The Davos apocalypse

FORT LAUDERDALE – At the World Economic Forum’s annual meeting in Davos last month, leading participants called for a rapid shift to cleaner energy to tackle climate change. There is something unsettling about the global power elite jetting into an exclusive Swiss ski resort and telling the rest of the world to stop using fossil fuels.

The apocalyptic bombast is even more disturbing. According to Angel Gurría, Secretary-General of the OECD, “our planet is warming dangerously,” and we need to act now “to avoid catastrophe”; the United Nations climate chief, Christiana Figueres, maintains that global warming means that “the world economy is at risk.”

Former UN Secretary-General Kofi Annan takes the prize for the most extreme rhetoric, claiming that not curbing global warming is “a terrible gamble with the future of the planet and with life itself.”

Yet, the rhetoric is unconvincing. Yes, global warming is real and man-made. But creating panic and proposing unrealistic policies will not help in tackling the problem.

Both Annan and Gurría cited Typhoon Haiyan in the Philippines last November as evidence of increased climate-change-related damage. Never mind that the latest report by the UN Intergovernmental Panel on Climate Change (IPCC) found that “current datasets indicate no significant observed trends in global tropical cyclone frequency over the past century” and reported “low confidence” that any changes in hurricanes in recent (or future) decades had anything to do with global warming.

Annan and Gurría also neglected to note that global Accumulated Cyclone Energy, an index for total hurricane activity, is hovering at the lowest values seen since the 1970’s. Indeed, the trend for strong hurricanes around the Philippines has declined since 1951.

Similarly, Gurría tells us that Hurricane Sandy, which slammed into New York City in 2012, is an example of inaction on climate change, costing the United States “the equivalent of 0.5% of its GDP” each year. In fact, the US currently is experiencing the longest absence of intense landfall hurricanes since records began in 1900, while the adjusted damage cost for the US during this period, including Hurricane Sandy, has fallen slightly.

Figueres claims “that current annual losses worldwide due to extreme weather and disasters could be a staggering 12 per cent of annual global GDP.” But the study she cites shows only a possible loss of 1 to 12 per cent of GDP in the future, and this is estimated not globally but within just eight carefully selected, climate-vulnerable regions or cities. By contrast, according to the IPCC, “long-term trends in economic disaster losses adjusted for wealth and population increases have not been attributed to climate change.”

On the contrary, the bulk of peer-reviewed economic evidence indicates that, up to around 2050 to 2070, the net global economic impact of rising temperatures is likely to be positive. Although global warming will create costs stemming from more heat-related deaths and water stress, they will be outweighed by the benefits from many fewer cold-related deaths and higher agricultural productivity from higher levels of CO2.

Figueres sees “momentum growing toward” climate policies as countries like China “reduce coal use.” In the real world, China accounts for almost 60 per cent of the global increase in coal consumption from 2012 to 2014, according to the International Energy Agency

Global warming is a long-term problem. Most models indicate that the cost toward the end of the century will be 1 to 5 per cent of world GDP. This is not a trivial loss; but nor does it put “the world economy at risk.” For comparison, the IPCC expects that by the end of the century, the average person in the developing world will be 1,400 to 1,800 per cent richer than today.

Such incorrect statements by leading officials reinforce wasteful policies based on wishful thinking. Figueres sees “momentum growing toward” climate policies as countries like China “reduce coal use.” In the real world, China accounts for almost 60 per cent of the global increase in coal consumption from 2012 to 2014, according to the International Energy Agency. While Figueres lauds China for dramatically increasing its solar-power capacity in 2013, the increase in China’s reliance on coal power was 27 times greater.

Figueres’s weak grasp on the facts has led her not only to conclude that China is “doing it right” on climate change, but also to speculate that China has succeeded because its “political system avoids some of the legislative hurdles seen in countries including the US.” In other words, the UN’s top climate official seems to be suggesting that an authoritarian political system is better for the planet.

The fact remains that global wind and solar power usage in 2012 cut, at most, 275 million tons of CO2, while soaking up $60 billion in subsidies. With the electricity worth possibly $10 billion, the average cost of cutting a ton of CO2 is about $180. The biggest peer-reviewed estimate of the damage cost of CO2 is about $5 per ton. This means that solar and wind power avoid about $0.03 of climate damage for every dollar spent.

Compare this to smarter technological solutions. In the short run, the US shale-energy revolution has replaced high-polluting coal with cheaper, cleaner natural gas. This has cut about 300 million tons of US emissions – more than all the world’s solar and wind power combined – and at the same time has profited Americans by saving them $100 billion in energy costs.

In the long run, current investment in green research and development will help drive the price of future renewable energy below that of fossil fuels, enabling a choice that is both environmentally and economically sound. In the meantime, even dramatic cuts in CO2 emissions will have very little impact on hurricanes 50 to 100 years from now. Lifting billions of people out of poverty, however, would not only be intrinsically good; it would also make societies much more resilient in the face of extreme weather, whether caused by global warming or not.

Unfortunately, as we saw at Davos, the global climate debate is polluted with myths and wishful thinking. If we want to do more good at lower cost, we should start by cleaning it up.

This post originally appeared in Project Syndicate.

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