The Kyoto Protocol on climate change based its targets for 2010 on 1990 pollution levels, a year chosen so that Europe need spend little money on environmental cleanup, since 1990 was the last full year of emissions by East Germany and the former Comecon countries.
Imposing costs on the United States while not incurring any itself has always been a key European Union objective in what it appears to regard as the zero-sum game of world economic development, so its enthusiasm for Kyoto is not surprising. That enthusiasm does not, however, demonstrate any enthusiasm by the EU apparat for the environment itself.
Of course, since the Kyoto Protocol failed to include the emissions of India and China, representing 40 percent of the world’s population, it was not at all a serious attempt to clean up the environment, but simply political posturing by former U.S. President Bill Clinton, British Prime Minister Tony Blair and the Third Way leaders who then dominated the EU.
Since the accord was reached in 1997, the pact is still well short of being signed by the emitters of 55 percent of emissions of all parties, the level needed to bring it into effect.
However, since this week’s Johannesburg World Summit on Sustainable Development is expected to attract 60,000 participants, including major EU leaders, we should look at what a world move towards environmentalism might do, and whether it would be beneficial.
After all, 60,000 people is a lot. It will presumably fill even the vast caverns of the Johannesburg hotel industry, emptied by that city’s appallingly high crime rates and South Africa’s poor economic performance. It exceeds even the tempestuous annual zoos known as the World Bank/IMF annual meetings. Even a non-environmentalist must thus recognize that the topic is important, or at least, that many of the world’s movers and shakers want to show their concern about it.
In 1971, the Club of Rome and Professor Dennis Meadowes of MIT constructed a computer environmental forecasting model that demonstrated that, no matter what you did, environmental collapse was certain within about 30-40 years. Here we are, 31 years later, and environmental collapse hasn’t happened. What went wrong?
Simple. Like most econometric models, the Club of Rome model confined itself to equations that economists knew how to solve — in those days case linear and exponential ones (“chaos” theory was at that time in its infancy).
The model made some assumptions, then extrapolated its exponential factors 30 or 40 years in to the future, and graphed the results, all of which, under any assumption chosen, showed a disastrous environmental explosion of one type or another.
The model had a simple flaw. The extrapolation algorithm for exponential equations must be rounded, if it is to be used by a finite computer. Repeat the extrapolation 30 or 40 times and the rounding error, too, grows exponentially, exploding off the page in one random direction or another whatever the true behavior of the variables.
The Club of Rome members believed they had demonstrated the importance of environmental factors; what they had actually demonstrated was the unreliability of computer-generated projections. The study also demonstrated the desirability of scientific peer review, by those not committed to the agenda in question.
We cannot say what the global temperature rise will be in 2100 because we cannot yet say anything meaningful about 2100. The butterfly effect means that random factors, yet to occur, will swamp any possible projection of the current reality.
At the simplest level, we can believe it probable that a substantial number of the children alive today will still be around in 2100 to find out how hot it is. But we cannot be sure even of that, and we certainly cannot predict which children will see the 22nd century.
In order to carry out reliable environmental forecasting, we need two sets of skills: the apolitical scientist, to assess the factors responsible for environmental change, and what changes they may produce and the emotionless banker, with his ability to make an accurate assessment of value, to determine which of the possible policy choices gives the best result at the least cost.
The politically committed, the ecologically motivated, the animal lovers, the makers of false computer models — all these skill sets can stay home.
If the Johannesburg summit had followed these principles when issuing invitations, its cost to the world’s taxpayers would have been a great deal less, although of course there would also have been correspondingly less boost to the South African tourist industry!
All environmental changes involve costs, or possibly benefits. If the mean world temperature rises 5 degrees Celsius by 2100, and floods the island of Mauritius, that has a large cost, to be sure, but it does not have an infinite cost.
After all, the island of Nauru has been mined for phosphates over the last half century and is now almost ready to disappear under the ocean. The Nauruans have a trust fund (which, by all means, they have to a large extent misused) and at least in principle, those with an economic interest in the continuing existence of Nauru have been adequately compensated for its disappearance.
Furthermore, if the world temperature rises by only 0.5 degrees Celsius by 2100, and the sea level rises by 10 centimeters, that has a much lower cost, not one-tenth of that of the 5 degree rise, but probably one-thousandth, since the adaptations needed to cope with the change would be modest. Assessment of the likely environmental effect of policy is a matter for the scientist; assessment of the likely economic cost a matter for the banker.
Absolutism, by which any environmental change is rejected, is not an acceptable approach to policy-making. To take a famous example, the existence of the snail darter species may or may not have been more important than the economic benefits to be brought by the Tellico Dam. The question was at bottom an economic one and should have been decided by the team suggested above, an impartial scientist and a clever banker. Not by environmental activists, and certainly not by politicians.
The other area in which the scientist and the banker can usefully work together is in the design of markets, to mitigate environmental effects.
For example, there appears to be a substantial environmental problem in the brown cloud of smog pollution over India and China. This problem itself demonstrates the futility of the Kyoto Protocol, which did not include either country.
To the extent that it is economically attractive for the West to clean up that cloud, the West should pay part of the cost of the cleanup and not simply accept a free ride on the environmental efforts of India and China. At the same time, government handouts accompanied by legislation are a methodology guaranteed to maximize the cost of the cleanup and the corruption involved in administering it.
If the West is to have green taxes, for environmental clean-up, the tax money must be spent where it can do most good. It is likely that a dollar spent in raising Indian and Chinese industry to acceptable environmental standards will do a great deal more environmental good than a dollar spent tweaking the already high standards in the West.
This, above all, is where the Kyoto Protocol was flawed. A system of tradable pollution reduction credits, whereby environmental tax monies were applied to clean up pollution in the most effective way possible, would automatically provide to the Chinese and Indian companies concerned the resources to clean up their emissions, at far less cost than making incremental improvements in the West.
Again, the scientist and the banker are needed to design an appropriate system: the scientist to assess the relative needs and costs of various possible environmental cleanups, and the banker to establish an economic mechanism that allows the free market full rein to get the cleanups accomplished.
The environment is therefore important and should be treated with the seriousness it deserves. Just as world economic development is too important to allow the protesters of Seattle to hijack the economic agenda, so cleaning up the environment needs skilled management, not political commitment, and hence must be removed as far as possible from the hysteria and absolutism of the environmental lobby.
Politicians, whose attention span notoriously extends only as far as the next election, are especially bad at solving problems of this type, whose time span runs into decades or even centuries. (As I have suggested in another column, a strong hereditary legislature would solve this problem, but we appear unlikely to get one soon.)
Presumably some of the 60,000 attendees at Johannesburg will be impartial scientists; maybe there will even be a few bankers. (The apparatchiks of the World Bank and the aid agencies, themselves with a strong political agenda, do not count for this purpose!)
It is, however, likely that the voices of reason will be overwhelmed by the voices of hysteria and agitprop,and that yet again an environmental conference will be a vehicle for mulcting Western — particularly American — taxpayers without putting in place meaningful measures to clean up the environment.
It’s time we found a better way. We have only one planet, and its health is too important to be left to agitators.
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)
This article originally appeared on United Press International.