Breakingviews - Review: Green sceptic sheds more heat than light

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LONDON (Reuters Breakingviews) - Bjorn Lomborg is a polarising character. Reviewing “False Alarm”, the Danish academic’s latest book, Nobel Prize-winning economist Joseph Stiglitz concludes it “would be downright dangerous were it to succeed in persuading anyone that there was merit in its arguments”. The book raises interesting questions, but also emits more heat than light.

Climate change campaigners often describe Lomborg as a “lukewarmer”. In other words, he accepts the reality that climate change is damaging the planet but disputes arguments that the benefits of intervention outweigh the costs. To do so he deploys his own dismal scientist with a Nobel Prize to show why he thinks climate alarmism is over-egged.

William Nordhaus is one of the pioneers of so-called Integrated Assessment Models, which attempt to quantify the potential impact of a changing climate on the economy. His striking figure is that a 4 degrees Celsius rise in temperature might only knock 2.9% off global GDP by 2100. To be on the safe side, Lomborg cites a more conservative hit amounting to 4% of global output.

Against this not-too-terrifying prospect, the author sets out what he claims is the epic expense of implementing the Paris Agreement, a global emissions-cutting accord signed in 2015. The cost of trying to make the allotted emission cuts will, he reckons, be at least $1 trillion a year by 2030. That leads to Lomborg’s coup de grace: the Paris Agreement will, he claims, only cut 64 gigatons of the 6,410 gigatons needed to keep within 1.5 degrees Celsius, or less than 1%.

Those who see these supporting struts as robust will readily accept the superstructure of Lomborg’s argument. The media, he says, has needlessly stoked public fear with endless climate-catastrophe scare stories. Action on climate change pushed by elites will regressively make poorer taxpayers shoulder the cost of a pointlessly accelerated decarbonisation via their energy bills. Much better, he asserts, to trust in humanity’s endless capacity for adaptation.

Lomborg’s approach, however, is far from the conventional view. Alternative analysis in the International Monetary Fund’s latest World Economic Outlook suggests the hit to GDP by 2100 could exceed 25%. The IMF says that swift action now could be a manageable cost and create a material GDP benefit after 2050. Plenty of others say more needs to be done.

The root of the problem is that integrated assessment models are imperfect. Massachusetts Institute of Technology economist Robert Pindyck has called them “close to useless as tools for policy analysis”. Like most financial forecasting techniques, they are acutely sensitive to the discount rate used. Nordhaus’s use of a relatively high one makes the costs look reasonable; London School of Economics economist Nicholas Stern’s use of a low one makes them look high.

Lomborg’s critique of Paris is also open to challenge. He is entitled to be sceptical of the scope for nations to go beyond the fairly meagre carbon-reduction pledges they have made since 2015. But the reason why the COP26 climate talks in 2021 are crucial is the widespread understanding that they need to be toughened up. Lomborg’s strong doubts that China will get serious sit uneasily with Beijing’s recent pledge to be carbon neutral by 2060. A United States under Joe Biden would also change the game.

There are other reasons why Lomborg’s contrarianism would have hit harder a few years ago. In 2020, oil majors BP and Total are charging into wind and solar. Investors like BlackRock, Wall Street banks and the West’s biggest insurer, Allianz, are placing climate change at the heart of their strategies. The International Energy Agency – historically far from a champion of renewable energy – recently lauded solar as the cheapest source of electricity in history. And on the cost front, UK economist Adair Turner’s Energy Transitions Commission recently pointed out that the bill to decarbonise over the next three decades, while vast, only amounts to 1%-2% of global GDP a year.

There’s certainly a market for Lomborg’s unconventional arguments. In a world where a sizable chunk of the population won’t wear face masks to protect themselves and others from Covid-19, it’s unsurprising that some disregard the risk of a socio-economic collapse sometime later in the century. And given it is increasingly likely that the planet will struggle to limit warming to 1.5 degrees Celsius, the book’s emphasis on the need for adaptation rather than wholesale prevention is understandable.

Still, the debate over climate change seems quite like the dilemma over whether to deal with Covid-19 via a hands-off approach or by painful lockdowns. If there was total clarity on the worst-case scenario, it would be possible to undertake a genuinely compelling cost-benefit analysis. But there isn’t, and as such most should err on the side of caution.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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