One of the more sober arguments in favor of radical action to combat perceived climate change is that doing nothing would be economically calamitous. That was certainly the conclusion of the controversial Stern Report in the United Kingdom. Economist Nicholas Stern concluded that we should spend 1 percent of the global economy every year to avoid the worst effects of climate change. Now even if you take Stern's numbers as correct—and many think he wildly overestimates the economic risks of doing nothing—he still advocates spending $700 billion a year on the supposed problem. Failure to do so could risk global GDP being up to twenty percent lower than it would be otherwise.
But a new study from economists Melissa Dell and Benjamin Olken at the Massachusetts Institute of Technology and Northwestern University's Benjamin Jones comes to a different conclusion. Yes, they find, global warming would hurt economic growth, but only in poorer countries. Climate change would have "very little impact" on wealthier nations. Here is how the economists put it:
We find substantial effects of climate shocks, but only in poor countries. In poor countries, a 1◦C rise in temperature in a given year reduces economic growth by 1.1 percentage points on average. The estimates suggest that climate change may affect the rate of economic growth, rather than just the level of output. Moreover, estimates using the overall change in climate from 1970 to 2000 rather than annual variation produce even larger estimates, suggesting that adaptation may not undo these effects in the medium term. ... Despite these large, negative effects for poor countries, we find very little impact of long-run climate change on world GDP. This result follows from (a) the absence of estimated temperature effects in rich countries and (b) the fact that rich countries make up the bulk of world GDP. Moreover, if rich countries continue to grow at historical rates, their share of world GDP becomes more pronounced by 2099, so even a total collapse of output in poor countries has a relatively small impact on total world output.
So if you do buy into the theory of man-made climate change, the next logical move would surely be to do nothing that would slow growth and technologcal advancement in rich countries -- such as a cap-and-trade regulatory system or onerous carbon taxes -- and do more to accelerate growth in poor ones through free trade and the exporting of democratic capitalism.
In one of its occasional assessments, the Intergovernmental Panel on Climate Change—the co-winner with Al Gore of the Nobel Peace Prize—posited a scenario in which the global economy would grow at about 2 percent a year for the next 100 years with "fragmented" and "slow" per capita economic growth and technological change.
Indeed, it is just this scenario that was used by Stern. By the year 2100, the size of the global economy would be $243 trillion. However, there is another IPCC scenario. It imagines "a future world of very rapid economic growth, low global population growth that peaks in mid-century and declines thereafter, and the rapid introduction of new and more efficient technologies." According to this story line, the global economy would grow at 3.5 percent per year, giving us a $550 trillion global economy in the year 2100, more than twice the size of the economy assumed in the first scenario. That is what we should be shooting for, not the constrained world of slow and "sustainable" economic growth, as thegreenies term it. Faster, please.