A Black Eye for Environmentalism

Worth A Look, Climate, Frontier Centre

Once the issue of Iraqi disarmament is dealt with, environmentalists will turn our minds back to cutting emissions of greenhouse gases. Remember, Prime Minister Chretien has committed us to do so by ratifying the Kyoto Accord.

By then, however, we can expect the entire scientific basis for the Kyoto Accord to be under severe attack. The International Panel on Climate Change, probably the most prestigious scientific group ever assembled to deal with any global issue, will be backpedaling on the projections it issued in the Third Working Group’s Special Report on Emissions Scenarios. That is the report whose most-quoted projection was that global temperature would rise over the next century by between 1.4 and 2.8 degrees Celsius. That is the report that had convinced most of us, myself included, that doing nothing about climate change was simply not an option. Even delaying a decade to fill in some major gaps in our knowledge about climate change was not an option either.

The backpedaling will not be about the climate models used. There is still disagreement about that, but no more than one would expect about any important issue. This is a world in which even evolution theory does not go unchallenged. Instead, the backpedaling will be about the economics underlying the global output projections which drive the greenhouse gas emissions forecasts, which in turn drive the projections of temperature change.

The output growth assumptions are under severe attack by Ian Castles, the retired chief statistician of Australia, and David Henderson, the retired chief economist of the Organization for Economic Cooperation and Development (OECD). The credentials of Messrs. Castles and Henderson are impeccable. Further, their arguments are based firmly on analysis already accepted officially by the UN, the IMF, the World Bank, and of course the OECD.

How could so eminent a body as the IPCC have made such a mistake? It turns out that while the IPCC’s reports and conclusions about climate matters reflect the inputs of many eminent climate scientists, their assumptions and conclusions about global emission-producing activity do not reflect the inputs of many eminent economists. Otherwise the material error that will undermine global support for the IPCC’s work would have been sptted in time to prevent it.

The big material error is that all the projections of the Third Working Group’s Special Report on Emissions Scenarios are based on a wildly optimistic assumption about how fast developing nations will be able to grow over the coming century. The projections are such that by 2100, the US standard of living will have been caught up to and passed by such economic powerhouses as Algeria, Argentina, South Africa, Libya, and both Koreas – South and North. Over the coming century, per capita income of the entire area of Asia excluding Japan will grow at an average annual rate that is twice as fast as anything achieved by any other single nation over any previous century. Since that area includes the enormous populations of India and China, the mistake matters a lot to any projection of global output.

The output forecasts are based on two ideas. The first is that the developing world will do a lot of catching up to the advanced nations by 2050. The second is that the developing world is now far behind. In order to catch up from far behind, the developing world will therefore have to grow much more quickly than the developed world. The problem stems from the measurement of ‘far behind’ having been hopelessly exaggerated by a material error.

To compare per capita output of the Asian countries with that of the OECD countries, any analyst must convert both to a common unit. The IPCC’s economists used market exchange rates. This is equivalent, as Ian Castles puts it, to having each Indian villager convert his income from rupees to euros, and then buy all of his goods and services at average world prices. Such a measurement yields the result that the OECD nations in 1990 have an output level per capita that is forty times as big as the Asian nations excluding Japan.

What the IPCC should have used is an exchange rate corrected to reflect differences in purchasing power. With that approach, the OECD nations had output per capita that was only ten times as high as the Asian nations excluding Japan, and the multiple has declined significantly since then.

If the Asian nations start much closer to the leading nations, as proper measurement would have shown, then the same degree of catching up implies much slower growth than the IPCC actually projected. Much slower growth for all the developing areas of the globe means much less increase in output, much less increase in greenhouse gas emissions, and therefore much less global warming. How much less neither Mr. Castles nor Mr. Henderson have speculated, but it would surely be of the order of one half to three quarters less. The IPCC will presumably be re-doing its calculations and presenting revised projections sometime later this year, now that its current projections have been shown to be wildly off target.

What follows for Canada? If Russia fails to ratify the Kyoto Accord, our Prime Minister’s decision to commit Canada to its targets for emissions reduction will no longer be binding as a treaty obligation. Otherwise we will be bound to a treaty obligation whose urgency will suddenly be in considerable doubt. The government can use the excuse of mistaken information from the IPCC to back out of the Accord, but at some cost in loss of face. If it goes ahead, it can expect to encounter much greater opposition from the groups that do bear the cost.

With such increased political costs, significant government action on global warming might not happen at all. We might well end up doing nothing.

This would be a pity, since the scientific evidence of current global warming being significantly due to human activity remains as compelling as before, and some further increase to 2050 is still the most sensible forecast.

But just as the pressure for less waste of energy was sapped in the 1980s when the Club of Rome forecasts of imminent global energy shortage were shown to be theoretically unsound, so the pressure for less emission of greenhouse gases will be sapped when the public realizes that the IPCC’s current projections of global warming are all based on fantastic forecasts of global output growth. Our best chance of doing something serious about global pollution levels will have been lost.

Norman Cameron is a professor of economics and a fellow of St. John’s College, University of Manitoba