The Economic Costs of Global Warming

In debating this issue with bloggers Domenico Bettinelli and American Papist, the issue of the economic costs of taking action against global warming arose. Specifically, these guys accused me of proposing policy actions that would "wreak havoc on the global economy for one thing, leaving millions in poverty" (Bettinelli) and "destroy the very things it is trying to protect... such as the care of the impoverished, and concern for developing and 3rd-world countries"(Papist). I think the time has come to address this point, and in doing do, to refer to the most important study to date on the costs of global warming, the UK-treasury mandated Stern Review.

Bottom line of this comprehensive report: by not acting, the costs of climate change will eat up 5 percent of global GDP each year, which could rise to 20 percent, taking into account a wider range of risks. In contrast, the cost of reducing greenhouse gas emissions would amount to 1 percent of global GDP a year. The major economic costs go far beyond the inconvenience to the American lifestyle of high gas prices, as "hundreds of millions of people could suffer hunger, water shortages, and coastal flooding". The most vulnerable, the poorest countries, will suffer "earliest and most", even though they are least responsible for global warming. Moreover, the next 10-20 years will prove absolutely crucial, rendering little time for complacency. Clearly, the benefits of decisive early action outweigh the costs.

Now, these results are not uncontroversial. In particular, the discounting assumptions have been heavily criticized in some quarters. It is customary in these exercises to discount the future simply because it is the future-- attaching less weight to the welfare of tomorrow than today. Stern rejects this methodology on ethical grounds. Hence his estimates of the damage caused by global warming are larger, simply because his discount rate is so much smaller.

There is much to like in this analysis from a Catholic perspective. If the true definition of "prudential judgment" is the application of Catholic doctrine to changing concrete circumstances, then the Church has an urgent duty to speak on this topic. And the Holy See observer to the United Nations, Archbishop Celestino Migliore, echoed the Stern Review when he noted that global warming will impose a disproportionate burden on "the poorest and weakest who, even if they are among the least responsible for global warming, are the most vulnerable because they have limited resources or live in areas at greater risk." He called for a shift from the "heedless pursuit of economic growth" toward an approach more respectful of Creation.

The discounting assumptions underlying the Stern report are also worthy of support from a Catholic perspective, as they do not fall into the utilitarian trap of assuming our lives are worth more than the lives of those not yet born. And, yet, how much of the current global warming denial is motivated by selfishness, by a tendency to heavily discount the future? See here for a tongue-in-cheek answer!