The Rational Optimist_ How Prosperity Evolves - Matt Ridley [154]
As for what might happen after 2100, in 2006 the British government appointed a civil servant, Nicholas Stern, to count the potential cost of extreme climate change far into the future. He came up with the answer that the cost was so high that almost any price to mitigate it now would be worth paying. But he only managed this by first cherry-picking high estimates of harm; and second using an unusually low discount rate to measure the present value of future loss. Where the Dutch economist Richard Tol had estimated costs as ‘likely to be substantially smaller’ than $14 per tonne of carbon dioxide, Stern simply doubled the figure to $29 per tonne. Tol – no sceptic – called the Stern report alarmist, incompetent and preposterous. As for discount rates, Stern used 2.1 per cent for the twenty-first century, 1.9 per cent for the twenty-second, and 1.4 per cent for subsequent centuries. Compared with a typical discount rate of about 6 per cent, this multiplies the apparent cost of harm in the twenty-second century one hundredfold. In other words, he said that a life saved from coastal flooding in 2200 should have almost the same spending priority now as a life saved from AIDS or malaria today. Hordes of economists, including notable names like William Nordhaus, quickly pointed out how this made no sense. It implies that your impoverished great great great grandfather, whose standard of living was roughly that of a modern Zambian, should have put aside most of his income to pay your bills today. With a higher discount rate, Stern’s argument collapses because, even in the worst case, harm done by climate change in the twenty-second century is far less costly than harm done by climate-mitigation measures today. Nigel Lawson asks, reasonably enough: ‘How great a sacrifice is it either reasonable or realistic to ask the present generation, particularly the present generation in the developing world, to make, in the hope of avoiding the prospect that the people of the developing world in a hundred years time may not be 9.5 times as well off as they are today, but only 8.5 times?’
Your grandchildren will be that rich. Do not take my word for it: all six of the IPCC’s scenarios assume that the world will experience so much economic growth that the people alive in 2100 will be on average four to eighteen times as wealthy as we are today. The scenarios assume that the entire world will have a mean standard of living somewhere between today’s Portugal and Luxembourg, and even the citizens of developing countries will have incomes between those of today’s Malaysians and Norwegians. In the hottest scenario, income rises from $1,000 per head in poor countries today to more than $66,000 in 2100 (adjusted for inflation). Posterity in these futures is staggeringly wealthier than today, even in Africa – an interesting starting assumption for an attempt to warn us of a terrible future. Note that this is true even if climate change itself cuts wealth by Stern’s 20 per cent by 2100: that would mean the world becoming ‘only’ two to ten times as rich. The paradox was stark when the Prince of Wales said in 2009 that humanity had ‘100 months left to take the necessary steps to avert irretrievable climate and ecosystem collapse’, then went on in the same speech to say that, by 2050, there will be nine billion people on the planet, mostly consuming at Western levels.
The reason for these rosy assumptions about wealth is that the only way the world can get that hot is by getting very rich through emitting lots of carbon dioxide. Many economists think these futures, wonderful as they sound, are