people. It comes down to this: when we see a malnourished child or a town hit by a hurricane and seriously suggest that we should make lives better by cutting a ton of carbon dioxide, we are not actually trying to do good, but rather imposing our own priorities on people who have little power to assert their own. It has become too easy to believe that policies aimed at cutting carbon are the answer to everything. They’re not, and we need to stop campaigning for and enacting policies that will have the world’s poorest paying for our mistakes.

Thus far, humanity has excelled at showing how not to fix the climate. We have spent three decades trying the same, deeply broken approach, over and over. Politicians lurch from one climate summit to the next, with climate campaigners urging them on to make even more ludicrous promises. Enough is enough.

THE FIRST WAY to tackle climate change is to effectively implement a tax on carbon dioxide emissions, usually just called a “carbon tax.”

Carbon taxes can aggressively reduce emissions and thereby limit global warming’s most damaging effects at fairly low cost. This is not a controversial idea. Most economists agree that the most effective way to reduce the worst damage of climate change is to levy a tax on carbon dioxide emissions.

For the climate change debate to become more rational and pragmatic, we need to realize that we have to pay both costs: the climate change impact cost and the climate change policy cost. Making the temperature rise smaller means making the climate change policy cost bigger.

FIGURE 11.3 Total global climate change impact cost and climate change policy costs over the next five hundred years for different temperature rises by 2100, using Nordhaus’s DICE model. Climate policy is, implausibly, expected to be efficiently implemented across all countries and centuries. Optimal policy (with the lowest total cost) indicated.

In Nobel laureate William Nordhaus’s economic model, this optimal point is to be found if we keep temperature rises to 6.3°F in 2100. At 6.3°F, the climate change damage costs would be $87 trillion, and the climate change policy costs would be $21 trillion, leading to an overall cost of $108 trillion: this is the smallest possible combined price tag the world can achieve.

MANY CAMPAIGNERS BELIEVE that allowing temperature rises of 6.3°F is not nearly ambitious enough. But that is only because it has become commonplace to talk about incredibly costly or even impossible temperature cap targets like 3.6°F (2°C) or 2.7°F (1.5°C) without any acknowledgment of their costs or plausibility.

When politicians and campaigners talk about extremely drastic climate policies, they don’t acknowledge, and perhaps don’t even realize, that those policies have a cost to society vastly greater than the costs of the damage they are trying to avoid. We want to avoid climate change damage. But implementing a climate change policy also has costs, and the more ambitious the policy, the higher the costs. The policy that will leave the world best off is the one where we avoid the worst climate change damages and avoid the worst climate policy costs.

UNFORTUNATELY, THE OPTIMAL climate policy requires a globally coordinated carbon tax, and that is possible only in a fairy-tale world. It doesn’t ever happen in real life.

A realistic, moderate and increasing carbon tax policy can definitely make a net benefit for society worth $18 trillion, or 0.4 percent of GDP. But what happens if we aim to enact much more ambitious climate targets, through much higher carbon taxes? The total costs increase dramatically. Trying to keep the temperature rise to 3.9°F in 2100 is still less ambitious than the popular idea enshrined in the Paris Agreement of keeping temperature rises under 3.6°F (2°C). Yet, the total loss to humanity from climate change and policy damage would reach a staggering $391 trillion, or 8.4 percent, of GDP.

THE BIGGEST PROBLEM we face when we confront global warming is that fossil fuels produce carbon dioxide. We need to reduce emissions to limit warming, but we have no easy and cheap alternatives to fossil fuels. That’s a big problem, but it is not humanity’s first big problem. When we look back in time, we seldom fixed big problems by telling people to live with less of everything they wanted. And for a good reason: it is a hard sell. Instead, we typically managed to solve big problems through innovation.

Consider the challenge of hunger in the 1960s and 1970s. The biggest fear then was Asia’s inability to feed itself, because it wasn’t growing enough food for a fast-growing population.