Richard Tol’s 2013 article, “Targets for global climate policy: An overview,” has been taken by some as a definitive summary of what economics has to say about climate change.1 It became a central building block of Chapter 10 of the recent IPCC Working Group 2 report (Fifth Assessment Report, 2014), with some of its numbers appearing in the Working Group 2 Summary for Policymakers.2
After extensive analysis of multiple results from a number of authors, Tol reaches strong and surprising conclusions:
- climate change will be a net benefit to the world economy until about 2.25°C of warming has occurred
- the optimal carbon tax is a mere $25/tC (or $7/tCO2)
- the economically “efficient” climate scenario is likely to lead to atmospheric concentration of greenhouse gases of more than 625 ppm CO2-equivalent by the end of this century; lower targets might have ruinously high costs
Despite, in the end, almost acknowledging the peculiarity of these conclusions, Tol continues to claim that no compelling argument to the contrary has been made: “A convincing alternative to the intuitively incorrect conclusion that continued warming is optimum, is still elusive.”
Tol’s conclusions in this article do not follow logically from his data and analysis. Though claiming an authoritative and objective stance, he offers, in fact, a controversial reading of climate economics.
As he sees it (with my numbering)
- “There are 16 studies and 17 estimates of the global welfare impacts of climate change…
- “There are 75 studies of the social cost of carbon marginal damages from another tonne of emissions, with 588 estimates…
- “…a single group of estimates of the impacts of climate policy, found in one review article … includes the models with the best academic pedigree…”
Each of these points is founded on faulty selection of data and analyses, and contains interpretive flaws that make Tol’s facile conclusions unsupportable. First, it highlights 16 studies, some of them very old, from a handful of authors, as if they represented all we know about climate damages. Second, it identifies a larger number of studies of the social cost of carbon, more than half from the same handful of authors, and then focuses almost entirely on the subset of results with a high discount rate. Where it reports on my own work, the survey clearly misrepresents the original published source. Third, it purports to prove that low-carbon stabilization targets are expensive by ignoring models and analyses that reach these targets, but making ad hoc adjustments to other analyses that fail to describe a path to a stable climate.
The field of economic analysis of climate change is a work in progress, with many interesting, sometimes contradictory, developments and approaches appearing in recent years. Most of the field, and most of what economists are writing about climate change, cannot be seen through the narrow, distorting lens of Tol’s review article.
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