One of the recurring themes of my work on the economics of climate change is that the very people who lecture the world on the dangers of “science denial” don’t actually follow their own advice. The recent announcement of the Nobel Prize in Economics, along with the release of the UN’s latest IPCC (Intergovernmental Panel on Climate Change) report, illustrates my claim perfectly. Specifically, William Nordhaus just won the Nobel for his work on basically inventing the economics of climate change. But while Nordhaus’ model shows that even a ceiling of 2° Celsius is too aggressive—with the costs outweighing the benefits—the media breathlessly tells the world that the latest “science” from the IPCC shows humanity that we have about a decade to implement draconian measures if we are going to achieve the goal of limiting warming to 1.5°Celsius.
The Media Announcements
The screenshot and quote below give a flavor of what I mean. The first comes from The Guardian, which blares its headline that the IPCC urges immediate and drastic action in order to contain global warming to 1.5°C:
The following quotation comes from the New York Times article announcing this year’s joint winners of the Nobel (Memorial) Prize in Economics, namely William Nordhaus and Paul Romer. Note how the piece ties Nordhaus to the virtually simultaneous release of the latest IPCC report:
The 2018 Nobel Memorial Prize in Economic Science was awarded on Monday to the American economists William D. Nordhaus and Paul M. Romer for reshaping the understanding of the long-term determinants of economic growth.
Mr. Nordhaus was cited for his work on the implications of environmental factors, including climate change. Mr. Romer was cited for his work on the importance of technological change.
Mr. Nordhaus, a professor of economics at Yale University, pioneered the economic analysis of climate change. He is also a leading proponent of the use of carbon taxation to reduce emissions, a policy approach preferred by many economists.
The announcement of the award came the same day that a United Nations panel on climate change released a report warning of dire consequences from climate change and urging governments to respond to the problem with greater urgency. The report builds on and cites Mr. Nordhaus’s work. [New York Times, bold added.]
Now, any normal citizen reading the above two samples from our major media—who ostensibly are all up-to-speed on the “consensus” and would never dream of letting ideology get in the way of the empirical evidence—would be quite certain that William Nordhaus’ work supports the IPCC’s call to limit global warming to 1.5°C. And yet, as I’ll show in the next section, this is utterly false. Nordhaus’ work shows that such an ambitious climate change goal is far too aggressive.
Nordhaus on Proper Climate Policy
Now to be clear, I am a critic of Nordhaus’ work on climate change economics. Back in 2009 I wrote a peer-reviewed article criticizing his “DICE” model, and here at IER I’ve written articles (such as this one) arguing that Nordhaus misled the public in one of his popular articles on climate “skeptics.”
However, what I want to do in the current post is simply show that the guy who just won the Nobel Prize for his work on climate change economics does NOT support anything close to the IPCC’s latest announcement. This should show that, far from being “settled science,” the ever-increasing stridency of the calls for global action to combat climate change are more and more based on ideology and/or arbitrary decisions not tied to reasoned analysis.
For starters (and I thank David R. Henderson for reminding me of this salient point), as of DICE-2007 (i.e., Nordhaus’ model back in 2007), the climate goal of limiting global warming to 1.5°C was a horrible policy, which would make humanity $14 trillion (in present-value terms, in 2005 US$) poorer than doing nothing at all. (See Table 4 of my article to see the details.)
Now it’s true that the numbers have changed since 2007, and Nordhaus’ model would no longer give such a pessimistic assessment. However, back in 2013 Nordhaus argued in his then-new book on climate change that the optimal policy (depending on assumptions regarding participation among the world’s governments, etc.) would limit global warming from 2.3°C up to nearly 4°C, as Paul Krugman admits in his review of the book.
Please re-read my last sentence: As of 2013, William Nordhaus—who just won the Nobel Prize for his work on the economics of climate change—was saying the optimal path of global warming would allow for temperature increases of at least 2.3°C and possibly close to 4°C. Yet the IPCC’s media people are telling the world that we should really shoot for 1.5°C of warming to avoid catastrophe, and that the difference between 1.5°C versus 2.0°C is huge.
I have serious reservations about the work of William Nordhaus and the other creators of so-called Integrated Assessment Models (IAMs), which are used to calculate the “social cost of carbon.” Yet to the extent that we are going to take IAMs at face value—and the major media touting Nordhaus’ Nobel certainly do—then they should give pause to those clamoring for aggressive government action. Although Nordhaus favors a carbon tax, his work shows that the recent goals announced by the IPCC are ludicrously aggressive, and would likely cause far more damage to economic growth than they would alleviate in terms of climate change.