11 Mar 2014

IER Comment on the “Social Cost of Carbon”

Climate Change, Shameless Self-Promotion 42 Comments

If you are a true nerd about the global warming stuff, you should definitely get a cup of coffee some morning and spend a half hour carefully reading the Institute for Energy Research (IER) formal “comment” (submitted to the government) on the Social Cost of Carbon. However, if you have a shorter attention span, in two blog posts at IER I will summarize our key arguments.

Here’s the first post.  An excerpt:

On the theoretical front, our main theme is that the “social cost of carbon” is not an objective fact of the world, analogous to the charge on an electron or the boiling point of water. Many analysts and policymakers refer to the “science being settled” and so forth, giving the impression that the SCC is a number that is “out there” in Nature, waiting to be measured by guys in white lab coats.

On the contrary, by its very nature the SCC is an arbitrary number, which is completely malleable in the hands of an analyst who can make it very high, very low, or even negative, simply by adjusting parameters. Precisely because the SCC even at a conceptual level is so vulnerable to manipulation in this fashion, the analysts giving wildly different estimates are not “lying.” As we will see, the estimates of the SCC in the peer-reviewed literature are all over the map, demonstrating that this is hardly a feature of the “outside world.”

42 Responses to “IER Comment on the “Social Cost of Carbon””

  1. Major_Freedom says:

    Great stuff.

    Yeah, I guess only economists understand that whenever anyone talks of “costs”, there is a subjective human valuation component. And by economists I mean Austrians.

  2. Tel says:

    On the theoretical front, our main theme is that the “social cost of carbon” is not an objective fact of the world, analogous to the charge on an electron or the boiling point of water.

    Dangerous stuff there, going right out on a limb and all… this might imply that all sorts of “social costs” are just made up numbers. What then? If committees can’t put prices on things, how can society operate at all?

    • Matt M (Dude Where's My Freedom) says:

      And yeah, this is why they cannot POSSIBLY concede this issue. It opens up the door to all sorts of troubling implications for those who would presume to micromanage our lives…

  3. Andrew_M_Garland says:

    Government:

    The social costs are hard to estimate, but we have done it. They are higher than your limited mind can imagine. We can’t meet them all, so we will raise as much revenue as possible through taxes and apply the money to shovel-ready projects. You are welcome.

  4. jack says:

    Hey is it just me, or is the Mises Institute being completely misrepresented in wikipedia.?

    here check it out

    http://en.wikipedia.org/wiki/Ludwig_von_Mises_Institute

  5. jack says:

    check out this sad attempt to smear the Mises Institute, Murray Rothbard, Lew Rockwell, and Ron Paul

    quote from a comment on a mises.org article

    ” well i mean, the first sentence

    “The Ludwig von Mises Institute (LvMI) ( or Mises Institute) is a tax-exempt paleolibertarian organization”

    i don’t think the mises institute, or anyone who reads this site identifies as “paleolibertarian”

    also check the very page for “paleolibertarianism”

    this is outright smearing the mises institute with racism, specifically lew rockwell and ron paul
    http://en.wikipedia.org/wiki/Paleolibertarian

    “Paleo-libertarianism developed in opposition to the social progressivism of mainstream libertarianism. The ideology was presented in Murray Rothbard’s essay “Right-Wing Populism: A Strategy for the Paleo Movement”, in which Rothbard reflected on the ability of paleo-libertarians to engage in an “outreach to rednecks” founded on social conservatism and radical libertarianism. He cited former Ku Klux Klan Grand Wizard David Duke and former U.S. Senator Joseph McCarthy as models for the new movement.[2]”

    “Paleo-libertarianism has sometimes been identified with racism. Political scientist Jean Hardisty describes paleo-libertarianism as entailing “explicit racism, anti-Semitism, and sexism”.[7] She notes Murray Rothbard’s praise of The Bell Curve, a “paleo-libertarian” work which argued that black people are genetically inferior to white people with respect to intelligence, and the Rothbard-Rockwell Report’s publishing of an article, written by white nationalist Sam Francis, which asserted that “of the two major races in the United States today, only one possesses the [intellectual] capacity to create and sustain” suitable levels of civilization.”

    “During Ron Paul’s run for the U.S. Presidency in 2008, paleolibertarianism was identified by several sources as the ideological influence behind the racist sentiments and language expressed in the Ron Paul newsletters circa 1989-1994. The libertarian publication Reason asserted that “a half-dozen longtime libertarian activists—including some still close to Paul” had identified paleo-libertarian theorist Lew Rockwell as the “chief ghostwriter” of the newsletters. Rockwell denied it.[2]“

    • Anonymous says:

      The beauty of Wikipedia is that you can make adjustments.

    • Andrew' says:

      I’ve never heard of paleo-libertarian. I have heard of paleo-conservative. I can’t keep up with what people who don’t know what they are talking about are telling me what I am.

      OTOH, it is just nice to be considered sometimes.

      • Yancey Ward says:

        Paleo-anything are people who clonk women over the head with clubs and drag them to their caves.

    • Major_Freedom says:

      Jack, truth will out.

      You don’t have to worry.

  6. Harold says:

    The “science is settled” opinion refers to climate change itself rather than the social cost. It is unfortunate if you have got the wrong impression.

    The problem is what would you have us do? The evaluation of the social cost is difficult, so we should abandon any attempt to quantify it?

    The settled science has always acknowledged there are positive aspects to warming. In *some* estimates these outweigh the negative in the short term as you point out. But the changes cannot be stopped when the balance turns negative. On current course, if we get these benefits, the negative ones *will* inevitably follow. An alternative way to look at this is to say we should limit the climate change to 2°C, where the benefits and costs will be not too far out of balance. This would require drastic cuts in emissions now.

    This makes the discount rate very important. Market rates are not appropriate because the market is not looking so long term, so why would we use the wrong measure?

    There are two problems. 1) The physical effects and social impacts climate change will have in the future. These are somewhat uncertain, but there is an actual answer – there will actually be a certain amount of money involved.
    2) How we should value the future. This does not have a physical reality, and must be decided in order for us to make informed choices. Just because there is no objective “right” or “wrong” answer does not mean we should not make the attempt.

    Those arguing for not including the social cost in policy planning are arguing for a discount rate that does not value the future at all. This is just as arbitrary as any other value. We cannot avoid choosing, since to make no decision is a choice also.

    • Andrew' says:

      “The “science is settled” opinion refers to climate change itself rather than the social cost. It is unfortunate if you have got the wrong impression. ”

      That is not credible. The people who tout your falsity (no, the actual science isn’t settled either) want to win elections. So, they would love people to believe they also have the answer.

      What makes this all the more offensive is that the actual cost of carbon is still negative. The costs are some point in the future, if at all.

      • Andrew' says:

        Now you try to blame their horrible communication skills or their intentional dissembling on Bob.

        Thank Bob for not allowing profanity or I’d tell you what I really think.

      • Harold says:

        The phrase “the science is settled” that I have seen has always been in reference to climate change, and often by climate change skeptics as a straw man argument.

        What falsity do you accuse me of? I never said the science was settled, I pointed out that the phrase was used in reference to climate change not economic assessments of the cost.

        I don’t know who “they” are you refer to, so i can’t comment on their communication skills.

        A survey of economists who had published in the area of climate change in 2009 showed:
        “37.5%  responded  that  “benefits  to  future  generations” 
        should  be  evaluated  “by  discounting  them  at  a  constant 
        discount  rate,”  while  36.8%  stated  that  they  should  be 
        evaluated  “by  using  alternative  discounting  methodologies 
        (such  as  hyperbolic  discounting),”  and  16.7%  stated  that 
        they  should  be  evaluated  “by  reference  to  moral  inquiries 
        unrelated to discounting.”
        “The  median  value  for  a  discount  rate  used  to  evaluate 
        impacts on future generations, if discounting was to be used, 
        was  2.4%,  but  there  was  wide  variation,  suggesting  that 
        there is no clear consensus.”
        http://resources.ofdan.ca/docs/EconomistsandClimateChange.pdf

        This is clearly not a settled issue. It is misleading to suggest that it has been seriously argued that it is.

        • Yancey Ward says:

          No, the “Science is settled” is not a straw man created by skeptics about the science of global warming- indeed it is the entire point of calling people deniers in the first place, for goodness’ sake. Also, it is basically assumed by the global warming crowd that the social cost of carbon is a positive value, again minus any real evidence.

        • Cosmo Kramer says:

          “The phrase “the science is settled” that I have seen has always been in reference to climate change”

          So when one disagrees with the IPCC estimates of Co2 impact on temperature, what are they called exactly? Do the alarmists EVER acknowledge that the only disagreement is on the impact of Co2? Of course not.

          What do they say about our motives?

          What do they say about our funding? Do the alarmists ever mention the corporations that are only in the climate change movement for money? Nope.

          Want to see straw men? Just look at every alarmist article.

          http://www.salon.com/2014/01/09/9135_out_of_9136_scientists_believe_climate_change_is_happening/

          Let me know when you guys realize that we agree that humans cause climate change.

    • Cosmo Kramer says:

      “The evaluation of the social cost is difficult, so we should abandon any attempt to quantify it? ”

      No. We should make sure we are right before spending tax dollars.

      “This would require drastic cuts in emissions now.”

      Is this a feasible cut in emissions “now”?

      • Harold says:

        Depends what you mean by “feasible”. Technologically feasible, but not without some cost, which makes it politically infeasible.

    • Matt M (Dude Where's My Freedom) says:

      “This makes the discount rate very important. Market rates are not appropriate because the market is not looking so long term, so why would we use the wrong measure?”

      Why would governments be any more likely to look long-term? What is it about governments previous behavior (wars, massive debts, social programs that always fail, disastrous economic policies, etc.) that would indicate to you that they are the most qualified to examine long term costs and benefits?

      • Harold says:

        We are talking about Government policy. Whether or not they are the best body to do it, they are the ones that actually make policy. Whatever policy they choose has to include a discount rate even if implicitly. I see no reason why the policy should be based on an arbitrarily high discount rate. If they ignore the social cost they are implicitly using a high discount rate.

        • Matt M (Dude Where's My Freedom) says:

          What makes a high discount rate “arbitrary” and a low discount rate non-arbitrary?

          • Harold says:

            Both are to some extent subjective – more philosophical than scientific. i do not disagree with this point. The economic literature is apparently is tending towards accepting a low discount rate for multi generational impacts, so this would be less arbitrary if this is the case.

    • Major_Freedom says:

      Harold:

      “The “science is settled” opinion refers to climate change itself rather than the social cost. It is unfortunate if you have got the wrong impression.
      The problem is what would you have us do?”

      That IMPLIES costs Harold. Yes, the problem is what should we DO. And that is exactly why costs are being considered. Economic planning includes planning for costs.

      What, does your mommy and daddy pay for everything and you have not learned the concept of costs?

    • Tel says:

      The “science is settled” opinion refers to climate change itself rather than the social cost. It is unfortunate if you have got the wrong impression.

      Mkay, strictly about the climate itself and nothing about the costs… got it.

      The settled science has always acknowledged there are positive aspects to warming.

      Yup, strictly about the climate and nothing about the social costs… except when otherwise… now I got it.

      • Harold says:

        Tel: There is a difference between “the science being settled” about climate change and there being such a thing as settled science. The science that is settled acknowledges that there are some benefits to increased CO2. This settled science includes CO2 promoting growth of some plants in greenhouses. I think we can all agree that this is settled science and it represents a positive aspect of increasing CO2.

        MF – sorry I don’t get what you are saying here. The two sentences were separated by a paragraph in my post. The settled science part is not connected to the next bit. Have I said that things can be done without cost?

        What discount rate would you have us use? Or would you have us say that this is so far in the future we do not need to consider the costs to future generations? If you say this you have de facto accepted an arbitrary discount rate.

        Yancey Ward “No, the “Science is settled” is not a straw man created by skeptics about the science of global warming-” I never said it was – I said it was often used in that way. You seem to be making a straw man argument.
        “Also, it is basically assumed by the global warming crowd that the social cost of carbon is a positive value, again minus any real evidence.” This is not just assumed, it is based on research. Have a look at the article Bob linked to.

        Cosmo Kramer:
        When you say “our motives” I do not know which group you are affiliating yourself with.

        “Do the alarmists EVER acknowledge that the only disagreement is on the impact of Co2? Of course not.”

        It is not. Do you remember the Urban Heat Island effect and how this showed that the global temperature records were all wrong? Then came BEST, which pretty much showed the opposite. That was not about CO2, that was about global temperatures.

        “Want to see straw men?” No, I do not. I would rather see reasoned argument. Please.

        Look – the “settled science” point was not the main one – it was pointing out a rhetorical use of language. The main point is that whatever we do assumes a certain discount rate. If we do not include future costs in policy we assume a high discount rate. We *must* select a discount rate to use in policy because any policy inherently includes it. This is the “what would you have us do?” question

        • Cosmo Kramer says:

          “When you say “our motives” I do not know which group you are affiliating yourself with.”

          Anyone that does not “agree” with the idea that we (government) must “do something” about Co2, or says that sensitivity is lower than the IPCC says.

          Saying that a doubling of Co2 only causes 1 Celcius of warming versus 3 Celsius magically turns one into a phony-paid for-denier.

          This whole debate is being waged by numbskulls. A minute fraction are debating climate change as you are. I wish every alarmist used your arguments, not that I endorse them.

          We all need to come to the table and see eye to eye. Then we can talk about the climate’s sensitivity to Co2, and if/what we do about it.

  7. Andrew' says:

    Part of the “so-called” settled science is the temperature projections that they continue to flub up in addition to the economic discount rates that they continue to exaggerate and assumed remediation costs they continue to misconstrue.

    Now if you are now claiming that what “they” are saying is only that humans are causing…”something, but we have no idea what, when, or how much” then well thank them for telling us absolutely nothing useful when we could have been spending time on actual problems- like solving this one which they will never do in a million years. Tell them not to let the door hit them in the ass when they leave so the adults can get back to work.

    • Cosmo Kramer says:

      They take the consensus argument WAYYYY out of context.

      Even “Lord” Monckton agrees that there is climate change, and that Co2 is a greenhouse gas etc… He just disagrees with the amount of warming that is attributable to Co2. If true, then as he says, it is MUCH wiser to do nothing.

      Consider this analogy

      How much resources would it take

      • Cosmo Kramer says:

        oops

        Consider this analogy

        How much resources would it take to prevent every murder vs attempting to solve a murder once it takes place. Well how do you prevent any murders from occurring? Assign a policeman to every home, business, location?

        I’d like to assume that the effects of climate change will be small enough that we can deal with them at a far cheaper cost than trying to prevent Co2 from being emitted. Or….. I strongly believe that the free market will do a better job at limiting pollution, without the limiting of pollution being the primary goal. I.E. we will grow the economy, instead of stifle it, while improving our energy system at the same time.

        • Harold says:

          “I’d like to assume that the effects of climate change will be small enough that we can deal with them at a far cheaper cost than trying to prevent Co2 from being emitted.”

          And I’d like to imagine I will win the lottery next week. Yay!
          Unfortunately policy is best if it is not based on what we like to imagine, but if we base it on evidence instead.

          • Richie says:

            Whose “evidence”?

            • Harold says:

              I think we should use the same sources of evidence that we would for any area of enquiry. A good starting point would be the hundreds of peer reviewed articles published in the scientific literature. Do you have a better source of evidence?

              • Cosmo Kramer says:

                “And I’d like to imagine I will win the lottery next week. Yay!”

                Nice “gotcha” but no logic to back it up. You didn’t even address the analogy……

                “Unfortunately policy is best if it is not based on what we like to imagine, but if we base it on evidence instead.”

                So constantly revised estimates of Co2 climate sensitivity is what exactly?

                1. It may be better to simply deal with the effects of AGW, rather than killing our energy production.

                2. Free markets may simply do a better job at curbing emissions than the government.

                I am saying “may” or “like to assume’ because it is an economic debate. Economics aren’t provable like physics is. But…… you are too lazy to understand that.

                ” A good starting point would be the hundreds of peer reviewed articles ”

                The hundred’s of articles reviewed by people that agree with the same conclusion…. Go Science!!!

                I would rather look at who has been right. How many horrible acts have been committed based on argumentum ad populum?

                We then consider (as a society) how to act in response.

              • Harold says:

                Ok – the analogy. We should evaluate the costs and benefits of preventing murder and spend the amount that maximised the benefits. A lot of the effects will be uncertain, so we will have to make some estimates and arrive at the best figure we can. Attempting to prevent all murders will obviously be a poor use of resources, so we should not attempt to do so. Neither should we make no attempt to prevent murder because we cannot identify completely accurately the costs and benefits. Pretty much the same as climate change really. The difficulty with climate change is that the costs and benefits are more philosophical in nature since they span greater time periods.

                The free market fails to deliver optimum results when there are externalities. I am in favor of applying a market based incentive (e.g. tax) rather than more roundabout methods such as subsidies.

                I may be lazy, but I don’t think you have enough evidence to conclude that.

                Evidence based is different from argumentum ad populum. I agree that you should look at who has been right. I may disagree with how we decide who is right.

            • Richie says:

              I think we should use the same sources of evidence that we would for any area of enquiry. A good starting point would be the hundreds of peer reviewed articles published in the scientific literature. Do you have a better source of evidence?

              Right, because those “peer-reviewed” (as if “peer-reviewed” is a magical elixir) are not biased in ANY way.

  8. Harold says:

    A bit off topic, but related. I came across this the other day
    “The theory of anthropogenic global warming (AGW) is false. It is simply not true. Actually, it is just a fairy tale for adults that hundreds of millions of people around the world choose to believe with blind faith. When asked to produce evidence for AGW, most adults in the western world come up totally blank. When pressed, most people will mumble something about how “most scientists believe it” and how that is good enough for them. This kind of anti-intellectualism even runs rampant on our college campuses. If you doubt this, just go to a college campus some time and start asking students why they believe in AGW. Very few of them will actually be able to give you any real reasons why they believe it. Most of them just have blind faith in the priest class in our society (“the scientists”). But is what our priest class telling us actually true? When AGW was first proposed, they didn’t actually have any evidence that it was true. And since then the missing evidence has still not materialized. Most Americans would be absolutely shocked to learn that most of what is taught as “truth” about AGW is actually the product of the overactive imaginations of members of the scientific community. They so badly want to believe that it is true that they will go to extraordinary lengths to defend their fairy tale. They keep insisting that the theory of AGW has been “proven” and that it is beyond debate. Meanwhile, most average people are intimidated into accepting the “truth” about AGW because they don’t want to appear to be “stupid” to everyone else.”

    This seems to sum up quite a lot of peoples view of AGW, not necessarily everyone here.

  9. guest says:

    Can someone uncheck “The English Language” on the language filter, please.
    :D

    Or can someone point me to a list of words for which the filter will reject a comment submission?

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