Climate change is a problem. But our attempts to fix it could be worse than useless

The UN Climate Panel came out with its final report yesterday. It is a summary
of its 3 main reports, published over the last year. It tells us that global
warming is real and a significant problem. And as usual, the media hears
something else – in the words of Mother Jones magazine, how future warming
will be “ghastly,
horrid, awful, shocking, grisly, gruesome.”

In between the alarmist hype and the reality of climate change we once again
risk losing an opportunity to think smartly about energy and find a
realistic way to fix global warming.

Fossil fuels aren’t going anywhere

^{The world will continue to rely on fossil fuels for a long time to come}

We need to realise that the world will not come off fossil fuels for many
decades. Globally,
we get a minuscule 0.3pc of our energy from solar and wind.
According to the International Energy Agency, even with a wildly optimistic
scenario, we will get just 3.5pc of our energy from solar and wind in 2035,
while paying almost $100 billion in annual subsidies. Today, the world gets
82pc of its energy from fossil fuels, in 21 years it will still be more than
79pc.

The simple reason is that cheap and abundant energy is what powers economic
growth. And for now, that means four fifths from fossil fuel, and much of
the rest from water and nuclear. While wind is lower cost in a few, rural
areas, coal is for the most part much cheaper, and provides power, also when
the wind is not blowing.

As the poor half of our world is reaching for a similar development to that of
China, they will also want much, much more power, most of it powered by
coal. Even the climate-worried World Bank president accepts that “there’s
never been a country that has developed with intermittent power.”

Realising that fossil fuels will be here for a long time means stronger focus
on moving from coal to gas, since gas emits about half the greenhouse
gasses. The US shale gas revolution has reduced gas prices and lead to a
significant switch from coal to gas. This
has reduced US CO₂ emissions to their lowest in 20 years.

In 2012, US
shale gas reduced emissions three times more than all the solar and wind in
Europe. At the same time, Europe paid about $40 billion in annual
subsidies for solar, while the Americans made
more than $200 billion every year from the shale gas revolution. Gas
is obviously still a fossil fuel and not the final solution, but it can
reduce emissions over the next 10-20 years, especially if the shale
revolution is expanded to China and the rest of the developing world.

Climate change is a problem – but not the biggest the world faces

^{Poverty, disease, poor sanitation and starvation kill more people than climate
change will}

While global warming will be a problem, much of the rhetoric is wildly
exaggerated – like when UN secretary-general Ban Ki-moon calls it “an
existential challenge for the whole human race.” The IPCC finds that
the total cost of climate change by 2070 is between 0.2pc and 2pc of GDP.
While this is definitely a problem, it is equivalent to less than one year
of recession over the next 60 years.

Global warming pales when compared to many other global problems. While
the WHO estimates 250,000 annual deaths from global warming in 30 years,
4.3 million die right now each year from
indoor air pollution, 800 million are starving,
and 2.5 billion live
in poverty and lack
clean water and sanitation.

When the UN asked 5 million people for their top priorities the answers were better
education and health care, less corruption, more jobs and affordable food.
They placed global warming at the very last spot, as priority number 17.

Bad ‘solutions’ can cause more problems than they fix

^{Growing crops for biofuels has destroyed rainforests and driven up the cost of
food}

Climate policies can easily cost much more than the global warming damage will
– while helping very little. The German solar adventure, which has cost
taxpayers more than $130 billion, will at the end of the century just
postpone global warming by a trivial 37 hours.

While a low carbon tax in theory could help a little, the political reality is
that climate policies almost everywhere have been ineffective, done little
good while sustaining the most wasteful technologies. The IPCC warns than
less-than-perfect climate policies can be 2-4 times more expensive.
Biofuels, for instance, have driven up food costs, likely causing an extra
30 million starving, with prospects of starving another 100 million by 2020.
And it is likely that biofuels cause net increase in CO₂ emissions, because
they force agriculture to cut down forests elsewhere to grow food.

This is why we have to be careful in pushing for the right policies. For
twenty years, the refrain has been promises to cut CO₂, like the Kyoto
Protocol. For twenty years these policies have failed. We should instead
look to climate economics to find smarter solutions.

The fundamental problem is that green energy is too expensive, which is why it
will need billions in subsidies the next two decades. Instead of making more
failed promises to pay ever more subsidies, we should spend the money on
research and development of the next generations of green energy sources. If
we can innovate the price of green energy down below the cost of fossil
fuels, everyone will switch, including China and India. Economics confirm
that for every dollar spent on green R&D, we will avoid $11 of climate
damage.

But this requires us to separate the hype from the real message from IPCC:
global warming is a problem, but unless we fix it smartly, we won’t fix it
at all.