The Good, the Bad, and the Ugly of the IPCC 1.5 degree report and the Nobel to Nordhaus

For those interested in climate change economics, two news items broke through to the mainstream press this week.  First, the Intergovernmental Panel on Climate Change (IPCC) released a dire report on the state of climate science.  The report was written by consensus by scientists from around the world, and will be considered by the UNFCCC at their upcoming meetings.

The good news:

The report focuses on what would need to happen to stay at about 1.5 degree C change (2.7 degree F), compared to the previously considered level of 2 degree C (3.6 degree F). The Paris Accord discusses both levels as potential targets, and this report provides scientific evidence that the lower level is better for the planet and humanity.  The report also touches on how to get there: net-zero emissions by mid-century, and negative emissions after that.

Most countries that profess to care about climate change will give some lip service about taking this report seriously.  The best case outcome of the report is that the EU and a few others others will “ratchet up their ambition” under the Paris Accord.

Other good news is that solutions exist (see the end of this article for more on that).

The bad news:

Even those countries who say they care will not do anything near the scale required to avoid the worst effects of climate change.

The report shows that the available carbon budget barely exists.  Under current conditions, the world could hit 1.5 degrees C as soon as 2030.  Also, net-zero emissions is not currently feasible, and technological innovation is not being funded at the scale needed.

The ugly news:

Of course, it barely needs mention that the report will be rejected by anti-science ideologues in the United States.

The report is in direct conflict with the continued political influence of the 1% and the fossil fuel industry (what FEASTA member John Jopling calls the “Global Monetocracy”).  In the United States, the report will also be ignored or attacked by the evangelical religious (magic-based?), anti-science fundamentalists who think God has a plan for the planet regardless of carbon dioxide levels.  Some of them (secretly?) believe that if humanity is purged by a series of plagues, well, that would conform to their Biblical interpretation of an apocalyptic Rapture that will (ethnically?) cleanse the world of non-white, non-Christian fundamentalist people.

Professor Kevin Anderson notes that the professors and climate academics who wrote and will read the IPCC report are among the global elites most responsible for the problem.

But the hand wringing and self-flagellation must be transformed into political action.  This means joining groups that are advocating for big picture solutions such as a (very very high) carbon price, and the only way that will be politically salable is by returning the revenues back to the people as a climate dividend as part of a basic income.

That’s the first half of the good, bad, and ugly for the week.

The second big news of the week was the award of the 2018 Nobel Prize in Economics to William Nordhaus, who shared the prize with Paul Romer.  Over the years Nordhaus has written important economic policy arguments for carbon pricing and modeled the costs of climate change at various levels of abatement.

The good news:

Nordhaus’s work has helped promote the idea of a carbon tax to economists, and he even helped make carbon pricing the default policy wonk economywide climate solution.  The recognition conferred by the Sveriges Riksbank Prize in Economic Sciences could help elevate Nordhaus’s framework to a larger audience.

The bad news:

Nordhaus’s climate-economics model, called DICE (Dynamic Integrated Climate-Economy), merges general equilibrium theory from economics and equations from the various strands of climate science to arrive at an “optimal” level for a price on carbon, based on the “social-cost-of-carbon.”

Unfortunately, as noted here :

In his first published work using DICE, from the early 1990s, he recommended a carbon tax of $5 a tonne of CO2, inching slowly upward until peaking at $20 in 2085.  His “optimal” policy was expected to result in an atmospheric concentration of CO2 of over 1400 ppm (parts per million)… yielding global warming in excess of 3º C.  (Nordhaus, 1992)…

In his latest work he advocates a carbon tax of $31 per tonne in 2015…[which would] result in more than 3º warming.  To give a sense of how modest his suggestion is, consider that, in the same paper, Nordhaus calculates that the most efficient carbon tax to limit warming to 2.5º is between $107-184 per tonne depending on assumptions.

In other words, Nordhaus’s recommendations for a very low carbon price would not save the planet; they would provide window dressing coverage to the status quo.  In the end, policy makers would make themselves feel better while the planet still burns.  Too low a carbon price allows the fossil fuel industry to survive much longer than a survivable planet demands.  They would just pay the tax out of their increased profits.  The public would be reassured that the policy makers are doing something about it, and would not take to the streets. Nordhaus also opposed “quantity limits” such as carbon caps. Nordhaus would have society forego regulations, phase-outs, and bans, instead relying on a magical fallacy called the “free market.”

The ugly news:

The Swedish Bank’s award is a step forward for carbon pricing as a concept, but the climate problem is far greater than the Bank or Nordhaus are willing to admit.  Economic growth is the driver of environmental destruction and climate change, and the choice to pair Nordhaus with his co-winner Paul Romer, who focused on increasing economic growth (even if in an innovative way), exemplifies this blind spot.  Infinite economic growth on a finite planet is the epitome of unsustainability.  Put simply, central banks and their choice of Nobel-winning economists have thus far been unwilling to advocate for solutions that can actually address the problem.

One such solution is Cap Global Carbon.  A Global Climate Trust would be formed to administer the global carbon budget to the countries of the world, using some form of per capita equity.  Upstream fossil fuel companies would have to buy permits representing their emissions under the cap.  Revenues would be returned to people as climate dividends as a starting point for global basic income.

This relatively simple idea could transform the debate around climate change and carbon pricing.  We should celebrate the positives from those news stories in raising general awareness.  But for those who recognize the bad and ugly parts of those news stories, we must turn the resulting feeling of powerlessness into a political movement to form a Global Climate Trust and implement Cap Global Carbon.

Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members.