Case study 1.1: Global Warming
Part I: What to do about global warming1
A UN treaty now under discussion looks promising –
as long as it remains flexible
How should reasonable people react to the hype and
controversy over global warming? Judging by recent
headlines, you might think we are already doomed.
Newspapers have been quick to link extreme
weather events, ranging from floods in Britain and
Mozambique to hurricanes in Central America,
directly to global warming. Greens say that worse will
ensue if governments do not act. Many politicians
have duly jumped on the bandwagon, citing recent
disasters as a reason for speeding up action on the
Kyoto treaty on climate change that commits rich
countries to cut emissions of greenhouse gases. This
week saw the start of a summit in The Hague to
discuss all this.
Yet hot-headed attempts to link specific weather
disasters to the greenhouse effect are scientific bunk.
The correct approach is coolly to assess the science of
climate change before taking action. Unfortunately,
climate modelling is still in its infancy, and for most of
the past decade it has raised as many questions as it
has answered. Now, however, the picture is getting
clearer. There will never be consensus, but the
balance of the evidence suggests that global warming
is indeed happening; that much of it has recently
been man-made; and that there is a risk of potentially
disastrous consequences. Even the normally stolid
insurance industry is getting excited. Insurers reckon
that weather disasters have cost roughly $400 billion
over the past decade and that the damage is likely
only to increase. The time has come to accept that
global warming is a credible enough threat to require
a public-policy response.
But what, exactly? At first blush, the Kyoto treaty
seems to offer a good way forward. It is a global
treaty: it would be foolish to deal with this most
global of problems in any other way. It sets a longterm
framework that requires frequent updating and
revision, rather like the post-war process of trade
liberalisation. That is sensible because climate
change will be at least a 100-year problem, and so
will require a treaty with institutions and mechanisms
that endure. The big question over Kyoto remains its
cost. How much insurance is worth buying now
against an uncertain, but possibly devastating, future
threat? And the answer lies in a clear-headed
assessment of benefits and costs. The case for doing
something has increased during the three years since
Kyoto was signed. Yet it also remains true that all
answers will be easier if economic growth is
meanwhile sustained: stopping the world while the
problem is dealt with is not a sensible option, given
that resources to deal with it would then become
steadily scarcer.
That points to two general conclusions about how
to implement Kyoto. The simplest is that countries
should search out ‘‘no regrets’’ measures that are
beneficial in their own right as well as reducing
emissions – such as scrapping coal subsidies,
liberalising energy markets and cutting farm support.
The second is that implementation should use
market-friendly measures that minimise the costs
and risks of slowing economic growth.