Climate Policy: Is Bjorn Lomborg ‘assuming a can opener’?

On climate policy, I always find Bjorn Lomborg (author of The Sceptical Environmentalist) worth reading. He challenges me to think more broadly.

But I wonder about the thinking behind one of his central climate policy prescriptions. If I understand him correctly, he concludes:

1. A carbon price on greenhouse gas emissions is fine in principle, but apply it at a modest level in practice, and don’t hold your breath waiting for emerging economies to follow developed countries’ example. In short, making fossil fuels more expensive relative to alternatives is not the way to go.

2. Reducing man-made greenhouse gas emissions requires investment in research and development (R&D) to uncover new no (or low) emissions energy. Here lies the path to a global climate policy.

3. R&D must make no (or low) emissions energy cheaper than current fossil fuel technologies. This ensures all countries will adopt such technologies through self-interest, rather than being driven by (non-enforceable) penalties, or international ‘moral suasion’. Well, of course they will, if it’s feasible.

I agree there’s a good case for a carbon price. On simplicity, transparency and price stability grounds, a carbon tax is a better instrument than an emissions trading scheme (ETS).

As argued below, I think a carbon price could play a larger role than envisaged by Bjorn Lomborg. Unless the price is based on national consumption of emissions, rather than production (and perhaps even then) I agree we can forget about major developing country emitters acting soon.

Doing more R&D hopefully would improve chances of finding lower emissions energy technology. Imposing a carbon price makes rewards from successful R&D more attractive.

How this might be financed is an important question. It can’t be finessed by assertions that x% of GDP should be hypothecated to the climate policy cause. Real-world political Budget pressures faced by elected governments don’t work this way.

It is Bjorn Lomborg’s third point that worries me the most.

It suggests there are no (or low) emissions energy technologies ‘out there’, just waiting to be discovered, that are even cheaper than current fossil fuel technologies. Are there?

Don’t get me wrong. I would love no (or low) emissions technologies to be cheaper than, say, coal-fired energy. We emerged from the Stone Age despite not running out of stones because there were more cost-effective alternatives. Can we do it again?

Escaping the fossil fuel age without running out of fossil fuels would be terrific. Indeed, that’s the object of the global climate policy exercise, isn’t it?

A global climate policy deal is the Holy Grail of current negotiations (despite the failures of the past two decades). A practical no (or low) emissions technology that is cheaper than current fossil fuels like coal would be seized by all countries in a heartbeat – if it could be found.

But is Bjorn Lomborg ‘assuming the problem away’, just like the caricatured economist marooned on an island with a can of beans, who, to ‘solve’ his nutritional crisis, ‘assumes a can opener’ (even though, at that stage, he does not have one)?

R&D is an uncertain activity. We don’t know in advance what innovations might prove cost-effective.

Future energy sources delivering Bjorn Lomborg’s outcome must have (i) no (or low) greenhouse gas emissions, and (ii) in operation, be cheaper than current technologies using fossil fuels.

We can’t be absolutely sure such energy sources exist.

Sure, we can assume greater efficiency and lower average emissions from existing processes as technology is refined (albeit at higher cost?).

We can also expect new energy technologies to deliver more efficiency, but a higher cost is also likely.

But can we reasonably expect to unearth the climate quinella: no (or low) emissions technologies that are also lower cost than current fossil fuel technologies? See Figure 1 below for a conceptual illustration of what’s required.

Figure 1

At this stage we don’t know.

It might be possible but it is no lay down misère.

I think Bjorn Lomborg’s assumed new technology emissions reduction frontier (see Figure 1) is an ambitious concept at this stage. I’d like to think he’s right, but I’m not sure, and at present I don’t think anybody can be sure. That’s the nature of R&D.

For that reason, I think a policy that includes appropriate R&D into lower-emissions technology, plus a larger price penalty or incentive to curtail existing emissions (via more efficiency, marginal shifts into lower emissions known technology, and the like) is a better risk management approach.

This approach could also help finance more R&D.

I have not discussed these comments with Bjorn Lomborg. If I have misinterpreted his position, I apologise unreservedly. I also thank him if I have summarized his position fairly, because (again) he’s got me thinking.