Dedicated to the balanced discussion of global warming
Harry Clarke – February 20, 2007
This is an interesting blog entry. The article discusses the costs of preventing a catastrophic danger. It starts out with a discussion regarding a theoretical asteroid hit that might happen in 3 decades but then starts to deal with the costs of avoidance of preventing global warming.
What the entry does not explore is the concept of lost opportunity cost. If the global economy spends 1 trillion dollars preventing or reversing global warming, what could we have done with that money and was it as good of an investment. To continue that thought, what good would occur if we only spent half of that money? Would that be enough to do 90% of the 1 trillion? Difficult issues, I grant you, but issues that must be discussed.
catastrophe, economy, GM
The cost of a direct hit by the asteroid on earth is estimated at $400 billion. The expected damage cost today – the expected benefit of avoiding a collision, ignoring discounting – is a shade under $8.9 million. It is $5 million if an annual discount rate of 2% is used.
The ‘asteroid problem’ sounds analogous to the theoretical paradigm for dealing with the effects of global warming by accounting for catastrophic risks
…if tagging of the asteroid can be done quickly enough, the decision to intervene in planning a defection mission can be postponed until the likelihood of a hit can be known with certainty. The idea that dealing with catastrophic outcomes associated with climate change can be deferred until their likelihood is known with certainty is less plausible.
The known (but uncertain) possible consequences of doing nothing add a lot more to the expected costs than do the known (but uncertain) possibilities of adaptation and so on producing lower-than-expected costs. Even more important, the ‘unknown unknowns’, that is, the possible consequences of which we are not yet aware, are dominated by nasty surprises that await us if we continue changing the climate rapidly.
It would only sensible to apply the ‘asteroid problem’ logic if you could delay taking strong and expensive policy actions to deal with potentially catastrophic effects of climate change until you know for sure whether they will occur.