Proponents of doing something about global warming are proposing moderate policies (viz the IPCC “midrange” estimates about what we need to do) to mitigate warming. In order to have any meaningful impact on the trend of global temperatures, world economic activity would need to be slowed by about 1.7 percent per year for the next 50 years and beyond.
That is a big number – it represents over $1 trillion in lost economic activity every year we have such a policy. If all of those declines happened here in the US, it would represent a loss of about 7% of output each year. To put that in perspective, since the start of this recession, total economic activity has remained about flat. That is, we have had 0% economic growth between December 2007 and today. This outcome has already been labeled a “crisis” in America, and we are mortgaging our children’s future to prevent GDP from falling by possibly 2% or 3% (or perhaps worse) over the course of the recession.
How much of a loss of US GDP would we expect if we follow through on the preferred strategy of the IPCC? Well, the US is “guilty” of putting about 25% of the world’s carbon in the air, so we are likely to have to face 25% of the costs of reducing it. That would mean about 1.75% per year in lost US output in order to do something that might have a beneficial impact environmentally. And we are proposing to do that voluntarily! This begs two obvious questions:
- Why do anything at all about the current “financial crisis”? After all, it promises to deliver the right amount of economic contraction if we just let it run its course. And if the contraction is too severe, consider that a downpayment on future emissions reductions.
- How can we characterize the recession as a crisis and what the environmentalists are proposing as “responsible”? If you lose 1.7% of GDP involuntarily that is a crisis? But if you do it to yourself it is prudence? Apply that same logic to your money. If someone forces you to go to a casino and you lose $100, that is a crisis. But if you go of your own volition and lose that same $100 it is not? Well, in the latter scenario, not all of us are willing to go to Las Vegas under most any circumstances.