The AGW lobby would have us believe that the opportunity costs of their proposed policies are quite low. Just yesterday in a Financial Review op-ed John Quiggin wrote
No credible economist suggests the economic impact will be more than marginal.
Clive Hamilton describes the opportunity costs of AGW in a New Matilda piece (emphasis added, the Atkin paper is here)
I have often wanted to put the following question to sceptics like Don Aitkin: What if you are wrong? What sort of moral responsibility will the sceptics have if they succeed in their aim of stopping the world from taking action to reduce greenhouse gas emissions?
If scientific advances cause scientists to reject the conclusions of past IPCC reports and agree that there is nothing to be alarmed about, it will be mildly embarrassing for people like me; but not too much harm will have been done — according to all of the economic studies, the costs of reducing emissions are low.
But if Aitkin and his fellow sceptics were successful in stopping policies to cut emissions and the IPCC projections turn out to be correct, then environmental catastrophe will follow and millions of people will die. Do they lose sleep over this? Do they worry about how their grandchildren will see them? Or are they so consumed by their crusade that they know they will never be proven wrong?
Okay – so the stakes are (apparently) high. Notice the asymmetry in the opportunity cost; very little if the AGW lobby are wrong and very high if the AGW lobby are correct. Mind you those assessments of the relative costs comes from the AGW lobby itself.
This brings me to a very carefully worded op-ed published in both the Age and SMH by Tim Wallace. He is having a go at Christopher Monckton. In particular this point
Christopher Monckton’s rhetorical tilts against wind turbines might be regarded as humorously quixotic, but his spinning of deeply flawed American and European biofuel policies into a blanket denuciation of all climate change action, accusing “environmental extremists” of “eagerly” starving to death millions of the world’s poor, is no laughing matter. At best this argument is recklessly simplistic; at worst it is deliberately disingenuous.
This might lead the reader to believe that Monckton is incorrect in linking climate change policy to starvation. Apparently he has made the argument for some time – as have others. As Wallace admits the so-called ‘biofuels genocide’ argument has an excellent pedigree (emphasis added).
Monckton is not the first person to link biofuels to genocide (Fidel Castro, for example, did so in April 2007) or to call using food for fuel a crime against humanity (the UN special rapporteur on the right to food, Jean Ziegler, called it such in October 2007). In Monckton’s own nation, Guardian columnist George Monbiot warned as early as 2004 that biofuels could lead to humanitarian and environmental disaster.
“Every potential solution must be handled carefully,” said Al Gore, the man climate sceptics most love to hate, at the first Biofuels Congress of the Americas held in Buenos Aires in May 2007. The twin dangers of biofuel production if not pursued carefully, he said, were further deforestation and the driving up of food prices. Greenpeace, the Worldwide Fund for Nature, Friends of the Earth, the Sierra Club and so on are all in furious agreement: food crops should not be used to fuel vehicles.
I’m not sure if Fidel Castro fits into that group, but the Age did publish an op-ed from him just last month.
So far, so good. It seems there might be something in the argument about the AGW scare leading to food shortages. But then Wallace does something very interesting (emphasis added).
That the diversion of food crops to biofuel production has been the main contributor the doubling of staple food prices in recent years need not be disputed, though Monckton’s crediting that rise to “a sharp drop in world food production, caused by suddenly taking millions of acres of land out of growing food for people who need it” is a less than accurate representation of the document he cites as his reference.
Wallace then goes onto imply that Monckton’s argument is inconsistent with a World Bank publication that Monckton quotes. Wallace doesn’t tell us what that document is, but he gives enough clues to track it down (or, at least, I have tracked down a document based on his clues).
An internal World Bank working paper was leaked to the Guardian newspaper in 2008 that indicated that biofuel production was responsible for the bulk of rising food prices.
This document is marked ‘Draft, not for citation or circulation’. The subsequent ‘official’ World Bank copy is here. A critique of the paper can be found here. The World Bank have another paper on their website that makes the same points.
Increased bio-fuel production has contributed to the rise in food prices. Concerns over oil prices, energy security and climate change have prompted governments to take a more proactive stance towards encouraging production and use of bio-fuels. This has led to increased demand for bio-fuel raw materials, such as wheat, soy, maize and palm oil, and increased competition for cropland. Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for bio-fuels production in the U.S., while existing stocks were depleted by an increase in global consumption for other uses. Other developments, such as droughts in Australia and poor crops in the E.U. and Ukraine in 2006 and 2007, were largely offset by good crops and increased exports in other countries and would not, on their own, have had a significant impact on prices. Only a relatively small share of the increase in food production prices (around 15%) is due directly to higher energy and fertilizer costs.
There can be little doubt that the World Bank believes that demand for biofuels has caused the bulk of the increase in food prices.
How does Wallace describe the World Bank position?
It attributed 70-75 per cent of price rises to biofuel-driven demand “and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans”. It identifies US and European Union subsidies, mandates and import tariffs to promote domestic biofuel production as the main problem.
As if they were somehow separate from the increased demand for biofuels. But that is not how the World Bank describe it.
the most important factor was the large increase in biofuels production in the U.S. and the EU. Without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate. Recent export bans and speculative activities would probably not have occurred because they were largely responses to rising prices.
So Wallace is creating a bit of a straw man here. Where Wallace is correct is in arguing that the agricultural policies of the EU and the US are economically irresponsible. We know that and this is a point well worth repeating. So too are Australian quarantine policies – they are a disgraceful impediment to free trade in agricultural goods.
The other straw man worth noting is the entire premise for the op-ed. I saw Monckton making the biofuel – food trade-off argument here (at 5:40 minutes into the debate). I didn’t see him referring to either ‘extremists’ or ‘eagerly’ starving people to death; I did see him saying that it was a disgrace, and David Koch agreeing that it was a disgrace. At best Wallace can argue that Monckton hasn’t described the mechanism whereby biofuels have crowded out food production and reduced food security, but when everyone agrees that this is what has happened it is a bit rich to attack Monckton’s description of the argument and somehow imply that it isn’t happening. More importantly it shows that there are very real costs associated with the AGW lobby being wrong.
But as Wallace points out, it is the environmental lobby that recognised very quickly the problems with the rush into biofuels. The cost that this has caused are a not a result of “the AGW lobby being wrong” on temperature increases, but on an improperly managed and ill considered response to AGW. (It is also a response that can presumably be turned around or adjusted quite quickly, unlike the matter of reducing use of coal and oil.)
steve from brisbane
29 Jan 10 at 12:16 pm
Let me quote Hamilton, again.
This statement is false.
Sinclair Davidson
29 Jan 10 at 12:21 pm
Biofuels is the most cracked idea for reducing emissions but not the only one. Even Monbiot has a go at it . Note that it has been especially popular among some Nationals here and the previous Bush administration in the US.
There are no regrets policies like ramping up nukes which Maggie, Monckton’s old boss recognised.
jtfsoon
29 Jan 10 at 12:21 pm
Is there a figure on how many people have been killed by warmenism in relation to bio-fuels?
C.L.
29 Jan 10 at 12:31 pm
No one’s forcing people to stop carbon emissions via the use of bio-fuels. If the current generation of bio-fuels turn out to be a bad idea, well, there’s lots of other things that could be used anyway. Thus I don’t see why Quiggin isn’t correct as the use of bio-fuels is almost an orthogonal problem to emissions reductions.
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In places that really matter like China, for example, I don’t really see what the problem is with them replacing some of their awful power plants which are killing people and reducing rainful (hence increasing food prices) via smog at this very moment with some nuclear plants and all of the other types of energy generating methods that they will need to install anyway (and no doubt intend to). If clean power happens to cost them a bit more in start up costs, well, tough — the place is dirty enough such that a bit of money spent now will save a lot later (especially if you consider the costs of reduced rainfall and public health costs which will become important as they become richer and pretend to still be socialists). In addition, if they get good at mass manufacturing some of the clean technologies (and I really don’t see why they won’t — just look at SunTech), I don’t see why their price won’t drop compared to now such they are comparable or cheaper to dirty technologies. Once this happens, all you need then is time to reduce emissions as all the old stuff gets replaced.
conrad
29 Jan 10 at 12:41 pm
The costs are high, the benefits are low:
http://rogerpielkejr.blogspot.com/2010/01/what-tangled-web-we-weave.html
Semi Regular Libertarian
29 Jan 10 at 12:53 pm
So too are Australian quarantine policies – they are a disgraceful impediment to free trade in agricultural goods.
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Don’t these disgraceful policies keep nasty diseases out of it?
Adrien
29 Jan 10 at 12:56 pm
There’s another angle on the “opportunity cost” theme. That is, the environmental lobby have pushed the global warming issue at the expense of other environmental issues. Therefore, other issues don’t get the same attention.
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To a large extent they’ve neutralised this problem by finding links from global warming to pretty much any pet environmental issue you care to name. For example global warming is bad for… coral reefs; accessible drinking water in poor nations; disaster recovery in poor nations; endangered species; droughts and desertification; dryland salinity; bushfires; malaria;
… and so on.
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Even so, there’s an opportunity cost. All these other issues dance in the shadow of the global warming juggernaut. It’s like they’ve put all their money on a horse that they’re sure will win; and will worry about paying off their other debts when the race is over.
daddy dave
29 Jan 10 at 12:57 pm
Hamilton refers to people that do not support the wholesale transformation of our energy infrastructure, etc. crusaders. When did people sceptical of significant to radical change become ‘crusaders’?
It also interesting that Hamilton and co. are insensitive to the costs of being wrong, preferring to cheer themselves up with suggestion that the costs are merely negligible. When know this to be wrong.
dover_beach
29 Jan 10 at 12:58 pm
dd, the problem with the bet, even if they win, is that it won’t cover the original outlay.
dover_beach
29 Jan 10 at 1:00 pm
I’m shocked Hamilton this time isn’t also trying to get the kids to attack their parents like the coward did a little while ago.
I don’t know how the ignorant or lying bald twat gets the idea that reducing emissions to levels he finds acceptable is low. It simply isn’t true. It would be enormously high in the cost of present and future living standards.
And what if the bald pseudo intellectual galoot is wrong about the dangers of emissions? What then?
Someone ought to tell Hamilton that the precautionary principle works both ways.
Can’t we send him off to fight the Taliban?
JC
29 Jan 10 at 2:19 pm
JC
Based on his views he is more likely to fight *for* the Taliban.
jtfsoon
29 Jan 10 at 2:20 pm
hahahaahhahaha
Send there anyway and give the choice on which side he wants to fight… That’s the best answer from a libertarian perspective. LOL.
JC
29 Jan 10 at 2:27 pm
oops Send HIM and give HIM…
JC
29 Jan 10 at 2:32 pm
Well analyzed Sinc.
I have remarked before that many or most AGW campaigners will not accept any defect or adverse consequence from what they are prescribing.
[I've moved this from the other thread. Sinc]
ken nielsen
29 Jan 10 at 4:24 pm
Hamilton is plagiarising Blaise Pascal, and they were both wrong.
Yobbo
29 Jan 10 at 7:13 pm
Bravo & Hello! I found this site thru Andrew Bolt, a daily read for this American regarding the view from down under. I’m a strong advocate for extensive utilization of “opportunity cost” analysis applied to all policies and especially to AGW.
IMO, there may well be a Nobel Prize waiting for someone in establishing a clear Oportunity Cost methodology.
WestWright
30 Jan 10 at 9:48 pm
I suggest you check out William Nordhaus.
http://nordhaus.econ.yale.edu/
Semi Regular Libertarian
31 Jan 10 at 11:57 am
Congratulations to Sinclair on tracking down the World Bank Development Prospect Group’s 2008 policy research working paper on rising food prices.
I trust the “clue” of explicitly referring in the sixth paragraph of my piece to the “The World Bank Development Prospect Group’s 2008 policy research working paper on rising food prices” aided the discovery process.
I would invite readers to read the report and judge for themselves the merit of Sinclair’s claim I have not represented the report’s conclusions accurately.
Tim Wallace
31 Jan 10 at 2:42 pm
Actually Tim I think you have represented the World Bank publication quite well. Very well. Your op-ed was very carefully worded so that it is not inconsistent with the World Bank Report but makes it look like Monckton is wrong.
Sinclair Davidson
31 Jan 10 at 6:51 pm
I read these comments suggesting that grain biofuels are bad.I fully agree.
What I find strange is that there has been no debate in our media, on sites such as this etc about our own grian ethanol disgrace.
The E10 mandate demands that 28 percent of our average annual NSW cereal starch production be converted to ethanol for no read benifits.
How about having a look at this homegrown scam.
two bob
3 Feb 10 at 10:00 pm