Human Forcing of the Climate: Some (Over) Simplified Economics

So you just don’t understand why “they” don’t get it. 

Wait, which they? In this case, the “they” is the guys with the money, and more specifically, the World Bank. We know the folks at the World Bank have quantified the cost of carbon dioxide, or they are trying to. A noble steed, no doubt, can’t they see the horror that awaits us?

Or maybe they are fudging the numbers? Would you believe it’s the numbers that tell them there is no problem?

Seriously now…The folks at the World Bank have determined the cost of CO2, in terms of damage to mother earth’s economy, due to human forcing of the climate. They, and a bunch of people concerned with paying the bills–think insurance companies–have agreed the costs will  be $100 a ton for carbon, not CO2 and perhaps as high as $225 a ton for carbon, again not CO2. The numbers might change as more data arrives and that is peachy.

Wow, as high as $225 a ton. The carbon traders are having trouble getting $50 a ton.  Wahoo! We finally have some real numbers to work with and those number are going to be THE LEVER to get some real work done on the climate problem. Right?

Wrong–just the opposite.

Look deeper into the numbers: The GDP of the top twenty countries on Earth is around $59 trillion dollars. The whole deal is only around $64 trillion, now aren’t you glad you don’t live inTuvalu?

Okay, let’s do the math:

• (Net tons of carbon emitted by human activities) x ($100 at ton) 
• (Net tons of carbon emitted by human activities) x ($200 at ton)
• Divide that number by the GDP number (in this case $60 trillion–I know the other 170 or  countries don’t really matter but what the heck).
• And the answer is?

At $100 a ton the cost is right around 1.5% of  World GDP.

 At $200 a ton the number is doubled to 3.00% of World  GDP.

Guess the response to that? Who cares. It only makes sense to consider 1 per cent damage or 2 per cent damage from global warming as let’s say…hmmm, I know, how about we just call it a carbon tax? Wait a minute. All this noise and aggravation about global warming is a hit of 3% to the global GDP in 10 or 20 years? And we have the time to build mitigating technologies? Heck, why bother? I’m going golfing.

And now you know why nobody is listening to the doomsday scenarios. Gee, those guys are smart. Right? Hang on. The metric is wrong. Dollars have different values, depending on how they are used. For example: Let’s say three $100 million dollar server facilities suffer storm damage in one year. Will that hurt the Internet? That depends on which server facilities are hit. The right three could effectively cripple the Internet for months.

Let me try another example: If we sustain 65 billion dollars worth of damage (65 billion dollars is the estimate of total damage from Katrina) in each  of 10 major coastal cities in one year does anyone really believe that will translate to just a 1.5% hit to the global GDP…over the long run? Heck 650 billion dollars still leaves 70 billion dollars or so in incidental damage for next year.

The point is this: a dollar spent on high value infrastructure is more important a dollar than a dollar spent on a pack of cigarettes. Or to put it another way, a critical economic link is worth more than the dollars to replace it because it impacts other economic engines.

The issue is the interrelationships between economic engines and their ability to enhance systemic failures. A simple dollar analysis of loss for a vaguely understood, highly energized, global change is short-sighted.

So we are back to square one? “They” aren’t listening because “they” have hard data that says the losses for anthropogenic forcing of the radiative balance are minimal–about 3% of global GDP.

Well, at least we are all on the same page. Perhaps we can get a damage number on the cost per ton of CO2e?