Costly Carbon Cuts
Imagine for a moment that the fantasists win the day and that at the climate conference in Copenhagen in December every nation commits to reductions designed to keep temperature increases under 2 degrees Celsius. The result will be a global price tag of $40 trillion in 2100, to avoid expected climate damage costing just $1.1 trillion, according to climate economist Richard Tol, a contributor to the Intergovernmental Panel on Climate Change.
Yet the real tragedy is that, by exaggerating the threat of global warming, we have awoken the beast of protectionism. Global warming has given them a much stronger voice. Already, politicians are responding — and using the fear of global warming to create « green fences » against free trade.
This is a massive mistake. Economic models show that the global benefits of even slightly freer trade are in the order of $50 trillion — 50 times more than we could achieve with carbon cuts. If trade becomes less free, we could easily lose $50 trillion. Poor nations — the very countries that will experience the worst of climate damage — would suffer most.
In other words: In our eagerness to avoid about $1 trillion worth of climate damage, we are being asked to spend at least 50 times as much — and, if we hinder free trade, we are likely to heap at least an additional $50 trillion loss on the global economy. To put it bluntly: Despite their good intentions, the activists, lobbyists and politicians making a last-ditch push for hugely expensive carbon-cut promises could easily end up doing hundreds of times more damage to the planet than coal ever could.