The high cost of cooling...

If global warming is happening, it's better to adjust to it, rather than try and stop it...

What is the optimal climate change policy—the one that sets future emissions reductions to maximize the economic welfare of humans? Yale University economist William Nordhaus,perhaps the world's leading expert on the economics of climate change, has just released a new study, The Challenge of Global Warming: Economic Models and Environmental Policy,which estimates the costs of various proposed trajectories for limiting carbon dioxide over the next couple of centuries.

Nordhaus and his colleagues have developed a small but comprehensive model that combines interactions between the economy and climate called DICE-2007, short for Dynamic Integrated model of Climate and the Economy. Nordhaus first computes a baseline that assumes that humanity does essentially nothing to limit its output of carbon dioxide. By 2100 CO₂ atmospheric concentrations would rise from the pre-industrial level 280 parts per million (ppm), to 380 ppm today, to 685 ppm in 2100. Global average temperature would rise by 2.4 degrees Celsius by 2100. In this baseline scenario, the DICE-2007 model estimates that the present value of climatic damages is $22.6 trillion. DICE-2007 includes damage to major sectors such as agriculture, sea-level rise, health, and non-market damages.

Nordhaus then uses his model to assess the ambitious CO₂ reduction proposals made by British economist Nicholas Stern and former Vice President Al Gore. Nordhaus calculates that the Stern and Gore proposals for steep immediate emissions reductions produce very similar cost/benefit results. Nordhaus also evaluates explicit temperature and concentration goals, e.g., limiting average temperatures to 1.5 degrees Celsius above current levels or greenhouse gas concentrations to no more than 1.5-times pre-industrial CO₂ atmospheric concentrations.

So what did Nordhaus find? First, the Stern proposal for rapid deep cuts in greenhouse gas emissions would reduce the future damage from global warming by $13 trillion, but at a cost of $27 trillion dollars. That's not a good deal. For an even worse deal, the DICE-2007 model estimates that the Gore proposal would reduce climate change damages by $12 trillion, but at a cost of nearly $34 trillion. As Nordhaus notes, both proposals imply carbon taxes rising to around $300 per ton carbon in the next two decades, and to the $600-$800 per ton range by 2050. A $700 carbon tax would increase the price of coal-fired electricity in the U.S. by about 150 percent, and would impose a tax bill of $1.2 trillion on the U.S. economy.