A short primer on climate change and the greenhouse issue

The first calculations of the effect of burning fossil fuel on the world's climate were made more than a hundred years ago. They suggested that the average temperature of the Earth would rise a degree or more because extra carbon dioxide in the atmosphere would act rather like a blanket and reduce the normal cooling of the Earth's surface. At the time people viewed the change in a very positive way.

Since then, and particularly over the past 25 years, an extensive and highly planned international research effort has attempted to translate the broad prediction of global warming to a more detailed assessment of the likely change of climate of individual regions. The effort taught us a lot about the workings of the earth-atmosphere system, and returned us a lot in terms of new technology.

Nevertheless, this massive effort has yet to provide us with reliable forecasts of climate change. The science of climate change is plagued by uncertainty. At least part of that uncertainty, and perhaps most of it, will never be resolved.

Research has concentrated on the complex numerical models fashioned to give the best possible simulation of today's climate. It is assumed that, if the simulation of today's climate is good, then the model may also be good at simulating the change to a future climate. The assumption is highly questionable.

The recent Inter-governmental Panel on Climate Change (IPCC) assessment, predicting a rise of average temperature over the next century somewhere in the range 1.2 to 5.8 degrees Celsius, presents the extreme values obtained from a set of numerical climate models, each of which was fed with various scenarios of future atmospheric carbon dioxide and dust pollution. The significant point is that there is no practical way to assess which (if any) of the models is more likely to give a correct answer, so that there is no way to assess the confidence which one might place in the results. At best they ‘provide support for’ the results of the simpler calculations of climate change.

The bottom lines of all this are as follows.

We have some confidence (not nearly 100% but at least some confidence) that, over the next century, and as a consequence of man's extra input to the atmosphere of carbon dioxide and other greenhouse gases, the Earth's average surface temperature will rise a degree or three above the temperature it would have been otherwise. With much lesser confidence we might accept that the temperature will rise a degree or three above that of today. The lesser confidence comes about because there is considerable evidence from palaeo-records that the Earth's temperature changed rapidly (i.e. over periods of the order of decades and centuries), considerably (i.e. by several degrees) and naturally (i.e. as a result of self-generated fluctuations) at apparently random times in the past.

There is reason to believe that such an increase of temperature would be greater in the polar regions than at the equator – perhaps by a factor of two. There is reason to believe that the overall global sea level might rise by a few tens of centimeters per century. There is reason to believe that the global average rainfall might increase by something of the order of 10 or 20 percent.

No confidence can be placed in forecasts of climate change at any greater level of detail .

To put the projected change in a broader context, climate has been much the same as at present for the past 10,000 years. The average temperature over this period seems to have fluctuated within the range of perhaps a degree or so. Over the past several million years, there were repeated retreats into ice ages where the average temperature was perhaps five to ten degrees colder than it is now, and where great ice sheets covered much of North America and Europe. The last ice age was at its peak about 20,000 years ago. The average temperatures of the relatively short warm periods between the ice ages were much the same as today. There were large fluctuations of temperature during the ice ages, and possibly also during the intervening warm periods.

The instrumental record of the past hundred years suggests that the Earth has warmed by a few tenths of a degree over that time. This is consistent with calculations about global warming and the enhanced greenhouse effect, but is certainly far from proof of them. The warming is still well within the range of what seems to have been natural fluctuation over the last ten thousand years – or indeed over the last thousand years.

Extremes versus Averages.

If the average temperature of a place should rise by one or two degrees, one might reasonably expect that there will be more extremely hot days and less extremely cold days, more extremely hot seasons and less extremely cold seasons, and so on. People notice a change in extremes and in the frequency of rare events much more readily than a change in the average. In the jargon of statisticians, the main concern is with the 'tails' of the frequency distributions of rainfall, temperature and the other variables of climate. This again brings great uncertainty into the climate issue.

If the shape of a distribution and its ‘tail’ does remain the same, the relative change in the number of extreme events is always greater than the change in the average. To take an imaginary example, a few percent increase in the average rainfall of a place may cause far more than a few percent increase in the number of occasions of very high rainfall, and far more than a few percent decrease in the number of occasions of very low rainfall.

It is largely this mathematical consequence which makes the possibility of a small increase in global-average temperature and rainfall so significant. It raises the possibility that there will be large increases in heat waves, floods and other forms of extreme climatic event, and perhaps large decreases in the number of cold spells and droughts.

On the other hand it is also this mathematical consequence which allows a fair amount of uncritical overstatement about the possible disastrous consequences of climate change. There is no particular reason to assume the shapes of frequency distributions and their 'tails' will remain the same in a slightly warmer world.

The Impacts on Society.

The uncertainty of the science provides great opportunity for speculation about the possible impacts of an overall global warming. Many of the speculations are not particularly likely or even realistic. On the other hand the uncertainty ensures that any particular speculation cannot easily be disproved.

On the scale of nations there will almost certainly be both winners and losers. For instance, one can imagine that more very hot days could increase the human consumption of water and therefore the requirement for expensive water storage. On the other hand, fewer very cold days could decrease the losses of frost-sensitive agriculture. These sort of balancing example is rather more likely (at least in the larger and more economically diverse countries) than are extreme scenarios of absolute national disaster.

Indeed, in terms of purely economic welfare, a general proposition might be that climate change is potentially disastrous (as opposed to being simply a problem) only when the affected populations cannot move or change behaviour to take advantage of the change. It is probably not even a problem for those populations which, because of other changes in society, quite naturally shift position or behaviour on the time-scale of a few decades.

Thus most economists of the larger countries find it a little difficult to get excited about the possibility of climate change – at least as it might affect the purely economic sectors of their society. First, they say, climate change may not happen. If it does happen, then it is likely the impact will be more-or-less neutral on the national scale. And if it does happen and the overall impact is detrimental, then 'discount for the future' will ensure that the loss of value in the years to come is too small for the present generation to worry about. Discount for the future is a method of valuing future material goods from the viewpoint of the present. It is applied because most people would pay more for some material good now than for the promise of the same good in several years time.

Smaller countries might reasonably have quite a different view.

Many of the most powerful arguments for limiting greenhouse warming are based on preserving the current state of the environment. The arguments are necessarily qualitative, and usually (if subconsciously) involve application of a discount for the future much smaller than that appropriate for the purely economic resources of society.

Because the arguments are qualitative, it is difficult to establish that the impact of climate change will be inherently more significant than the impact of any other human activity which affects the environment. A classic example is the suggestion that a warmer world will allow the spread of tropical diseases to new areas. However, it has been argued that the spread (and eradication) of disease is so completely dominated by human activities such as the clearing of land and the transfer of populations that any impact of climate change would scarcely be noticeable.

What Are We Doing About It.

The Kyoto Protocol was negotiated by 160 nations in 1997. It is an attempt to limit national emissions of greenhouse gases in order to slow or halt an associated change of climate. Basically, the agreement sets emission targets for the individual nations. Australia, for instance, has agreed to limit its annual emission by the year 2012 to no more than 108% of its emission in 1990. For the world as a whole, the aim of the Protocol is to reduce the global emission of carbon dioxide to 5% below the 1990 value by the year 2012.

It is highly doubtful whether the nations will be able to meet the targets that have been set. And because, in any event, the potential costs to the nations are so large, it is still doubtful whether the nations will formally ratify the agreement.

The Protocol was negotiated against a background of expectation that an economic mechanism of 'carbon trading' will evolve. Basically, the idea is that the nations will issue permits for carbon emission, set to match the targets set by the Kyoto Protocol or its follow-on agreements. The permits will be tradeable, both nationally and internationally, with the idea that market forces will ultimately replace government direction in the process of encouraging more efficient use of fossil fuel. Individual companies will be able to decide whether to spend money on new 'carbon efficient' technology or on the acquisition of carbon credits from those industries or countries which have a surplus.

The economic bottom lines of a carbon trading economy are as follows.

First, it is a mechanism of imposing a cost on carbon emission as a means of encouraging efficiency in the use of fossil fuel. The rather esoteric discussion about the potential for trading between those who can sell 'carbon credits' and those who need to buy them tends to obscure the fact that the number of credits will be less than that needed for the nations to carry on business as usual. There will be a net cost to the nations, and presumably that cost will fall mainly on the energy industries.

Second, the cost is significant. One can argue about the numbers, but both quick calculation and detailed economic modelling suggest that full implementation might cost Australia something of the order of one or two percent of its gross national product a year – that is, something of the order of $6-12billion a year.

Third, the economic disturbance will create winners and losers quite apart from the energy industries themselves. For instance, it is unlikely that the costs to Australia will be spread evenly between the states.

There is considerable national and international momentum towards carbon trading in one form or another. And there is no doubt that the larger energy-related industries are already trying to position themselves to take advantage of carbon trading opportunities should they arise, and are already looking towards methods of limiting their carbon emission. This is presumably a good thing, although from the strictly rational point of view they would be foolish to spend effort on improving their carbon efficiency before such an improvement becomes mandatory. There are already examples where industry is actively delaying improvement so as to position itself for maximum benefit in the future when the rules of a carbon trading economy are established.

Is It Worth it?

Given the enormous costs associated with the development of carbon trading economies, one would have imagined that the Kyoto negotiations involved some sort of cost-benefit analysis. In fact, no such calculations were made.

We are beginning to have a rough idea of the costs. Australia for instance has earmarked close to a billion dollars over the next few years to encourage industry to become more carbon efficient. This billion dollars is relatively small compared to the one or two percent of gross national product which may be the cost to Australia of implementing a carbon trading scheme.

Because of the uncertainties associated with both the science and the possible impacts of climate change, we have absolutely no idea of the long-term benefit. For all we know, it may be a long-term loss.

One can make a few general statements.

First, it is very hard to justify the expenditure on purely economic grounds. Even if the impact of climate change is detrimental, discounting of future value argues against the expenditure of lots of present money on the problem. One might consider it cheaper to adapt to climate change than to distort the economy of energy usage.

Second, one could perhaps justify the expenditure on 'environmental-economic' grounds provided that society is convinced that it should spend today's money on preserving the current environment for the benefit of generations more than 100 years ahead.

Third, one could perhaps justify the expenditure purely on the grounds of the precautionary principle. Most people would wish to prevent the possibility of some unforseen and disastrous change of climate which might basically alter the structure and economic well-being of human society.

Fourth, one could perhaps justify the expenditure on the grounds that there are indeed significant risks for the smaller and less economically diverse countries. One can argue that it is the moral responsibility of the wealthier nations to remove such risks.

Finally, one can of course justify a 'no regrets' policy of encouraging expenditure on actions which are otherwise sensible. Among these are improvements in the efficiency of machinery and forms of transport which rely on petroleum fuel.

The fundamental question still to be answered is whether, in view of the uncertainties associated both with the science and the economics of the matter, it would be cheaper and more sensible to spend money on adaptation to climate change if and when it occurs. The question has been more-or-less deliberately excluded from much of the national and international debate in order not to divert attention from efforts to reduce greenhouse gas emission.

Climate change is now essentially a problem for politicians and social scientists. Their task has become peculiarly difficult because the overall issue has become something of a symbol – almost a religious symbol – of all that is bad or profligate about human society.