The UN Climate Panel came out with its final report yesterday. It is a summary of its 3 main reports, published over the last year. It tells us that global warming is real and a significant problem. And as usual, the media hears something else – in the words of Mother Jones magazine, how future warming will be “ghastly, horrid, awful, shocking, grisly, gruesome.”
In between the alarmist hype and the reality of climate change we once again risk losing an opportunity to think smartly about energy and find a realistic way to fix global warming.
We need to realise that the world will not come off fossil fuels for many decades. Globally, we get a minuscule 0.3pc of our energy from solar and wind. According to the International Energy Agency, even with a wildly optimistic scenario, we will get just 3.5pc of our energy from solar and wind in 2035, while paying almost $100 billion in annual subsidies. Today, the world gets 82pc of its energy from fossil fuels, in 21 years it will still be more than 79pc.
The simple reason is that cheap and abundant energy is what powers economic growth. And for now, that means four fifths from fossil fuel, and much of the rest from water and nuclear. While wind is lower cost in a few, rural areas, coal is for the most part much cheaper, and provides power, also when the wind is not blowing.
As the poor half of our world is reaching for a similar development to that of China, they will also want much, much more power, most of it powered by coal. Even the climate-worried World Bank president accepts that “there’s never been a country that has developed with intermittent power.”
Realising that fossil fuels will be here for a long time means stronger focus on moving from coal to gas, since gas emits about half the greenhouse gasses. The US shale gas revolution has reduced gas prices and lead to a significant switch from coal to gas. This has reduced US CO₂ emissions to their lowest in 20 years.
In 2012, US shale gas reduced emissions three times more than all the solar and wind in Europe. At the same time, Europe paid about $40 billion in annual subsidies for solar, while the Americans made more than $200 billion every year from the shale gas revolution. Gas is obviously still a fossil fuel and not the final solution, but it can reduce emissions over the next 10-20 years, especially if the shale revolution is expanded to China and the rest of the developing world.
While global warming will be a problem, much of the rhetoric is wildly exaggerated – like when UN secretary-general Ban Ki-moon calls it “an existential challenge for the whole human race.” The IPCC finds that the total cost of climate change by 2070 is between 0.2pc and 2pc of GDP. While this is definitely a problem, it is equivalent to less than one year of recession over the next 60 years.
Global warming pales when compared to many other global problems. While the WHO estimates 250,000 annual deaths from global warming in 30 years, 4.3 million die right now each year from indoor air pollution, 800 million are starving, and 2.5 billion live in poverty and lack clean water and sanitation.
When the UN asked 5 million people for their top priorities the answers were better education and health care, less corruption, more jobs and affordable food. They placed global warming at the very last spot, as priority number 17.
Climate policies can easily cost much more than the global warming damage will – while helping very little. The German solar adventure, which has cost taxpayers more than $130 billion, will at the end of the century just postpone global warming by a trivial 37 hours.
While a low carbon tax in theory could help a little, the political reality is that climate policies almost everywhere have been ineffective, done little good while sustaining the most wasteful technologies. The IPCC warns than less-than-perfect climate policies can be 2-4 times more expensive. Biofuels, for instance, have driven up food costs, likely causing an extra 30 million starving, with prospects of starving another 100 million by 2020. And it is likely that biofuels cause net increase in CO₂ emissions, because they force agriculture to cut down forests elsewhere to grow food.
This is why we have to be careful in pushing for the right policies. For twenty years, the refrain has been promises to cut CO₂, like the Kyoto Protocol. For twenty years these policies have failed. We should instead look to climate economics to find smarter solutions.
The fundamental problem is that green energy is too expensive, which is why it will need billions in subsidies the next two decades. Instead of making more failed promises to pay ever more subsidies, we should spend the money on research and development of the next generations of green energy sources. If we can innovate the price of green energy down below the cost of fossil fuels, everyone will switch, including China and India. Economics confirm that for every dollar spent on green R&D, we will avoid $11 of climate damage.
But this requires us to separate the hype from the real message from IPCC: global warming is a problem, but unless we fix it smartly, we won’t fix it at all.
Bjørn Lomborg, an adjunct professor at the Copenhagen Business School, founded and directs the Copenhagen Consensus Center, which seeks to study environmental problems and solutions using the best available analytical methods.