Should climate change policy be subject to a cost-benefit analysis leading to a variety of policy choices? Or is it so critical that the only “proper” path is immediate and extreme carbon reduction, regardless of the costs and the impact of those measures on the welfare of the population? Bjorn Lomborg’s new and controversial work, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet (https://bookshop.org/a/12343/9781541647466) (Basic Books, 2020) leans strongly in the direction of the former. Conducting that analysis, he comes to some shocking conclusions, notably that the “optimal” mix of global warming and economic activity sees a 6 degree or so increase in global temperatures by the end of the century. Yes, shocking.
Other than some low-hanging fruit in carbon reduction through a global carbon tax, he argues that the economic math of more severe carbon reduction is challenging. Instead, Lomborg advocates more investment in poverty reduction that allows people at risk of suffering from climate change to better adapt to higher temperatures and more extreme weather. Less controversially, he supports a massive increase in green energy R&D.
Some NBN listeners will likely disagree with Lomborg’s stance, perhaps with his basic cost-benefit framework and most certainly with his conclusions, but all participants in the debate should be aware of this approach.
Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors (https://www.amazon.com/Getting-Back-Business-Portfolio-Investors/dp/1260135322) . You can follow him on Twitter @Back2BizBook (https://twitter.com/Back2BizBook)  or at http://www.strategicdividendinvestor.com (http://www.strategicdividendinvestor.com/)
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Welcome to the new books Network good afternoon everyone this is Daniel Paris host of new books in finance a Channel of the new books Network I’m delighted today to have as my guest Bjorn lomor director of The Copenhagen consensus Center an international Think Tank uh Bjorn’s new
Book is called false alarm how climate change Panic cost us trillions hurts the poor and fails to fix the planet it just came out from basic books Bjorn thank you so much for being on the show hey Dan it’s great to be here so I I was
Quite intrigued by uh the title and the implications of your book I I work in Investments and my my day job is in effect to forecast the future and then to create models about future outcomes and uh at the same time over the last several years ESG investing I’m
Sure you’re familiar with the environmental social and governance investing which is very uh prom Min in Europe and is increasingly prominent in the United States has entered The Narrative of investing and it it uh directs a portion of that uh forecasting about the future into very specific questions about environmental and social
And governance choices that we make and and their implications so when I I saw your book uh which in effect tries to uh put some meat around the the very high-profile issue of um forecasting environmental outcomes and the the Investments it may be my term and maybe
Not so much your uh your term but the Investments around Environmental Policy I was very much intrigued so thank you for being on the show can you can you describe kind of it as an overview level how you got to this where you wanted to do a public policy analysis of something
That is uh of basically of Environmental Policy thank you yes Daniel I I can that that’s what I wrote a book on uh but actually I think it’s even more interesting what you’re talking about with the ESG uh because uh I really came to this conversation uh in a somewhat
Roundabout way uh because my goal and the goal of my Think Tank the Copenhagen consensus we work with more than 300 of the world’s top Economist and seven Nobel orts to try to find out where can you spend a dollar and do the most good now it’s not probably the investment
Question of where can you spend a dollar and make the most money but it’s the question of saying if you will sort of effective altruism or those kinds of ideas to say where can an extra philanthropic dollar be spent or a government dollar to help the world the
Most and obviously one of those uh one of those very Central focuses is on climate and so let’s just get it very clear climate is a real man-made problem and it will create a significant problem towards the end of the century so this is a real problem the point that I try
To make throughout the book is that we have dramatically ex saturated the threat a lot of people so about half the world’s population now believes that it’s likely global warming will lead to the extinction of the human race whereas the UN climate panel indicates that by
The end of the century the cost of climate change will be equivalent to say 3.6% I’m sure we’ll get back to that 3.6% reduction in GDP so to put it very bluntly because they also expect each one of us will be on average 3.5 times
Richer by the end of the century the UN is essentially saying instead of being 3.5 times richer will only be 3.34 times richro which of course is a problem but not the end of the world and that has implications because we need to think about how do we focus on climate
And do so smartly and also of course remember all the other things so hence the subtitle you know it hurts the poor and actually fails to fix the planet much of what we do cost lots does very little to help with climate and often takes away attention from all the other
Challenges that we also need to fix so let’s let’s just stop there and kind of take that as a uh framework for analysis that uh we’re look use the term richer i i in the book and most of the narrative about this is is in terms of GDP so
We’re looking at the uh gross domestic product uh sometimes in nominal terms sometimes in real terms that is inflation adjusted but the the issue that you’re posi and you acknowledge in the book that both just CO2 emissions or just temperature is a single measure of the climate problem and the same way GDP
Is a single measure of call it Prosperity richer uh the economic activity so we are T we’re making choices almost from the very beginning as to how we are defining these problems and as you say GDP is a flawed thing was created you don’t go into the history of
GDP but I will for clim created in the 1930s to to help uh the Roosevelt administration uh in an emergency deal with something it’s a very flawed measure of economic activity uh but it it exists to this day and it’s it’s what we use same thing with CO2 emissions
They’re not the entirety of the story of climate change but they’ve become accepted as kind of the base so we’re go your book really goes with CO2 in temperature and GDP and measures the one against the other and forecast the one against the other uh through time is
That a a fair way of putting it yes it is uh and and just to uh because obviously there’s a lot of people who feel GDP is very little related certainly when you get up into higher GDP per capita uh but I also show uh in the book that actually uh you know
There’s been other people trying to look at these many other formulations of what would be a better welfare measure for the world because obviously GDP you know it measures the ambulances that take us away from from uh from accidents and it measures the the uh uh theft alarms and
Police that hurricanes are good for GDP because you have to rebuild everything so there’s some real quirks say the least all these things but it turns out that when you try to correlate how satisfied are you with life which arguably could be said as to be one of
The ultimate measures of is this good for man uh it actually correlates almost as correlates better than five out of six of these indices that have been tried to be made that try to be much more broad what that tells us is obviously it’s a flawed measure but
Fundamentally if you’re going to have a conversation where we’re not going to get bogged down in in just definition after definition it is probably a pretty good in uh indicator of whether we die less we’re better educated our kids don’t die we have more food we have more
Of a lot of different things and and so yeah flawed but probably an okay estimate okay estimate so now we’re forecasting the future and for was mentioning this in the green room when we were chatting beforehand uh the the the climate Community the UN Nu for all
Intensive purposes of have settled on on uh the year 2100 the 80 years from now with various pit stops in 2050 to some extent 2030 but we’re looking at over 80 years the forecasting dilemma I I you know I am tasked with forecasting out the next three to five years including
Net benefits cost benefits that’s challenging 80 years uh doing uh uh the analysis both from an environmental perspective and the policy perspective the GDP perspective the prosperity perspective that that must have given you pause it certainly gives me as a reader pause uh in realizing how subjective this is when you’re trying to
Forecast out 80 years did you you know how did you resolve that for yourself that that is a the right way to frame this in terms of timelines so again I I simply take a lot of these things for given because this is a a book that
Tries to make make an overall an engaging argument that I think most people want to engage in so it’s you know it’s a three or 400 page book it’s not a three or 4,000 page book uh and and so you know the UN has set out a
Five different scenarios of what will be the GDP growth uh over this century and I think one of the important things that many people don’t quite recognizes that the UN estimate that on all scenarios the world will be much richer and reasonably likely a lot more richer and
Much more uh uh much less unequal uh will be much better off in so many different ways and the important bit is if that actually ends up not happening so let’s assume that GDP growth would be much much less the problem of global warming will also be much much less
Because most of this is actually driven by the fact that most of humanity will become rich in the 21st century and hence emit a lot more CO2 remember it’s not the US Europe uh the rest of the rich world that will be emitting most of the CO2 it’s all the newcomers so China
But also India and Africa that’ll really be the main producers of CO2 so in some sense it’s baked into the issue we’re only going to have a big problem with climate if we also get a situation where people will get very rich obviously getting rich part is wonderful getting
Much CO2 is a problem and so there’s a this there’s a a tension in this but fundamentally you’re not going to have much of a of a global warming problem if you don’t also have this GDP growth so I think it’s fair to say let’s go with the
UN scenarios let’s go with what most people assume as as sort of the uh the standard scenarios because they actually uh illuminate the most likely path but absolutely there there’s no way this is telling you what is what is going to be in existence in 2100 that year but it’s
Going to tell you about the dynamic if we have a system that’s both uh uh that’s go both about getting richer and hence having more welfare but also hence using more energy and unless we transition to Green energy we’ll have more CO2 okay so you you have both the
The combination within the UN and within the climate community of this uh what’s perceived to be a tradeoff and part of the climate Community is sort of anti-growth at some sort of uh future level uh um superficial level but it is basically in in your presentation a tradeoff that
Growth comes with energy consumption with carbon generation uh your I think distinctive take on that is that the virtues of and I’m not going to call it rich because that’s kind of a a loaded word but the removal of an increasing percentage of the population from poverty into something other than
Poverty is part of the solution itself to mitigating climate change can you elaborate on that it’s not just growth for growth sake it’s the in in your argument uh the consequences of uh removing again large percentage of the population India and Africa and China into a higher standard of from a lower
Standard of living to a higher standard of living creates in addition to the carbon it actually creates positive opportunities for mitigating climate change can you discuss that well so this is really U uh it’s a it’s called the shelling uh uh conjecture uh it’s one of the Nobel economists that we work with
Tomas shelling who’s unfortunately dead now uh but he already back in the 80s uh talked about the idea of saying look climate change will produce problems but if you lift people out of poverty they will also have much more ability to tackle many of these problems the
Obvious thing is you know if you live under corrugated roof and a hurricane comes in you’re like likely to be vastly damaged in these in these sort of Slum cities but if you are much better off and you built a a house of of of stone and and you know better building
Construction materials you’re much more likely to actually stay put uh the simple metaphor is if a hurricane hits Florida uh you know lots of damage but very few dead whereas the same sort of Hurricane hits Guatemala uh like hurricane Mitch back in 1998 you get uh tens of thousands of dead and you
Actually get an economy that’s almost devastated for years so being less poor also makes you a lot more resilient now obviously that’s great in many different respects that have nothing to do with climate simply means you can get your kids to get them better school you can
Get them better nutrition you can stop them from dying and all these things but it also actually turns out that for really poor people it’s probably even the best way to help with climate getting people out of poverty makes them a lot less vulnerable to climate than
Cutting tons of CO2 which will only help very slowly and in 100 years so uh with that framework of the benefits of economic growth versus the uh parallel rise in carbon and global warming you come up with an idea again which appeals to me is the finance
Person um an optimal front in my business it’s called an efficient Frontier and I’m a a big crit of the notion of an efficient Frontier and that’s one of the reasons again I thought this was uh an interesting book I think it’s fantasy but you you did say
Listen there are trade-offs here if you if you plot the tradeoffs between uh reduction of carbon and it’s a presumed reduction of of global temperatures against the costs of said efforts you know some mitigation efforts are extremely expensive dollars that could be spent elsewhere some are cheap uh and
You you come up with policy analyses you and others and you PL this you came up with an optimal point which I think is is a little hard for me to wrap my arms around with but to describe your optimal point a combination of of uh where you
Get the best mix of economic activity allowing people to adapt uh uh the most banging for the for the lower carbon buck and it’s not it’s more on the growth side which is not surprising given your kind of your stance it does involve carbon reduction and not exactly
The full un worst case scenario but it’s a little closer to the worst case scenario from a temperature perspective than than perhaps I was expecting but can you explain how you got to that point yes so fundamentally climate change like any other issue should at
Least have a sense of how much is it going to cost us to do climate policy and how much benefit is that going to derive us and I can claim absolutely no uh uh sort of ownership to this because this is something that people have been
Doing for 30 years it was started by a guy called William nordhouse at Yale University back in the uh really in the 70s first but it really got going in the 90s uh he got the Nobel Prize in climate economics he’s the only climate Economist to get that in
2018 and I rely on a lot in my book on his models uh but these models are very similar uh to at least a number of other of the most well-established uh models that are also the models that went into for instance Obama’s estimate of what’s
The cost of uh of emitting a ton of CO2 the so-called social cost of carbon so these are these are well-respected models basically they say how much damage is going to happen as temperatures go up so they try to estimate if temperatures go up one degree Fahrenheit how much damage is
That going to give two three four all the way up to 10 or 20 or something and obviously it gets less and less certain because we don’t know uh but we have good estimates of what will happen what are the kinds of things that would happen and they’ve tried to build a lot
Of models and this is essentially an average of all those models and have to chime in I’m sorry on discount rates which again for new books and finance uh uh regular audience they will they’re reaching for their their hp2 C’s at this point to ask about the discount rate and
We’ll just have to agree to disagree that the um when you’re doing 80-year projections or even coming up with 50-year projections or 30e projections everyone knows that the slightest change in the discount rate of either the benefit or the the detriment has a huge impact that’s just in the nature of the
Exercise uh so supporters will highlight a par of a particular approach you know lean the discount rate in their Direction critics will lean the discount rate in another direction there’s there’s no way to resolve this on this podcast so we’ll just acknowledge it and move on yes and I think the the
Important part here is really to say if you have if you want to do a lot about climate you basically want a low discount rate because then you say the future matters enormously compared to the present uh and and you’re absolutely right you can turn that around Nar
Argues for a market-based uh uh uh discount rate so basically if you deviate a lot from a market-based uh uh uh discount rate as for instance uh many climate Advocates would do uh his sort of C argument would be to say well then you could just invest that money in real
Terms and actually deliver a much much greater uh benefit in the in in the long run or you know things that could help pay for the problems that you get but you’re absolutely right so so my my point was more to say so we construct this uh uh estimate of how much are
Global warming going to cost uh you know how much damage are we going to experience and the answer from both dice which is the uh Nord house model but also from fund and page which are the other uh two uh sort of most globally well-known and most academically
Discussed models show about 3 to 4% cost uh by 2100 in a sort of scenario of we don’t do anything so the impact of climate change by the end of the century if we do nothing is equivalent to making us feel like we are three to four per
Less well off than we otherwise would have been so that go on sorry can I just because I I because it’s a complicated argument so that’s one side of the point then the other side is how much is it going to cost you to cut carbon emissions now
Obviously cutting a little bit turns out to be fairly simple we know that you you can reasonably cut 5 10 15% at very low cost if you do it smartly unfortunately politicians often don’t do that but if you do it smartly basically with one carbon tax or a cap and trade system
That’s very effective that is well regulated you can cut this very very easily you know had we done that for instance in Europe most of that would have come from Simply switching from coal to gas very cheap very simple to do but also there’s lots of inefficiencies
In any system especially when you don’t price carbon so if you start pricing it you can cut it cheaply if you want to cut a lot more and obviously if you want to go to Net Zero as many people are now starting to talk about that is a very
Different thing you’re basically talking about re-engineering the engine of growth that has been driving you at least the last 200 years you know clearly the Industrial Revolution was Bas on coal and then later on oil and gas and we know that there is a very strong bidirectional connection between
Uh the amount and cheapness of energy and growth so if you try to reduce uh the the emissions of CO2 which typically means you have to get less reliable or less uh efficient and often costlier uh energy in you will have a cost now this
Is not going to take you to the PO housee so this is not the you know the Republicans sort of oh it’s the end of the world kind of thing but it has real costs uh just to give you one data point uh uh the New Zealand government is the
Only government actually that have promised to go net carbon Zero by 2050 uh and they have actually asked for an independent review of how much is that going to cost their official estimate indicate that it’s going to cost them 16% of GDP by 2050 so you get a sense of
Yes there’s a problem here you know the 3% by 3 to 4% by the end of the century with global warming if you cut a little bit you can actually cut the most damaging uh scenarios I’m just this is obviously you you need to do this in an
Actual spreadsheet or something but I’m just giving you a sense so if it was 4% maybe you can cut it down to 3% that’s great you’ve just CAU a percent of the damage cost by 2100 if you did that for half a percent GDP loss you’re you’re
Well off that’s a great idea but if you cut say 2% with an expenditure of 16% and again I’m just making you know hand movements here because you actually need to look at the the the the numbers then clearly you have made a bad deal you’ve
CAU you’ve paid up 16% but you’ve only cut the damages by 2% the point here is like any Economist would end up saying there is an equilibrium there is a place where you have the minimum cost and cost to from climate you have to remember we
Need to pay both we both need to pay the damage that will come from global warming we need to pay the damage that will come from global warming policies it’s about minimizing the sum of those two that’s what Nord house has done that’s what I point out in the book many
Other models will give about the same but I’ve just used nordhouse because he he got the Nobel Prize and you know he’s certainly uh the mainstream and gives very much the same outcomes what he says is if you cut temperatures by about 0.6 degrees Fahrenheit so down to three
From where they would be given the current trajectory so so down from uh 7.4 Dees Fahrenheit down to 6.75 Dees Fahrenheit you have done the optimal outcome you have reduced damages over the centuries by 0.8% of GDP at an extra cost of 0.4% if you do more you’re actually
Going to end up with a lower net benefit if you do less you’re also going to end up with lower benefits so the point is do something don’t do everything so this however is where I think we’re we’re we get into aha moments because if the economists are forecasting that the optimal outcome
From an economic perspective and planetary perspective is a six or seven degree uh warming over the next 80 years a number of people I think most of the list listeners are going to say that’s that’s just crazy we’re going to bake that’s crazy we’re going to bake the
Planet we’re um we are you know it’s it’s just breathtaking to think that that would be a considered a reasonable uh conclusion yet I understand the economists again with their efficient Frontiers the my term not yours uh have come to that but that that really does beg for a reality check
Um the one specific thing now you do try to address to your credit you know you address the implications of the changes in standards of living and the you know how life would be lived on a planet that’s that much warmer the one thing I don’t believe and I’ll just ask you
Because I didn’t really see it as is um taking into account potential tipping points that can’t really be forecast as easily you know extra methane coming up as a result of the warming temperature which is not a clear part of the picture other other uh other you know the
Worsening of the storms and so forth despite the bullseye effect which is a point that you make repeatedly in the book um you know the storms aren’t necessarily worsening it’s just more people live on the coast and therefore more exposed that’s a summary of the bullseye effect but six degrees
Warmer six to seven degrees warmer uh you know says wow this is not a good solution in some sort of intuitive sense how do you respond to that so Daniel obviously that’s what I I I spend quite a bit of the book on trying to explain
Why this is very different from what you hear and this goes to the whole alarmism point because right now every day you hear all these terrible things that are going to happen by 2100 or even before because of global warming and clearly you think oh my God we don’t want all
Those bad things to happen but the problem with most of those arguments are that they’re based on models that at best have some very dubious assumptions built into them and let me just give you one example uh so for instance sea level rise which is you know one of the most
Well-known and you know if you think think about sort of illustration of global warming you’ll see uh the Lady Liberty being flooded or you know the Lou the Eiffel Tower being flooded or something it’s a very very powerful metaphor and has a sense of oh my God
This is really going to screw us all what the problem with those arguments are so you know one famous Study last year and it got headlines from Washington Post and across the country and really across the world was that 187 million people are going to get have to
Move and you know in some of the more spectacular news reporting it was they’re going to drown uh 187 million people will have to move if you don’t look for adap adaptation if you assume that everybody is just going to sit where they live for the next 80 years
And do nothing but if you look at what people actually do and there’s been lots of models done with this and there’s one study that I reference uh that have used three different models for uh for SE R and and eight different kinds of of uh uh economic uh uh development and five
Different ways of of adaptation they find for all of these models you will get dramatically lower impacts because most of this will be mitigated away we’ll simply be building uh uh you know levies uh we’ll nourish the beaches we’ll do a lot of other things that are incredibly cheap on an 80-year
Perspective so just to give you a sense of proportion what the actual study found was that if you allow people to adapt at very low cost much less than 0.1% of GDP you will instead of seeing 187 million people being flooded you will see 305,000 people being flooded
And that’s important because what that means is you have a problem that you’re being told is the end of the world kind of thing but the reality is it’s a very very small problem and that again you’re you’re even I I I just have to say that again I
Think most readers will say the the nature of of whether it’s the flooding whether it’s the uh vegetation changes whether it’s the basic temperature that that is at the far end of a quote manageable problem unless we’re all moving to Canada and Siberia I mean it
Seems like a uh you know the planet has been cooler the planet has been warmer but the planet with this many billions of people has not been dramatically cooler or dramatically warmer and it’s it’s I get the point and you know you make it very eloquently in the book
About various types of adaptation that’s available but it really getting uh a population this large to adapt to that extent is it’s a big ask you I mean obviously you’re aware that it’s a big ask but it is a very big ask and and Daniel this is where I think we need to
Get a sense of proportion again uh so you mentioned the storms which is another very very big indicator uh and and what the the best studies show uh the UN actually does doesn’t expect we’re going to see more hurricanes but we will probably see fiercer hurricanes and that’s much more important we’ll
Probably see fewer but more Fierce hurricanes overall that means more damage because fierer go to the cube whereas more just goes linearly so that is a problem but at the same time because we will get richer we will actually be much better able to prevent a large scale damage so you know
Fundamentally we’ll be much more like Florida and much less like Guatemala that matters because when you look at the total cost so right now hurricanes cost about 0.04% of GDP if we did if there was no global warming they estimate because we’d be much richer by the end of the
Century that damage cost would be down to 0.01% of GDP that’s a great decline simply because we get more resilient because of global warming that will double so it’ll go up to 0.02% but I think there’s two points to be taken from this it’ll actually be less damaging in relative terms in 2100
Even with more Fierce hurricanes than it is today and secondly of course the biggest challenge that we have from extreme weather is still 0.02% of GDP it gives you a sense of proportion yes global warming is a problem but it’s not this all all eating uh dimension of sense that we that we
Get from a lot of the media and I I think your gut feeling and the and the gut feeling that you’re describing all your listeners to as well is is not probably not well well uh what is that calibrated uh if you don’t know these numbers and if you do know these numbers
I think it’s a lot harder to believe this is the kind of thing that will end civilization that’s exactly why the economist find this is a three or 4% problem not a 50 or 100% problem which I think a lot of people sort of in their
Minds believe it is well I I let’s let’s move on to the next stage but I footnote that uh 3 or 4% problem assuming certain discount rates assuming certain U um well sorry tipping points that don’t tipping points that don’t uh show up as
Opposed to do show up yes the the 4% is actually 4% of the GDP in 2100 so that’s in independent of of of of discount rate but you’re absolutely right so sorry just a very quick one on on tipping points you’re right that if there is a
Tipping Point out there that lurks that could BAS Al eradicate world or make it dramatically much worse and by doing climate policies we could avoid that that would definitely change the cost benefit analysis now we don’t know these tipping points they you know we can
Vaguely sort of uh point to them and say this could be a problem but that’s true of course with any that we do with any investment that we do you know basically think about all the other things that we’re also fairly relaxed about the fact that HIV AIDS has been ravaging Africa
For uh de decades and you could very easily make up a scenario where you say if we don’t tackle hivs in subsaharan Africa it’s going to leave the port open for one or more failed States throw in some bio you know biot terrorism and you’ve got the perfect outcome for you
Know the end of the world by 2100 not a certainty but certainly a nonzero probability just like the uh the Tipping points that we’re talking about in climate these tipping points I would argue are almost everywhere and we decide to not take them very seriously in climate we have actually taken them
Seriously so nordhouse again did a study in 2019 uh on uh the melting of the Greenland uh ice sheet which would re rise sea levels about 20 ft so a huge uh impact what he found was that even the most dramatic models will add very very
Little damage by 2100 and even in the year 3000 it’ll still it’ll be a fairly small it’ll not be a zero impact but it’ll be a fairly small impact simply because we are very good at dealing with this even at very very high levels but obviously the point is even in 23 uh
Sorry in 3,000 I’m not used to saying 3,000 the year 3000 it’ll be a smaller part of the impact of what we’re actually going to see okay so let’s let’s uh we framed this and uh I’m going to choose to disagree in terms of the conclusion but I it is important to
Acknowledge the utility of of what you’ve done of a cost benefit analysis of of any major policy and indeed a good portion of the book deals with the fact that or the front of the book uh you know highlights that there is a lot of alarm and uh it’s there’s room for uh
Detailed analysis people are disagreeing on the detailed analysis but at least there is detailed analysis and and that’s fine I want to shift to an area where sort of some sort of agreement and I’m I’m kind of pleased to see agreement it appears to be the case and we’re
Shifting from 2100 and discount rates and and GDP forecast and temperature ranges and whether it’s livable or not at six uh six degrees warmer at that point to uh policies and uh next steps over the next couple years last 30 years has been from a policy perspective largely unsuccessful uh every couple
Years there’s an agreement uh a meeting of of global leaders everyone agrees to reduce their carbon emissions and it really really doesn’t happen there are cap and trade systems in the northeastern United States and in Continental Europe um but there appears to be one area of almost Universal
Agreement which is a carbon tax uh Left Right University even I don’t know if it’s the University of Chicago that probably asking too much but um you’re in support of a carbon tax uh certainly other parties are in support there’s a reasonable agreement and and uh there’s also agreement that the original level
Of the carbon tax was set way too low even by I think you would acknowledge that and uh so we need uh a carbon tax univer uh internationally applied that’s the tricky bit can’t be any leakage and at a higher level than the current market price of carbon uh I take it and
Correct me if I’m wrong that that’s in identifying the good easy straightforward efficient initiatives that we can take that a carbon tax is one of the straightest and best ways to get to that is that a fair summary so it’s it’s the first one that I say of
The five things that I think will help solve global warming uh I actually think so I’m absolutely for a carbon tax but I also point out that it’s going to do a lot less good than I think most people believe it’s going to you know cut some of the highest temperatures which is
Great but it’s not actually going to be all that challenging so even if it if it actually manages to cut about half of all our emissions by the end of the century uh because there’s a huge sort of inertia in the in the climate system it’ll only cut our temperature about a
Little less than one degree Fahrenheit by the end of the century so even an incredibly successful carbon tax that is globally adhered to and rationally uh uh adjusted upwards every year will not solve all of global warming it’s all a little bit of low hanging fruit low
Hanging fruit but but yes but I think there’s also an important point to be made that if we don’t get this right so I think the US is a is a I don’t a horror example but it’s certainly an example of how not to get it right that
Pitching a carbon tax very heavily may very well end up making all the other smart things that you can do much much harder simply because you end in a political stalemate uh so and and and what the EU is doing right now is basically saying all right as you
Pointed out it’d be much much nicer if everyone has the same carbon tax remember the EU doesn’t have that certainly no individual nation in the EU only has one carbon tax typically most Nations have about 30 different carbon taxes and many many many more uh and and
That of course really means that you have lots of leakage both inside your economy and certainly outside but what the EU is now talking about is setting up border posts where you basically have to pay the carbon tax when you uh export into to the EU in theory that makes good
Sense but of course in reality you have to remember it’s very likely that you know if a competitor sells cheese too cheaply uh the French might object and say surely there’s more implicit methane emissions in in this product and of course I’m again just kidding with the
French but the point here is that it will be used as a way to stall free trade and so it could very easily end up being a place where we generate a little bit of benefit but actually decrease the enormous benefit that we get from free
Trade a lot more so again I’m saying by all means good carbon tax could be very good but let’s not believe that this is the main thing that will fix global warming so if you allow me to my other point yeah I’m I’m just reaching for
Straws for any point of agreement and uh carbon tax I’m sure we we don’t we agree so so my main point is really that we need to dramatically increase investment and green energy R&D so and much of the book for readers much of the book is uh
Uh on a significant portion of the book is advocating uh dollars spent on R&D for green green energy as a higher return on investment than some of the potent the current policy dollars being spent yes so so we did a back in 2009 if you remember uh we actually had the globe
Met in Copenhagen at the end of 2009 we were supposed to fix global warming of course that ended terribly uh but but uh in the leadup to that meeting uh we assembled 27 the world top climate Economist three nobels to look at a wide range of areas of saying where can you
Actually spend a dollar and do the most good for climate and what they found was that the long-term best investment is in dramatically increasing investment in green energy R&D why because as we’ve seen in the past the best ways to fix problems generally for the world
Is not to try to tell everybody I’m sorry could you do with a little L could you turn down you know your consumption of the stuff that we don’t like that really really gets people excited and that’s of course what a carbon tax tries to do what does help make people really
Excited is to Simply find a better technology that will allow them cheaper to do many of the same things that they like to do but without the nasty side effects so a good example you know in Los Angeles in 1950s terribly polluted uh most of that pollution came from cars
And one obvious way to say to to fix that was to say tell people I’m sorry you can’t drive or you can’t drive very much that would have solved the problem it would probably also have been impossible what did solve much of the problem was an innovation the catalytic
Converter so in 1974 we find out this you know this thingy can actually dramatically reduce air pollution so you can drive and not get much of the problem so the idea here is if we can innovate the price of green energy and that could really be anything it could
Be Sol and wind with with storage it could be uh Fusion it could be efficient it could be uh you know water splitting a lot of other ideas if we could come up with one or a few technologies that would be cheaper than fossil fuel everyone would switch so let’s
Dramatically increase investment in green energy R&D we’re suggesting we should be spending six times as much as what the world is today so instead of 15 billion it should be about hundred billion dollars but the point is we should be spending a lot more and unfortunately because we’re so worried
Because we’re so focused on you know putting up the next uh solar uh park or the windmill park to make us feel like we’re doing something we forget to actually invest so despite the fact that Obama and many others got together and promised back in 2015 that they would
Double the amount of investment in green energy R&D we’re nowhere near that we’re probably the same level today what the just a as most people view solar and uh and wind as as as contributions and as a business person watching the cycle of an industry it it’s pretty well known that
At the beginning of any industry it’s kind of money losing and the returns are not what you would expect you got to work The Kinks out you got the technology needs to be improved the scale needs to be improved I I think I was a little taken aback in your book
That the degree to which you are uh in Pro investment in green energy but pretty critical of um of wind and so Sol and again I acknowledge the criticism backward looking but to me they you know they’re getting better pretty much every with every iteration uh why wouldn’t
They be a significant and I we understand most of the people listeners understand between base load and and and Peak load and you know that the wind may not blow in the evenings or the sun doesn’t shine in the evenings uh that type of thing but that why wouldn’t they
Be a significant portion of the solution along with uh your I wouldn’t call him your colleague but a pier Michael shellenberger who’s you know big advocate of the return of nuclear and there’s a community in favor of that Community against that but why not why wouldn’t green R&D include all of the
Above so green energy would green energy R&D would certainly include solar and wind and especially I think storage uh because the real problem with solar and wind as you pointed out is that that right now it’s very hard to see it doing anything but you know basically
Hollowing out uh most of the existing investments in in uh in coal and natural gas uh which of course is great for for wind and solar and it probably also saves the money overall because it’s actually better for the environment uh not climate change but mostly because it
Uh it pollutes less with small particulates but the problem is you can’t power most of the world most of the world’s places with Renewables right now certainly not without much much better storage and if you include the cost of storage you have a much different proposition and so in some
Ways you could say the the issue with fixing Global Waring is really just one of the current Solutions are just not costeffective uh so uh you know right now the world gets about 1% of its energy from solar and wind uh by 2040 the International Energy agency estimate
Will get about 4% a little more than 4% of our energy uh this is not what’s going to solve global warming in the next 20 years now it may very well be if we can dramatically reduce the cost of uh storage that we could see this go up
To say six or maybe even 10% still not the solution that we’re looking for in the short and medium term but it could very well be in you know in in in 60 years or so that it’ll be able to take over most likewise with uh the with
Fishing or nuclear power as you mentioned shellenberger is very uh eager to to promote the problem is simply right now new uh fishing uh uh power plants cost Fant fantastically much uh and and that’s why you know we should be investing a lot more in research and development fourth generation nuclear
Power which you know Bill Gates and many others are investing in they’re telling us this could be incredibly cheap and Incredibly safe and I would love that to be the case uh my only reservation is that’s also what they told about the other three generation so so the idea is
Not to say we want to get these Technologies and I’m totally technology agnostic I don’t I don’t have any game in in in this I I don’t have any shares in any of them but but the basic point is we need to get them to be there where
You want to do it without subsidies and that you can also Envision to do it more than just simply hollowing out the the existing infrastructure of coal and and gas which of course can be good in the short term but which does not actually allow you uh uh to to run your your
Power uh system in the long run where you get to the kinds of things that the UK is now experiencing that you basically have to pay people billions of pounds to make backup power so that you have something that’ll back up for your for your for your gra green energy
That’s not sustainable and it’s certainly not something that you can sell to China India and and uh Africa but clearly and I also mentioned that if you can get storage to be much cheaper for instance India instead of keeping increasing the number of coal fire power plants will actually start decreasing
Them but this is not going to solve global warming in any real part you know we’re still talking about getting to 5% or maybe even 10 or 15% with solar and Wind by 20140 this is only going to solve the problem once we get to a point where it’s just blatantly cheaper where
People will want to pick it up rather than have to be forced through you know policies and you know say want to pick it up uh want to make these changes uh on economic reasons I think one of you know the issues that is striking in in
This debate is and again I’ll reference the University of Chicago again is you’re you’re uh framing this in economic terms uh and then I I and others are pointing back in Behavioral Science terms not the uh you know not the classical uh liberal uh Market environment but how people behave and
How they perceive and you know the title of the book false alarm and and the Panic you know there may be an economic prescription it’s kind of dry uh you’re your case it’s oh it’s certainly dry yeah it’s kind of dry it’s uh it’s uh some unspecified that is unspecific uh
Adaptation uh low hanging fruit a reasonable carbon tax enforcement uh adaptation adaptation adaptation that works really well um in an academic setting I think you know part of the challenge is that human beings are subject to alarm and can s see the planet warming and the the
Challenges fa with that you know solar may not be the most efficient uh approach but uh you know people feel better when they see you know a windmill and again I realize that’s not the best way to analyze or promote public policy but it it needs to be taken into account to
Some extent that your book is trying to address for better for worse and again there are a lot of people on the other side of your argument as you well know uh uh you know the the perception of this not just the the reality of it yeah
So I mean I think there’s two points to this one is uh there’s no doubt that there’s a lot of people who feel very proud of the fact that they have more solar power wind power and it makes them feel like they’ve really made a difference uh and and and there my sense
Is simply look future Generations are not going to you know judge us for how well we felt about stuff they’re going to you know judge us in how well we actually fixed problems and my point is twofold partly that most of the policies that we do right now on climate cost
Quite a lot so I try to estimate for instance the cost of the Paris agreement at one to2 trillion dollars a year yet the benefit is almost immeasurable even in a 100 years so we are doing very little in climate at very high cost and we are also neglecting a lot of other
Problems you know Co is the obvious one uh but also the fact that the big world’s biggest infectious disease tuberculosis you could do something about that so cheaply so effectively and yet we seem to be fine with the fact that 1.5 million people die each year from easily curable infectious diseases
Like tuberculosis so my point here is to say we should not allow ourselves to be judged on how good we feel we should allow ourselves to be judged and how smart we actually do stuff and in order to get there I think we need to address the alarmism because absolutely if
Everybody feels like this is a meteor hurtling towards Earth you should drop everything else and just focus on that right that’s the only thing that we should be focusing on I’ve had people tell me look there’ll still be poor people in 2030 we’ll fix that when we
Get there right now our main point is to fix global warming and I think that’s you know if if you think it’s the M War if you think this is the end of the world that’s an obvious and IR rational argument and it’s entirely wrong this is
A long-term problem not the end of the world it’s you know 3 or 4% of GDP by towards the end of the century so it’s perhaps more correctly you know metaphor as metaphor as diabetes you know it’s a problem that we have to learn to live with it’s not something you can wish
Away it’s not something you can totally avoid it’s something that you need to treat you should certainly treat it leaving it untreated as a really bad idea but you also got to stop believing this is the only thing you need to do and certainly making everything about
Your diabetes you need to treat it you need to do it smartly and then you need to get on with your life and actually do all the other things that will ultimately end up mattering much much more and that gets back to the whole ESG conversation that you talk about where
We you know we went through uh with uh with 50 teams of researchers and several Nobel laws to look at where can we actually do the best ESG uh for the sustainable development goals and we found there are some of these goals that are fantastic and there are some of them
That are not very good and unfortunately even the best of the climate goals are sort of towards the lower end of of all the things you can do in the world but certainly many of the things that we do right now like the Paris agreement and many other things are incredibly poor
Ways of helping the world so spending lots of resources doing very little I would like us to do a little better than that well let’s let’s uh let’s summarize that uh again that you know the the path forward an agreement that there needs to
Be a path forward is uh a a a policy kind of of aggressive adaptation uh allocation of money to uh green research uh green Energy Research a a carbon tax of some sort uh and uh then uh and then go forward it is a again not it is an
Approach not without controversy and I encourage uh readers to to uh read the book it is false alarm how climate change Panic costs us trillions hurts the poor and fails to fix the planet planet by bjn lomberg and also to there there are uh reviews out there positive
And negative uh it is part of the debate I think even those who come to the conclusion that they disagree with the author will absolutely want to understand a framework of cost benefit analysis applied to this issue even if they are going to disagree on the inputs
Uh that framework of a cost benefit analysis is is absolutely critical buan thank you so much uh for being on the show I’m I’m uh grateful that you appeared Daniel it was my pleasure thank you