Economic Impacts of Climate Change

We've got a new section up on the Economic Impacts of Climate Change just in time for the ongoing eleven-day United Nations climate change talks in Bonn, Germany. Economic Impacts of Climate Change is the first of three sections housed under the climate change subcategory titled Sensationalism vs. Reality. Stay tuned for the other two sections, Environmental Impacts of Climate Change and Health Impacts of Climate Change.

Splashed front and center on headlines worldwide, we are hearing a lot about what will happen if we don't stop global warming. We are told that rising oceans, droughts, storms, etc. will wreak havoc on the environment and, by extension, the world's economies. The minds behind this line of thinking are employing brilliant marketers that have cornered the emotionally charged and downright sensational market for video:

On a more serious note (that doesn't include mammal suicide), the aforementioned alarmism is being disseminated by more than just emotionally charged videos. The Stern Review, a commonly referenced 600-page report released in late 2006, is one such supporting documentation that was promoted extensively worldwide. It concludes that:

The scientific evidence is now overwhelming: climate change is a serious global threat, and it demands an urgent global response.

This Review has assessed a wide range of evidence on the impacts of climate change and on the economic costs, and has used a number of different techniques to assess costs and risks. From all of these perspectives, the evidence gathered by the Review leads to a simple conclusion: the benefits of strong and early action far outweigh the economic costs of not acting.

Climate change will affect the basic elements of life for people around the world - access to water, food production, health, and the environment. Hundreds of millions of people could suffer hunger, water shortages and coastal flooding as the world warms.

Using the results from formal economic models, the Review estimates that if we don't act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

The problem with the alarmist claims is that the scientific and economic models supporting them are far from bullet-proof.  The Stern Review: A Dual Critique points out:

Two interrelated features of the Stern Review are that it greatly understates the extent of uncertainty as to possible developments, in highly complex systems that are not well understood, over a period of two centuries or more; and its treatment of sources and evidence is persistently selective and biased. These twin features have combined to make the Review a vehicle for speculative alarmism. In the judgment of the authors of the Dual Critique, the Stern Review mishandles data; gives too little attention to actual observation and evidence, as distinct from the results of model-based exercises; and takes no account of the failures of due disclosure, and the chronic limitations of peer reviewing, that have been characteristic of work relating to climate change which governments have commissioned and drawn on. As to specifically economic aspects, the authors note among other weaknesses that the Review systematically overstates projected costs of climate change, partly though by no means wholly as a result of its failure to acknowledge the scope for long-term adaptation to possible global warming; underestimates the likely cost-including to the world's poor-of the drastic global mitigation program that it calls for; and proposes worldwide adoption of a specially low rate of interest for discounting the costs and benefits of mitigation, on the basis of inadequate analysis and without regard for the problems and risks that would result.

Our opinion at Intellectual Takeout is that everyone needs to read and study both sides. After doing so, we're convinced that those who thoroughly study the issue will realize that the science does not support the alarmism. The real world simply is not tracking the models provided by the IPCC (the international body charged with assessing global warming) and others. And yet, most people simply believe that global warming is real, a crisis, and therefore any economic impact of global warming must be negative.

Sadly, unless people who disagree with the hype mount a serious campaign to spread the word, we are likely to see our freedom and our economy squeezed by the looming Copenhagen agreement at the end of the year.  The process has already begun domestically.

Educate yourself and then educate others by forwarding information from Intellectual Takeout on to your friends, family, and associates.