Don’t Worry About Global Warming

I had a discussion last night with a friend who asked what was the most unreasonable thing I believe (thanks Tyler Cowen), and the above was my answer.  It’s not that I don’t believe in anthropogenic climate change; I absolutely do.  It’s not that I don’t care; I would describe myself as a raging environmentalist.  It’s more a combination of extreme pessimism and somewhat unreasonable optimism.

First, the pessimism: it is unlikely that any regulatory solution is possible while burning fossil fuels is the world’s main source of power.  Any solution would require full cooperation not only between a large number of major actors (sovereigns), but their cooperation in monitoring the billions of smaller actors (individuals, businesses) that would have huge incentives to violate the laws.  These burdens will fall mainly on rich and powerful actors for the benefit of the poorest and least powerful actors.  It’s hard enough to get the US to pony up a few billion for the Eastern Seaboard after Hurricane Sandy; you really expect us to transform our way of life for the sake of the citizens of Lagos and Mumbai?

Get real.  I don’t like it, but that’s how it is.

Secondly, the reason for optimism is that alternative energy technology is advancing much faster than we think is possible.  Distributed solar is particularly exciting – half of all electricity generated is lost in transmission, so there are huge returns to technology that allows onsite production without suffering from diseconomies of scale.  If solar continues to improve, it’s easy to imagine it becoming ubiquitous much faster than we think is possible today.

For example: if you consider a large enterprise with huge power needs, you don’t even need solar to be cheaper – its predictability is a virtue all its own.  If you install solar panels, you know precisely what your power costs will be in 20 years.  On the other hand, try to imagine estimating the fully-burdened cost of coal-based power in 20 years.  It requires you to make sophisticated predictions about technology, relative factor abundance, and a whole bevy of regulatory concerns like potential carbon taxes.  If you’re confident and get it wrong, you go out of business.  If you’re not confident, you pay exorbitant fees to Wall Street to hedge risks.  Well jeez, wouldn’t you love being free of that?

Finally, if worst comes to worst, we’ll very likely find a way to deal with it.  There are already  a huge variety of potential solutions, with varying risks of destroying the planet.  I firmly believe that if warming gets bad enough, someone will undertake one of these approaches to either sequester large amounts of greenhouse gases, directly cool the planet, or both.  This approach may entail unimaginable ecological costs, or it may work out better than expected, or somewhere in between.  But in the end, global warming is a physical and chemical problem that must be tractable to engineering solutions.  Solutions will have unpredictable and potentially severe consequences,  so it’d be better if we never ended up having to do so, but it may come to that.

The long and short of it is that the political economy and technological situation suggest strongly that we’ll muddle through it somehow.  It’d be nice if we could pass a solution to encourage clean energy development and adoption without harming the economy too much.  Cap and trade or a carbon tax would be great.  But don’t lose sleep over it.

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