The Price of Everything - Eduardo Porter [105]
Using a similar set of climatic facts, Nordhaus advises us to address the problem more gradually. He proposes that the levy on CO2 today should start around $10 per ton and rise as the impact of carbon concentrations in the atmosphere increase, to about $200 at the end of this century. To the average American, who consumes 20 tons of CO2 annually, the bill would start at around $200 per year.
Nordhaus would tolerate more climate change than Stern. He would allow $17 trillion in climate-related damages to happen simply because he estimates we would need to spend more than that to eliminate them. By 2100, temperatures would be about 2.6 degrees Celsius hotter than in preindustrial times. But though we would suffer more damage, we would get value for money from our investments: avoid $5 trillion in damages at a cost of $2 trillion. In Nordhaus’s analysis, which does not contemplate the fast technological progress assumed by Stern, the cost of Stern’s strategy to cap warming at 1.5 degrees could balloon to nearly $30 trillion in present value, and prevent only $12.5 trillion worth of damages to the earth. And we’d still be left with $9 trillion worth of climate-related damage.
The European Climate Exchange, a market for companies to buy and sell permits to emit CO2, which was launched in 2005 as part of Europe’s efforts to reduce carbon emissions, suggests that investors believe the world’s policy makers are closer to adopting Nordhaus’s views than Stern’s. In the summer of 2010, the future contract for December priced one ton of CO2 at about €15 a ton—about $18.75.
What should our voter instruct her elected representatives to do? Dasgupta doesn’t quite know. And he is well versed in the economics of climate change. Perhaps, he suggests, cost-benefit considerations should be eschewed in favor of what is known as the precautionary principle, which would support large-scale spending to curb carbon emissions on the grounds that there is a chance, even if highly uncertain, of an Armageddon-like climatic catastrophe if we don’t.
He argues it might be more politically feasible than we think to mobilize resources to save future generations. If voters in rich countries saw ourselves as directly responsible for future generations’ plight, we might overcome our hostility toward foreign aid, which stems from the belief that the developing world’s poverty is, to some extent, the developing world’s fault.
Our voter could seek the high ethical ground by tweaking the parameters—maybe trimming Nordhaus’s 4 percent by a point or two. After all, even though it’s probably right to discount the value of money, environmental goods are likely to become more valuable as they become scarcer. So the monetary discount rate should be adjusted to take into account the rising value of environmental “goods.” Saving that forest with 107 trees next year will be worth more than saving the 100-tree forest today because though we will have more money next year there will be fewer forests to go around. So each surviving tree will be more valuable to us.
Maybe our hypothetical voter should just follow her belly. Ultimately, Dasgupta argues, “it is a ‘gut feeling’ about the awful things that could occur if the global mean temperature were to rise another 5 degrees that should make us very scared.” And there’s no parameter to tell us precisely how to price this fear.
SALVATION ON THE CHEAP
Or maybe she could cross her fingers and hope we will devise some clever technology to stop us from colliding head-on with the