1 Teekayu Klongtruajrok 14198103 English 1000 Section 73 Research Paper Third draft Economy Vs.

. Environment: The False Dichotomy Eduardo Porter of The Economist speculated that business logic would inevitably lead world leaders to not take solving global warming seriously. These are the words he expressed, Four years after committing to a 2-degree ceiling, the worlds current policies will lead us, by the end of the century, to blow past 3 (Porter). Such is the reality of the modern days fight against global warming. In the article Whos Gonna Pay For Global Warming, James Conca said that despite articulation of the physical aspect of climate change, the economic aspect still matters most to people. Conca is quite right, since money is something modern day humans connect intrinsically with survivability; the people who are in the position to do something about global warming most usually represent regions where the physical realities of global warming do not affect them too harshly. This drew us to an interesting, yet utterly cold dichotomy of whether economy or the world is more important. Due to the flawed sense of association within the human mind, this dichotomy is surprisingly valid. The problem established is something along the line of will dealing with the environment also result in the crippling of the global economy? This paper will argue that the world could be saved, even if too little too late, and the economy will still survive. Global warming is anthropogenic, which means that we are responsible for this mess. Lets review the current state of things through the latest Intergovernmental Panel on Climate Change (IPCC) report. According to J. P. of The Economist, the latest IPCC

2 report shows 99% correlation between human activities and global warming a 9% increase from the last IPCC meeting in 2007 which shows 90%. The rate of global warming that is used as a standard is radiative forcing, which is basically the difference between the amount of heat coming into the atmosphere and the amount of heat reflected inside the unit of measurement is watts per area or W/m2. Radiative forcing had increased four-fold in the past 100 years. However, the rate of temperature rise is still rather slow, comparable to that of in 1951. The article continues on to explain that there must be another heat sink that help traps the heat, and that is the cold water in the ocean floor; this is consistent with the rate of melting ice caps, which is rising dramatically; thus although we have some breathing room due to the seas heat sink, doom is impending. Finally, the IPCC had changed their estimate of the temperature increase from between 2C and 4.5 C to 1.5C and 4.5 C. Now that we had established the problem, we can work our ways to a solution, and the scope of the solution is to slow down temperature increase such that it doesnt go beyond the predicted limits which is 4 degrees Celsius. Any proposed solutions, of course have a cost, and we shall now do the analysis of the actual cost of fixing global warming, and how that compares with the current global GDP, and lastly, the returns on the investment. The economy will still be able to function even if it has to invest in dealing with global warming. There are many proposed solutions to global warming, but we will discuss two main ideas today: investing in alternative fuel and cost deterrence. Let us look at then first idea, which links naturally to the bill we have to pay. According to Nordhauss paper Economic Aspects on Global Warming In A Post-Copenhagen

3 Environment, the cost of reducing greenhouse gases in this case will be called carbon prices will grow exponentially over time. To give an idea of the estimated damages in the uncontrolled (baseline) case, those damages in 2095 are $12 trillion, or 2.8% of global output, for a global temperature increase of 3.4 C above 1900 levels (Nordhaus). The carbon price in this case may be the tax on limitation of emission of greenhouse gasses. In the optimal case, if everyone in the world to impose a limit on carbon emission as well as follow the guidelines set by the IPCC, the maximum amount of carbon in the air will be at barely 600 ppm at the year 2105 before starting to reduce. This means that the maximum temperature rise is only up to 3 degrees Celsius. All this is if everyone, especially the rich countries, help in implementing remedial and preventive policies. The carbon price that is set to limit the emission will grow over the years as well, as a natural response to the industries on the increasing annual severity of the climate change. This leads to the toll it takes on the annual global GDP. Using the model discount rates, the optimal scenario raises the present value of world income by $8.1 trillion, or 0.35% of discounted income. This is equivalent to an annuity of $403 billion per year at a 5% annual discount rate, (Nordhaus). So that means that in order to take measures against further excessive greenhouse emission, we must sacrifice 0.35% of national income right now. Nordhaus adds that, due to the difficulty in attaining the limits set as well as the inertia of climate change, the percentage will rise to 1% by 2050. This is quite costly, relatively speaking; but as all things must adapt to change, each country must also adapt their consumption attitude. This is not hard to do, it is just a matter of perspective and minimal willpower to change certain bits about ones lifestyle; however, that notion is a little subjective, so to put in a macro form, in regards to the least we can do, is that we

4 might even imply reduction in government corruption would more than suffice provides 0.35% allocation. There are other technologically sustainable means as well, and that is to evolve our energy production methods, which is the second idea we will be discussing. James Conca discussed investment in alternative energy in his article Coal Doesnt Have To Die, primarily with the goal of cutting back on fossil fuel as much as possible. We are presently at 36% gas, 32% coal, 19% nuclear, 7% hydro, 3% biomass and 3% wind and other (Conca). Conca proposes a new energy mix that would be achievable by 2040 and would most likely reduce carbon emissions to 1960s levels, and that is zero coal, 45% gas, 35% nuclear and 20% renewable would reassign coals share to gas (+9%), nuclear (+16%) and renewables (+7%), (Conca). The cost for creating this new mix is to produce 2.4 trillion kWhrs/yr energy from gas, 1.9 trillion kWhrs/yr energy from GenIII nuclear power, increase CAF standards for as and diesel to over 50 mpg, increase fully electric vehicles to 100 million units, increase natural gas vehicles to 25 million units, and implement energy conservation and efficiency goals in infrastructure construction which will save over 1 trillion kWhrs/yr; the total cost rounded up to approximately $7.4 trillion between now and 2040, with about half of that going to infrastructure and the rest to maintenance and miscellaneous activities, which means less fuel cost and less carbon emission. Some might say that this is a lot of money, but we can easily link this to the baseline of us not doing thing that the cost is mutually exclusive in both cases. If we dont do anything, we would have to pay higher price for fuel anyway, that is given that we did not spend any other money on other infrastructures however we all could intuitively say that infrastructure will be a cost nevertheless hence at the end of the day,

5 the cost to implement this policy would happen anyway, in another form, thus, it would be better for us to invest this money on something that is actually sustainable. All these costs are still within range of being manageable by the global GDP. However, this is a project that must be financed in such a way that it does not cripple the free market. According to James Conca in his article European Economic Stability Threatened By Renewable Energy Subsidies, an example of that happening is too much subsidies given to solar and wind power of the European Union which creates a warped market structure which threatens the stability of the EUs power supply the energy industries in the EU are public, which means that the free market will work as long as a fair auction happens; adverse effects happen when the EU decides to favor certain supplier more than the other. Solar and wind energy are given priority access to the electricity grid as well as guaranteed higher price, regardless of the supply/demand effect for example, in France, nuclear power wholesales at $54/MWhr but wind power wholesales at $112/MWhr. This kind of implementation deters other energy firms from entering the market while attract a dangerously high amount of investors to the renewable energy firms. This is bad because when all the other firms back down, there will no longer be sufficient energy with just renewables alone, and with this happening the investors trusts had plunged dramatically, which results in a very unstable market. The cost to fix global warming is not high at all; it is just a matter of implementation and political willpower. The false excuses of economic impact will still persist as long as world leaders do not change the way they view the problem. Porter wrote in his article Counting the Cost of Fixing the Future for The New York Times about the prospect of the inertia of the

6 problem of misled mindset, The two outlooks lead to entirely different decisions. The governments rendition of the moral approach implies that it is worth making every investment to reduce carbon emissions that has a rate of return of at least 2.5 percent, in terms of avoided damages. Business logic suggests that no investment should be made if the return after taxes is less than 5 percent (Porter). What Porter means is basically that the only reason that this dichotomy exists is because of this business-like, profit-driven mindset that persists within the subconscious of the collective of the human race. And given that the reader had already been informed about the true prices of saving the world, the excuse of economic restrictions should no longer exist, since evidences had shown that it is utterly economically viable. The only question that is left now should be how to invest and how worthy it is to invest. In matters of how to invest in global warming, Benzamin Yi pointed out that there is a common misconception regarding the fairness of the ways we plan to split the bills among the countries of the world, An equal distribution would be the global per capita cost x countrys population (including a growth rate). The global per capita cost would be calculated by total economic cost / the global population (with an estimated rate of growth). Each nation will be paying equally according to their population size (Yi). Yi further pointed out that the assumption that underlies this conception is logically invalid, This is not to say that it is fair for rich countries to pay all of the costs, nor is it to say that poor countries should pay what they cannot afford. Rather, it is to say that each nation should pay according to its respective circumstances as it fits in the considerations (Yi). There is three factors that Yi proposed we consider before splitting the bills: levels of sacrifice, contribution to the problem, and level of benefit. For

7 the first aspect, levels of sacrifice, the analysis could break this down into two scenarios we can consider: sacrifice of those who will face special burden after paying and sacrifice a nation made in order to gain background entitlement. The first case is easily understood as that you simply cant make the rich and the poor to pay equal amount of tax and expect both of them to be equally well off. The poor, in that case, made more sacrifice, relatively speaking. The second case could be understood as wealthy people must have worked hard some time before in their life, which results in them getting this rich in the first place. The analysis on the level of sacrifice could thus be summed up as how much relative wealth each country sacrificed and how much of their original wealth came from their own effort because if it is in the case of lazy countries that just lies on foreign aids, the sacrifice is not their own, hence, the claim of sacrifice is not valid. The second aspect, contribution to the problem, simply entails the analysis of long-term impact of each countrys actions, and their proportional relative percentage responsibility. The reason why long-term impact is brought into play is because some pollution emission might be justified in the case of innovation for greater environmental efficiency, which reduces the temporary impulse of emission as mere inconvenience. The third aspect, level of benefit, the analysis could be broken down into two levels: how the global community benefited from the industrialization that causes global warming and how each nation will benefit from the fixing of global warming. The first case is quite self-explanatory, since most of the modern world benefitted from industrialization. This level of analysis is needed because in the case of foreign countries that barely reaped the benefits of the 1800s industrialization, the effect of global warming on them is like an un-called for burden. However, it is worth pointing out that, even in those countries, there will still be, most

8 likely, foreign aid, which is a direct benefit of industrialization; but this is like a selfserving prophecy that comes round full circle that rounded off the net benefit to zero. The second case is also quite self-explanatory. Since global warming does not affect everyone equally, we must non-linearly take into consideration the net benefits of all countries. Say, countries along the tropic of cancer will benefit more from fixing global warming than countries in the northern region, while some countries might not seems to be affected by global warming at all, and for those countries, an extra cost would mean a negative benefit for their case. This consideration is necessary to guarantee a win-win compromise with all nations. In matters of how worthy it is to invest, most executives had rallied up and analyze the question of worthy of investment and lead all sorts of wild analysis about external impacts of the policies and other wonderfully creative terminologies from the macroeconomics word-bank. There are many problems in the world that also deserve attention, for example, poverty or eradication of AIDS. There is an opportunity cost to all things, if we were to put it in a general term. Not only this, but government intervention will only lead to crippling of the free market. To all these, the speakers voicing out these ideas forgot to analyze the opportunity cost of not solving global warming. Testing the limits of this analysis, if we were to not do anything about global warming, we have rising carbon price and trillions of irreparable damage to the environment. And to top it off, we have the demise of organic life forms on planet Earth. That last cost alone tends towards infinity, and that makes all the short-term economic excuses approximates zero, in other words, insignificant. The idea of business logic for profit is rather shortsighted and unsustainable on the long run. The IPCC need to, right now, take action while world

9 leaders need to change their mindset, from a focus on the short-term wealth to possibilities of a better future. However, other than the business-driven attitude of politician, there is another issue that harms the existence of possible solutions at the most grass-root level: politicalizing of issues by political extremists. Americans inclination to spurn scientific consensus and be unreasonably suspicious of research, more than a gap in enthusiasm, will make it tough to get kids interested in science, (B.D.) What B.D. means is that the bi-partisans controversies in America a perfect example of politicalizing scientific issues obstruct progress of scientific researches. Intuitively, people reject facts, no matter how well proven, if it does not coincide with their personal beliefs. This is a terrible concern that needs to be fixed in order for the problem of climate change to be taken seriously. So how is this relevant to the problem at hand? As politicians function most efficiently under the approval of their constituents, problems subjected to the politicians to solve have its resolution dependent on how willing the politicians are to solve it. If the constituents do not give a green light, it is highly unlikely that that particular politician will be on top of things. This poses as an even greater problem when we have a clearly un-political problem being politicalized by both the constituents and the political party, which tries so hard to deny responsibility to the problem. How could we solve a problem when half of the world refuse to believe it existed? The cost of global warming is high, indeed, but the cost of the solution to prevent, or even fix the damages, is more than manageable. What is left to fill the gap is for the world to actually drop the profit-seeking attitude and help one another. It is not one countrys fault and it is definitely not healthy to blame certain regions for this mess. Yi

10 ended his paper with a reminder of why delegating responsibilities fairly is not as easy as it superficially looks, It is unfair to simply distribute economic costs of global warming equally per capita. All three considerations levels of sacrifice, contribution to the problem, and levels of benefit should be calculated in the distribution of economic costs in order to possibly reverse global warming and prevent further damage in the atmosphere, (Yi). This is a collective problem, and we must solve it together.

11 Works Cited Conca, James. "European Economic Stability Threatened By Renewable Energy Subsidies - Forbes." Information for the World's Business Leaders - Forbes.com. Forbes, n.d. Web. 21 Oct. 2013. <http://www.forbes.com/sites/jamesconca/2013/10/20/european-economicstability-threatened-by-renewable-energy-subsidies/>. Conca, James. "Coal Doesn't Have To Die - We Can Make Furniture Out Of It - Forbes." Information for the World's Business Leaders - Forbes.com. Forbes, n.d. Web. 21 Oct. 2013. <http://www.forbes.com/sites/jamesconca/2013/07/14/coal-doesnthave-to-die-we-can-make-furniture-out-of-it/>. Conca, James. "Coal Doesn't Have To Die - We Can Make Furniture Out Of It - Forbes." Information for the World's Business Leaders - Forbes.com. Forbes, n.d. Web. 21 Oct. 2013. <http://www.forbes.com/sites/jamesconca/2013/07/14/coal-doesnthave-to-die-we-can-make-furniture-out-of-it/>. D., B.. "Science and politics: A failed experiment | The Economist." The Economist World News, Politics, Economics, Business & Finance. The Economist, n.d. Web. 21 Oct. 2013. <http://www.economist.com/blogs/democracyinamerica/2013/09/science-andpolitics>. Nordhaus, William D.. "Economic aspects of global warming in a postCopenhagen environment." Proceedings of the National Academy of Sciences of the United States of America (PNAS) 107.26 (2010): 1172111726. Print.

12 P., J.. "The IPCC climate-change report: It's still our fault | The Economist." The Economist - World News, Politics, Economics, Business & Finance. The Economist, n.d. Web. 21 Oct. 2013. <http://www.economist.com/blogs/babbage/2013/09/ipcc-climate-change-report>. Porter, Eduardo. "Counting the Cost of Fixing the Future - NYTimes.com." The New York Times - Breaking News, World News & Multimedia. The New York Times, n.d. Web. 21 Oct. 2013. <http://www.nytimes.com/2013/09/11/business/countingthe-cost-of-fixing-the-future.html?_r=4&>. Yi, Benzamin. "A Fair Distribution of Economic Costs in Global Warming." California Undergraduate Philosophy Review n/a (2010): n/a. Print.