How economists and climatologists deal with uncertainty...and each other.

mungereconserve.jpg Credit: Elizabeth Shoemaker

People across the nation are socking it to state gas tax revenues by buying energy-efficient cars, making it more difficult for states to pay for road maintenance. Legislators from Oregon estimate that as a result of all those hybrids, by 2014 the state’s gas tax revenues will begin to decline; as a result they may replace the current gas tax with a mileage tax.

Most climatologists agree that curbing greenhouse gas emissions and fighting global warming will require that we build more energy efficient cars and homes. Yet some of these choices are still not cost effective. Even as gas prices climb past $3 per gallon, filling the tank on a standard-engine economy car is still cheaper than plunking down the extra money for a $22,000 Toyota Prius. (Over the long term, however, a Prius requires only a $2.28 gas price to recoup its cost premium over an $18,000 Camry).

Economists have called for incentives to force conservation, such as increasing gas taxes to promote moves to more efficient cars or providing subsidies for installing solar water heaters. But when these incentives actually work, they can deplete tax revenue steams, creating a disincentive for the state to continue the incentive. And increased taxes can be unpopular, which is why Oregon is now considering alternatives to a gas tax.

Economist Eban Goodstein, of Lewis & Clark College in Portland, said Oregon’s solution to its tax crisis is incorrect, because it creates a disincentive to conserve. While an increased gas tax would motivate people to buy more efficient cars, a mileage tax would not: Taxes would be the same regardless of a car’s efficiency.

He added that while there’s a consensus in his field that the US should begin mandatory reductions in greenhouse gas emissions, “there’s a big disagreement about how fast it should be done.”

And this depends on the projections provided by scientists.

A few researchers, such as MIT atmospheric scientist Richard Lindzen, caution that the real damage caused by global warming could be significantly less than scientists are warning due to uncertainty in climate change projections. Lindzen says that research on climate change makes “ambiguous statements” that don’t justify the expense of the remedy—a position rejected by most of his peers.

Global warming skeptics such as Lindzen are actually climate change optimists, basing their arguments on just 1.5° C of warming over the next 100 years—the most favorable interpretation of current global warming data. But, according to atmospheric and oceanic scientist Daniel Kirk-Davidoff of the University of Maryland, this optimism is misguided.

“If we double CO2 as expected in the next 100 years, temperature will increase by 3° C, plus or minus 1.5°,” Kirk-Davidoff said, adding that Lindzen’s claim of 1.5° of warming, is as likely as a 4.5° rise.
This rise in temperature, however uncertain, will also influence the melting of the Arctic ice sheet. If we do nothing, said Kirk-Davidoff, sea levels will probably rise at least two or three feet in the next 100 years, which would carry catastrophic consequences in low-lying regions like Bangladesh, Louisiana and the Netherlands. He added that worst-case scenarios predict a rise of about 20 feet.

“Because the consequences of global warming are so catastrophic, you can’t make an [economic] analysis based on costs and benefits,” Goodstein said. “What’s the point if the impact is that millions of people will be under 20 feet of water?”

Here’s where the climatologists’ work depends on the work of economists to devise plans to reduce CO2 emissions. The best of these initiatives, according to Goodstein, start with ambitious goals.

“In the history of regulation,” Goodstein said, “very rarely are the stated goals achieved, but you make progress in that direction.”

In California, for example, a 1990 plan for controlling pollution mandated that 10% of all vehicles would have zero emissions by now. However, due to intervention from the auto industry, the regulation focused on low-emission vehicles, which, Goodstein said, drove hybrid technology development.

“You’d have to consider that to be successful,” said Goodstein. “There seems to be a process where everyone sets ambitious goals—and then adjusts them according to actual conditions.”

Goodstein said that targets need to be readjusted for several reasons; one of them being the effect technological change has on projections.

“In general, whenever we talk about reducing pollution, we find it’s cheaper than we thought,” said Goodstein. “Analysts can’t foresee technological innovations, and so they underestimate how clever people will be.”

“In 1979, there was no commercial wind power; now wind power provides a dramatic success story. There was around $1 billion in subsidy money. If we made similar commitments to other technologies, they could develop in the same way.”

Originally published May 17, 2006

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