Action on climate change will cost

September 24, 2007

Bill Clinton is bullish on climate change. “There is way more econ­omic opportunity than cost,” he told the Financial Times. Unfortunately Mr Clinton’s statement is wrong – cutting greenhouse gas emissions will have costs – and while playing down those costs may seem like good politics today, it will not serve Mr Clinton’s cause in the longer run.
In December, at a United Nations summit in Bali, the world’s leaders will begin negotiating a successor to the Kyoto protocol. That deal is crucial. Action to avert the worst effects of climate change cannot be postponed for ever. With Monday’s UN meeting and the Bush administration’s own climate change talks later this week, manoeuvring ahead of the summit is now in full swing.
Those manoeuvres are shaped by US opposition to Kyoto and by the need for large developing countries – especially China and India – to sign up to a successor. Mr Clinton was quite right to say that less developed countries cannot be expected to control their emissions unless the US gives them a lead.
Mr Clinton is wrong, however, to try to boost US support for action by playing down its costs. The Intergovernmental Panel on Climate Change estimates that action to avoid the most dangerous effects of climate change would reduce the world’s annual gross domestic product by 3 per cent by 2030: not an intolerable burden, but still painful.
Mr Clinton – and Mr Bush – imply there is an alternative. New technologies – solar panels, hydrogen-fuelled cars, and others as yet unimagined – will cut carbon emissions and make the US richer. But while technological fixes are essential, they will be developed only if there are costs to carrying on business as usual, and that means imposing painful taxes or restrictions on greenhouse gas emissions.
Mr Clinton calls for a burst of economic activity on climate change similar to US mobilisation for the second world war, but a better model is the settlement of the American West. The first was government directed and of short duration. The second was the result of thousands of individuals responding over many years to sensible incentives laid down by the government.
That is what needs to happen on climate change: the world needs to put a price on carbon emissions and let the market respond. If politicians pretend this can be done without pain, Bali will probably result in another five to 10 years of pretending to take action. Mr Clinton has the standing to help sell action on climate change to the public. He should not conceal its cost.