On Climate Change Risk

One of my readers has asked a question about climate risk.  Recently, statements have been made in various publications, ranging from Scientific American, Discover and The Economist positing that:

Action on climate is justified, not because the science is certain, but precisely because it is not.

This is a combination of the precautionary principle and the logic of buying insurance.

The fundamental problem with applying this to the climate change issue is that the likely magnitude of the problem is not very large (if it exists at all), and the costs to mitigate the supposed source is ridiculously high.

One buys fire insurance for your house because that while the risk of fire is small, the consequences are catastrophic.  But you do it because the cost of insurance is low.  If the cost of fire insurance was, say 10% of the replacement cost of the house on an annual basis, you wouldn’t buy it.  You’d bet that you wouldn’t have a fire.

With regard to the climate, while the IPCC has claimed very wide ranges of potential temperature increases, 1.4°C to 6.4°C, the probabilities lean much more to the bottom end of the range.  This must be particularly considered as the data of the last 12 years indicates a leveling off of global temperatures, even with increasing CO2 concentrations.

The question of whether such risks are catastrophic must be compared to past temperature changes and the impact on the civilization and ecosystems.  As there is significant evidence that the Roman and Medieval Warm Periods were warmer than today and the consequences for civilization was good, I would posit that attempting major changes to our economic structure in the name of “maybe things are going to go bad” seems awfully foolish.

Second, the cost of the such mitigations efforts must be compared to the risk.  Capture of CO2 costs >$100/tonne.  For Canada alone, this would be >$100 Billion just to reduce emissions by 17% from 2006 levels to by 2020.   This will result in us being 7% poorer than if we do nothing.  Are we willing to pay that much for that little change in emissions.  Atmospheric concentrations will still be rising…  To begin to reduce atmospheric CO2 and actually “stop” the suspected warming will cost a lot more.

Plus there is the question of whether it is even possible.  Replacing fossil fuels with wind and solar isn’t going to work unless there is a major improvement in PV cell technology and cost.  Nuclear could do some of the work, but environmentalists don’t like that and the regulatory structure makes it expensive – and the projects take too long.   Replacing 100 years of infrastructure isn’t going to happen in 40 years while still growing the economy.  This is why I used the cost of carbon capture as the yardstick – only it will be able to happen fast enough…

We must also look at whether adaptation is the better path.  People have adapted to climate change before – just not with the population we have.  But they also didn’t have the advantages of modern technology or free market forces that will create incentives and opportunities.

The “act now” crowd are responding to a statistically small risk with an exaggerated consequence – much like a lot of the health insurance programs in the United States – they cost too much for what they really do.

The real problem with the proposals to “act now” are that this action is to be arranged and operated by inefficient and corrupt government and supranational agencies, like the UN.   Adaptation will happen at the level of the individual, village, city, and nation, with entrepreneurs figuring out how to turn challenges into opportunities and profit.

So say no to “act now” and prepare to adapt if things do change.