Saturday, February 10, 2007

The Economic Side of the Global Warming Debate

Following Maarek's lead, I'll try to pay more attention to the "Society" half of our name in forthcoming posts, including this one (despite the title).

One of the big issues - at least by some measures - in our society today is global warming. Global warming spans multiple arenas - environmental, political, economic, even personal conduct since individuals effect and affect so much of what is considered global warming-causing activity.

Most people are well acquainted with the environmental, political, and personal-conduct aspects of the issue. People are aware of the types of changes that global warming "activists" (for lack of a better word) are anticipating: melting of the polar ice caps, coastal flooding, etc. People are also aware that it comes up as a political issue which some politicians try to leverage for one purpose or another. People are also aware of the various things that many people do that, intentionally or otherwise, contribute to or prevent global warming: recycling, wasting (or not) electricity, even being a vegetarian (the whole issue of methane from cows; as a side note, while most people think of carbon dioxide as being the main culprit in the global warming arena, it seems that methane is 50 times as effective at trapping heat in the atmosphere - thus creating the interesting question of which hurts the environment more - making some hamburger meat or driving six miles to the store to buy it).

The economic side of global warming, at least in my experience, is not very prominent in people's minds, though. There is, of course, massive economic considerations with global warming. Many of the processes that produce carbon dioxide, methane, and, for that matter, any substance that is potentially harmful to the environment, could be done in other - more expensive - ways. Thus, society faces the omnipresent decision of a trade-off. On the one side, there is cheap energy and products, and on the other side, more expensive or less energy and products.

Concerning this trade off, Townhall has an interesting article about a theoretical trade off between global warming and economic growth. While you should read the entire article, the short version is: since 1900, estimates for how much the earth has warmed are around .7 degrees Celsius, while global GDP increase about 1800%. Assuming that 100% of global warming is due to processes and activities whose only other benefit was the 1800% increase in GDP, the question is "is .7 degrees Celsius worth an 1800% global GDP increase?" The author's answer is "yes, absolutely." He does gloss over some very important considerations, but I think his general theme is worth thinking about and that his conclusion is, at least, tenable.

He goes on to state that "global cooling", i.e., reducing the amount of global warming we cause, is simply too expensive - at least right now. Apparently, the lowest estimate for how much it would cost is 1% of global GDP per year. In addition to the interest his article in general causes, I would like to point out a very good observation on his part, namely, that capitalism has a long and consistent tradition of making things cheaper. Think about it - it's an Econ 101 point - products and services start off with high costs that gradually lower over times as various market forces kick in. His point is that, currently, clean energy alternatives, such as hydrogen and fusion, are simply too expensive (or simply not mature), but will decrease in cost the longer we wait. Thus, theoretically, in 10-20 years, we might have a perfectly viable, cheap solution to the problem of producing energy. Simply "waiting the problem out" until we have such a solution would eliminate the cost of trying to curb gas emissions now - costs that could have severe detrimental effects on the global economy.

Of course, this either (a) ignores the obvious objection of "what about the emissions that we will continue to produce for the next 10-20 years and all of their detrimental effects? Shouldn't we start solving the problem as soon as possible and not worry more about our pocket books than our environment?" or (b) assumes that technological advances will be able to counteract those 10-20 years of detrimental effects as well.

While I'm not going to take a particular position on the various issues outlined above, I certainly do think it is something worth thinking about.

HT to CARPE DIEM for the link.


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