Get Rich Quick & Adapt to Changing Climate

The most damaging consequences of climate change will be in the Third World. But developing countries aren’t disproportionately vulnerable to climate change because they’re in more dangerous parts of the globe, but because they’re poor. Wealth and sturdy institutions are critical for handling natural disasters and climatic changes. This makes the real climate change question a question about economic development. How can the world’s poor get rich quick?

Chris Berg in Sydney Morning Herald (27 March 2011):

The answer to climate woes is to make countries rich and stable.

JULIA Gillard is half-right. The world is acting on climate change. But not acting to stop it – to adapt to it. In the 1920s, an average of 240 people out of every million died every year from extreme weather events: drought, flood, windstorm, landslide, earthquake, extreme temperatures and wildfire.

According to data from the International Disaster Database, last decade that figure dropped to just three per million.

Actually, the numbers are even better than they first look. The 20th century saw a 99.9 per cent reduction in the risk of death from drought. And the risk of death from floods came down almost as much: 89 per cent. Floods and drought – two of the most commonly mentioned consequences of climate change. We’re getting much better at managing and surviving them.

The causes of this remarkable decline in mortality are many. Better transport and communications help move food to where it’s needed, quicker. Globalised trade gives producers an incentive to do so. Hardy modern agriculture can survive not just long-term climatic shifts, but the more pressing problem of bad growing seasons.

Better flood control and prevention, weather forecasting and more responsive emergency services all help reduce the damage from floods. Never have we been better at protecting ourselves against nature.

If the past is any guide to the present, that’s how we’ll deal with further changes in climate (whether caused by human activity or not): through adaptation. Especially considering there’s next to no chance of serious international action to reduce carbon emissions. Sure, if Australia introduced a carbon price now, we would not be ”leading the world”. Other countries have introduced their own. But there’s action on climate, and then there’s ”action on climate”.

The only purpose of carbon pricing programs is to achieve deep emissions cuts. By that measure, they’ve been a dismal failure. Those jurisdictions that have introduced them have been slowly backing away from serious reductions. The coalition of 10 American states acting on climate that Gillard often cites will soon be nine: New Hampshire is planning to withdraw.

European climate policy is pushing bravely ahead. But if nuclear power is off the table after the Fukushima scare then cutting emissions there will be a dead end. As George Monbiot wrote in The Guardian last week, ”the energy source to which most economies will revert if they shut down their nuclear plants is not wood, water, wind or sun, but fossil fuel”.

And China has been increasing its carbon dioxide emissions by an average of 12 per cent every year this century. By 2020, China will be emitting nearly 500 per cent above its 1990 levels, even after their highly publicised emissions reduction efforts.

The goal of public policy must always be to increase human welfare. One lead author of the Intergovernmental Panel on Climate Change, Richard Tol, has pointed out that many studies of the economic impact of climate change have excluded the possibility of adaptation entirely – as if potential sea level rises will be met by humanity with a stoic fatalism, rather than levies and insurance. (Tol, it’s worth pointing out, is no climate sceptic.)

Nor do enough studies consider the positive effects of temperature increases. In a warming world, marginal land can become productive for agriculture, just as often as productive land can become marginal.

Given how we’re getting better at coping with extreme weather events, there’s reason for optimism. Taking all peer-reviewed studies of the economic consequences of temperature rises into account, Tol estimates that climate change could cost just a few per cent of global GDP over the next 90 years. That’s about one year’s economic growth. The cost of climate change is the equivalent of a bad recession, spread over nearly a century.

With the economic cost of climate change so low, Tol suggests (at most) an optimal carbon price would be $2 per tonne – a lot less than the $26 to $40 per tonne suggested by the government and commentators. But at $2, the cost of collecting such a tax would seriously eat up its revenue; hardly worth doing at all, and a bit trivial to be ”major economic reform” on which Julia Gillard could build her legacy.

The most damaging consequences of IPCC-projected climate change will be in the Third World. But developing countries aren’t disproportionately vulnerable to climate change because they’re in more dangerous parts of the globe, but because they’re poor.

Wealth and sturdy institutions are critical for handling natural disasters and climatic changes – as we’ve seen in the difference between the 2010 Haitian earthquake and the 2011 Japanese earthquake. This makes the real climate change question a question about economic development. How can the world’s poor get rich quick?

If her government is serious about tackling the consequences of climate change, that should be the one question exercising Julia Gillard’s mind. Her carbon price is, at best, a distraction.

Chris Berg is a Research Fellow with the Institute of Public Affairs and Editor of the IPA Review. He is a regular columnist with the Sunday Age. His book, ‘The Growth of Australia’s Regulatory State: Ideology, accountability and the megaregulators’, was published in 2008.

Source: www.smh.com.au