Kyoto is Dead: Now What?

The Brookings Institute, Goldman Sachs, the Wharton School of Business, and quite a few other prestigious institutions allied to host a conference of economists in New York last month on the top ten risks facing the global economy.

Among those risks was global warming (although it was considered far less threatening than the rise in oil prices or deficits, according to a poll of over 300 economists taken for the conference).

The panel on global warming was hosted by Carol Browner, who headed the EPA for the Clinton Administration. On the right hand side of the political dial was David Henderson, an economist at the Naval Postgraduate School; on the left was Warwick McKibben, who directs an economic research institute in Australia.

Both agreed that the world’s climate is warming. Both agreed that the laboriously-negotiated Kyoto Protocol is not going to help.

But Henderson sees global warming as not a problem, and likely to bring more benefits than costs. "Examples [he cited] include lower transportation costs, more tourism, longer growing seasons for agriculture, and slightly decreased mortality."

(I wish the summary bothered to mention how global warming is going to lower transportation costs; on the face of it, that sounds ludicrous.)

Henderson said that the Kyoto Protocol, even if implemented, could not reduce warming, and argued for reducing tariffs to give third world nations incentives to reduce greenhouse gas emissions.

McKibben agreed that Kyoto is not likely to work, not for technical reasons, but for political reasons–because it’s too centralized.

He outlined a decentralized strategy with the following features: [that it] be
driven by national rather than global policies, especially in developing countries, where
emissions are projected to grow rapidly and where the costs of abatement are low; have long-run
objectives; and be market-based with markets in both annual and long-run emission permits. The
“McKibbin Solution”, developed with his colleague Peter Wilcoxen, is analogous to the U.S.
government bond market, where securities with short and long run maturities are actively traded.

Hmmm…sounds worth investigation.

Most noteworthy to yours truly, however, is that fact that even Prof. Henderson, who saw mostly benefits from global warming, admitted that there is likely to be "costs such as air pollution in some areas,
an increase in the sea level, and increased frequency of hurricanes."

Since Hurricane Katrina has already cost more than the 9/11 attacks, and is estimated by one reinsurance group to be "the biggest single disaster in insurance history" how much less will transporation costs have to be to compensate? A fraction? 

Carol Browner concluded along these lines, "arguing that in many cases, costs of
environmental regulation turn out to be less and the benefits greater than initially envisioned."

Amen. It’s worth recalling how in the l960’s the auto industry forecast economic gloom and doom if air pollution controls were implemented; in fact, such regulations have hugely improved the air in places like Los Angeles since those smoggy times, despite massive increases in traffic.

Why do we take such improvements for granted? We give politicians like Rudolph Giuliani credit for reducing crime, and see him as a hero, and polential presidential candidate. I can understand that. But why can’t we give environmental regulators and their supporters, almost all of whom are liberal Democrats–such as Henry Waxman and George Miller and Carol Browner–credit for clean air and clean water? Don’t they deserve some applause as well?