In December 2015, Australia made a commitment to the global goal “to hold average temperature increase to well below 2°C and pursue efforts to keep warming below 1.5°C above pre-industrial levels.” Then in March 2016, the Turnbull government signed an agreement to make a $640,000 grant to Bjørn Lomborg to write yet another climate contrarian…
Bjorn Lomborg’s “consensus” approach involves ranking global development policies by their ratio of benefit to cost. But this hard-headed economic rationale can actually end up entrenching inequality.
Bjorn Lomborg is, undoubtedly, seriously concerned with poverty and inequality. Both in the work of the Copenhagen Consensus Center (CCC) and in his popular writings, this is a common theme. He has championed some very progressive ideas, including eradicating barriers to international migration. Unfortunately, he has also used rather distorted arguments and evidence about inequality to attack some of his favourite bugbears, such as subsidies for renewable energy.
The problem is that the central methodology of Lomborg and the CCC is at best blind to inequality and, in its application, could actually increase it. Moreover, there are good arguments to suggest that if we take a broader view of inequality to include intergenerational equality, the CCC methodology is not even equality-blind; it is equality-averse.
Simple analysis, simplistic outcomes
The basic idea, that of cost-benefit analysis (CBA), is straightforward and, indeed, literally high school-level economics. You work out the economic cost of a particular investment (or policy) and estimate its economic benefits (including estimates of indirect costs and benefits such as health). The idea of the CCC is that, with expert advice, policy interventions in climate change, international development, or other global challenges can be prioritised in terms of their benefit-cost ratio.
The methodology is, in itself, blind to inequality. This is because it is based on a Benthamite assumption that the objective is utility maximization irrespective of the distribution of that utility. Put simply, an investment of $100 that returns $1,000 accruing to an already rich person is, in these terms, better than an investment with the same cost that generates $800 return that accrues to a poor person.
As Duke University’s Matthew Adler has consistently argued, the CBA methodology can be adjusted relatively easily to incorporate “aversion” to inequality by simply weighting the calculation according to who pays, and whom it benefits. In a simplistic scenario in which the world is divided into “poor” and “rich”, we might for instance weight benefits accruing to “poor” people twice as highly as benefits accruing to “rich” people. Applying this weighting to our previous example would reverse the ranking of the investments.
I should stress that this is technically easy in the sense that it is quite a simple calculation, even in more realistic situations where you have gradations of wealth and poverty. But it is ethically more difficult. How much inequality aversion should we build in? This will necessarily be a somewhat arbitrary decision and subject to contested views, and indeed societies will expect to be free to make different value judgements about tolerable levels of inequality for different issues.
Cost-benefit and international development
Lomborg might assert that this doesn’t really matter because his centre is set up to look primarily at problems affecting the poor, so policies that benefit the rich are automatically ruled out. But this is insufficient defence because the world is not just divided into “rich” and “poor”. There are gradations of poverty, and while many individuals and families move in and out of poverty throughout their lives (in a process termed churning), there are many others who live in situations of “chronic poverty”, and it is these who are often missed or under-serviced by international development assistance.
It is my contention that a CBA approach to international development would simply exacerbate this problem, contributing to a widening divide between middle- and low-income countries and groups on the one hand, and those countries and groups trapped in chronic poverty on the other hand.
Let’s take the example of immunization against infectious diseases. CCC analyses of public health often return very sizeable benefit-cost ratios for such policies, and not surprisingly so: few international development experts would dispute that immunization is, in principle, a very cheap and effective way of improving livelihoods.
Such analyses, including the CCC papers on infectious diseases, are based on an estimated economic benefit expressed in terms of “disability-adjusted life years” (DALYs) – basically the monetary value on one year of healthy living for one individual. The CCC papers typically take a value of between US$1,000 and US$5,000 for a DALY.
Now suppose we agree with the 2012 CCC outcome that of a hypothetical budget of US$75 billion over four years, we would invest US$1 billion per year in child immunization. Where, geographically, would we invest it? Inevitably cost-benefit analysis would lead us to invest in relatively wealthy countries, because DALYs are necessarily worth more money in a place with higher economic standing.
Likewise, the costs for administering immunizations would probably be higher in poor countries, which typically have worse infrastructure, a comparative lack of trained health professionals, and are often bedeviled by insecurity and conflict.
Lomborg and his advocates might argue that their approach was never intended to be applied at this level of implementation (and, indeed, the CCC paper on infectious diseases argues for a single DALY for precisely this reason). But my example nevertheless shows how a cost-benefit approach without inequality aversion will almost inevitably prioritise marginal poverty rather than entrenched disadvantage. The consequences are clear: the poorest of the poor would still be left out and we would end up exacerbating inequality in the developing world.
The picture is complicated even more when considering issues where the benefits are deferred – such as taking action on climate change.
Cost-benefit calculations typically deal with this by using “discount rates”. Typically, humans are not good at deferred gratification; we would much rather have $100 today than next year, so discount rates place a lower value on returns the further they are in the future.
This approach is contentious, particularly in environmental economics, where the benefits of our investments accrue to future generations rather than ourselves. Do we have the ethical right to discount the value of the lives and livelihoods of future generations against our own shorter-term financial benefit?
In climate economics, the time horizons are so long that even a relatively low discount rate can generate apparently absurd conclusions. More generally, any discount rate can be interpreted as a preference for intergenerational inequality: it systematically values the welfare of future generations at a lower level than our own.
Cost-benefit analysis on the world stage
As we have seen, where cost-benefit analysis is applied to decisions that affect a diverse, disparate population (such as the global population), it is liable to entrench inequality unless we ask who benefits, rather than just how much.
Remember that cost-benefit analysis was originally developed to evaluate decisions that affect the same group that makes the decision. This might be a firm deciding how much to invest in R&D; a government choosing what infrastructure to build on behalf of the society it represents; or, at the extreme end, a person’s individual financial decisions that affect only themself.
But now imagine deciding on a major infrastructure investment in a developing country, and having to choose between road or rail. In this situation it would seem remiss not consider who benefits. Roads might generate a better overall economic return, but might also disadvantage those who are too poor to have a car.
The larger the scale of the decision-making, the more important these distributional considerations become. It is therefore crucial that the people affected by the decisions are represented in the decision-making process. But at the CCC, where the evaluation and ranking of priorities is made by an “expert panel” (however undoubtedly eminent in their fields), this is demonstrably not the case.
Thus the global aspirations of the CCC project are its Achilles’ heel. By calculating benefit-cost ratios at the global level, without the participation of those affected by the proposals, it risks favouring policies that will exacerbate, rather than overcome, global inequality.
Correcting Lomborg and Murdoch Press on Climate change
Bjorn Lomborg‘s latest op-ed in the Wall Street Journal resurrects repeatedly demolished distortions of fact to downplay the real and increasingly documented threats of climate change. His trademark tactic is to acknowledge that climate change is real and human-caused, only to then dismiss the solutions — reducing emissions and promoting clean energy now — as unnecessary or infeasible.
Fortunately, his longstanding fight against climate action is failing to persuade the public, as an overwhelming majority of Americans understand that climate change is a serious threat and that we’re already feeling the impacts. More to the point, they support action to reduce greenhouse-gas emissions, especially through continued expansion of clean energy and new rules for coal-fired power plants.
Mr. Lomborg has relied on similar distortions for his arguments many times before, even drawing censure from the Danish government for his “perversion of the scientific method.”
After the release of Lomborg’s “deeply flawed” book The Skeptical Environmentalist, the president of the American Association for the Advancement of Science remarked that Lomborg’s work was a testament to the “vulnerability of the scientific process … to outright misrepresentation and distortion.” One researcher decided to fact-check Lomborg’s claims and had so much material that Yale published it as a book: The Lomborg Deception. In the book, Lomborg’s many sloppy citations and misleading myths are thoroughly debunked, but that hasn’t stopped him from repeating the same general arguments in years since. When it comes to climate, he insists over and over: Don’t worry; be deceived.
- Climate change is happening now, and current temperature trends are in line with projections — with 2014 the latest year to break a record for average global temperature.
- Poor communities and developing countries are at higher risk from the impacts of climate change than are developed countries.
- Climate change has exacerbated extreme-weather events; adaptation is expensive. The influence of climate change on extreme weather is not measured by extrapolating from costs but by changes in the weather itself.
- Clean energy is the fastest-growing energy sector; the IEA predicts clean energy will receive nearly 60 percent of the $5 trillion to be invested in new power plants over the next decade.
Models accurately projected current rising temperatures. Lomborg cites the long-debunked notion that scientists and models have overestimated the rate of warming since the especially hot El Niño year of 1998. While Lomborg says the period from 1998 to 2012 saw “90% less temperature rise than expected,” this is simply false. From 1998 to 2012 temperatures continued to rise within the range of expected increase, by 0.05°C (0.09°F).
The difference between model estimates and observations is completely accounted for by natural variability and fits within the range of modeled uncertainty. The reality is that there is no inherent bias in climate models that make them overestimate the effects of human activity. A recent study that combined 114 possible 15-year trends since 1900 found there was nothing statistically biased in the way that model data differed from observed measurements of global mean surface temperatures. According to the study’s co-author, Piers Forster, “cherry picking” the most recent 15-year interval to refute climate-change modeling is misleading and obscures the long-term agreement between the models and measurements.
What’s more, short-term variation does nothing to change the fact that we are experiencing a dangerous rate of global warming, with nine of the 10 hottest years on record occurring since 2002 and NOAA and NASA officially declaring 2014 the warmest on record. So Lomborg’s insistence that we not worry about climate flies in the face of the record temperatures we’re experiencing.
Poor people and developing countries are at greater risk and will benefit from mitigation. While Lomborg attempts to sound well-meaning and concerned about poverty, it is difficult to find any evidence that his work does anything to alleviate poverty aside from critiquing climate-change policy. There is no contradiction between lifting poor people out of poverty and cutting carbon emissions. In fact, many developing countries have created their own mitigation plans in response to a growing understanding of the acute threats they face.
Developing countries are also at greater risk because weather can gravely affect their economic activities such as farming and tourism. So any effort to help reduce the negative impacts of extreme weather on these basic economic functions of developing countries would help their economic development.
Recent research has shown that extreme weather hampers economic growth in developing countries to a much greater degree than in developed countries. While Lomborg suggests that we should focus on relieving poverty, that’s the opposite conclusion of actual researchers, who say their study is evidence that we should limit warming to less than 2 degress C to protect developing economies. Specifically, the study author said that on a business-as-usual path (like that for which Lomborg advocates), “The average annual growth rate in poor regions is cut from 3.2% to 2.6%, which means that by 2100 per-capita GDP is 40% below reference.” Contrary to Lomborg’s claims, fighting climate change will in fact ensure that developing countries are able to grow their economy and prosper.
Extreme-weather events are worsening, and the cost of adaptation is high. Lomborg picks up a thoroughly debunked line of attack from Roger Pielke Jr. regarding hurricanes and the impacts of extreme weather. Pielke’s ploy is to first cherry-pick data, then “normalize” it for development, basically blaming the increase in losses from weather on increased wealth. That sort of analysis is so flawed that it caused FiveThirtyEight to apologize for publishing Pielke and recruit a more qualified scientist to rebut Pielke (who hasn’t written any other climate pieces for the site since his response to the controversial post).
For more details, see our previous rebuttal of Pielke on his claims regarding extreme-weather damage and costs. Why Lomborg would choose this particularly well-debunked myth to propagate is a testament to his willingness to deceive his audience in service of the “Don’t worry” mantra.
Renewable energy is cheap and growing much more quickly than fossil fuels. It is odd that Lomborg would criticize solar and wind power as being too expensive yet, in the next sentence, advocate for new battery technology to facilitate their development. In reality, clean energy is cheap and getting cheaper, and in many areas renewables have reached grid parity with fossil fuels, meaning they are no more expensive than the dirty fuels Lomborg would have us continue to rely on. Developing nations are adopting clean energy quickly — at twice the pace as rich nations. So clearly they are more than “expensive, feel-good measures,” as Lomborg claims, if they are quite literally bringing light to the most impoverished areas of the planet. It turns out that renewables are so promising that they seem to be leapfrogging fossil fuels, which is why Bangladesh leads the world in small solar-power home installations. The success story of renewables is, contrary to Lomborg’s opinion, something to be happy about.
Clean-energy growth has been booming, with strong future growth predictions. Wind, solar, and geothermal have all been expanding rapidly, with at least 17,000 megawatts of these three energy sources — equivalent to about 17 new nuclear reactors, enough to power around 13 million homes — under construction in the United States in 2013. China installed 36,000 megawatts of hydro, solar, wind and nuclear in 2013 and is on course to add more generating capacity from renewables by 2035 than the U.S., Europe and Japan combined. In 2013 more than a fifth of the world’s electricity came from renewables, and clean energy accounted for over half of all net additions to global power capacity. Twenty percent of the world’s electricity is hardly “imperceptible” in terms of climate impact, as Lomborg claims renewables will remain for decades.
Far from alarmist, the growing attention to climate change simply recognizes the facts. Yet the Wall Street Journal prefers to give its readers the same old song and dance: Don’t worry; be happy. Unfortunately, the evidence simply does not fit — unless you’re Lomborg, whose work shows a consistent “perversion of the scientific method,” and who is backed by the fossil-fuel industry.