November 28, 1997

How Fast to Cut Back? Two Views

By PETER PASSELL

hat, Americans worry?

To the frustration of environmental activists, the still-distant risks from global warming have yet to grab the attention of Main Street. But to many economists, the difficulty in mobilizing public support to meet America's international commitment to reduce greenhouse gas emissions to 1990 levels by 2010 may yet prove a blessing. For while some of the skepticism about the virtue of quick, decisive action is coming from the energy and auto industries, most independent experts also urge a long, hard look before we leap.

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To be sure, there may well be easy opportunities to slow global warming through bottom-up steps like better insulation and modest changes in agricultural methods.

But crash programs, most economists argue, are apt to increase the cost of containing emissions without increasing the benefits. More important, they question the logic of diverting vast economic resources from other uses without a better understanding of the payoff. "The most effective policy won't be the most dramatic," cautioned Robert N. Stavins, an environmental economist at the Kennedy School of Government at Harvard University.

The economists' immediate concern is the difficulty of slowing emissions without support from China, India, Brazil and a half-dozen other big emerging economies. While Europe, America and Japan are heavy emitters of greenhouse gases, it's widely agreed that the cheap fixes lie elsewhere.

William Nordhaus, an economist at Yale University, estimates that bribing or bullying the developing world to switch to energy-saving, carbon-sparing technologies -- things like insulating buildings and generating electricity with natural gas rather than coal -- would get the job done for one-ninth the cost of squeezing comparable emissions out of the developed economies. His computer simulations suggest that cutting emissions in the United States back to 1990 levels by 2010 would require a doubling of energy prices, "more than the price run-up during the two oil crises," he noted.

Just as costly as doing it in the wrong place would be doing it at the wrong pace.

A blitzkrieg on emissions, compared with a more deliberate effort to pick the low-hanging fruit first, would require that relatively new carbon-emitting capital -- power plants, industrial equipment and vehicles -- be scrapped rather than replaced gradually. And it would force countries, companies and consumers to adopt exotic greenhouse-friendly technologies like fuel cells before they are fully worked out -- or fully affordable.

No less important, a rapid transition would tie up capital that could otherwise be used to increase productive capacity.

A hundred billion here, a hundred billion there could add up to real money.

Economists also note that while the debate in Kyoto is about annual levels of emissions, what matters in terms of climate change is the accumulated levels of greenhouse gases. Alan Manne of Stanford University and Richard Richels of the Electric Power Research Institute, a research organization in Palo Alto, Calif., that is supported by the power industry, compare two paths to stabilizing atmospheric carbon at 550 parts per million, double preindustrial levels, around the end of the 21st century. With the rapid transition mandated by current international agreements, annual emissions would peak at seven billion tons around 2050. But on a cost-minimizing path, the emissions would peak at 10 billion tons but then fall more rapidly to achieve the same atmospheric concentration of greenhouse gas.

Taking the faster route to the same end would double the cost, adding a trillion dollars to the ultimate bill. "So much depends," Dr. Richels said, "on what we call 'when flexibility.' "

If the issues of where and when emissions should be curbed give policy wonks reason to pause, they pale in importance beside the core question: How much is climate stabilization really worth?

Sharp, rapid increases in temperature might transform the biosphere in catastrophic ways, conceivably threatening human survival. But the pace and amount of warming that the Intergovernmental Panel on Climate Change now views as most likely -- an average increase of about four degrees Fahrenheit by 2060, with an increase in rainfall of 7 percent and a one-foot rise in sea level -- suggest a different story.

According to the most plausible computer simulations, the economic impact on the temperate zones would be relatively small; increases in agricultural productivity could more than offset the added costs from storm damage and coastal flooding. Canada and Russia could be big winners, as their growing seasons lengthen and heating bills fall. Even the United States might come out ahead: Robert Mendelsohn, an economist at Yale, estimates that output would increase by $37 billion.

The picture is far more dire for the poor, predominantly agricultural tropics, vulnerable to flooding, drought and epidemics. But in a world of limited resources, and limited generosity, Thomas Schelling, an economist at the University of Maryland's School of Public Policy, argues that it would make more sense to divert the sums needed to curb global warming into investments that mitigate poverty in the developing world.

"They have more immediate environmental problems -- sanitation, congestion, disease -- that demand prior attention," he said.

"Their best defense against climate is their own development."

Many economists who are sanguine about the likely consequences of unchecked temperature increases would still recommend buying some insurance against less likely catastrophe scenarios -- for example, the possibility that the melting of polar ice could liberate trapped methane and lead to runaway warming. But they insist that it would be irrational to throw big sums at risks this remote. Dr. Nordhaus, the Yale economist, said, "I've seen nothing that justified increasing the wholesale price of energy by more than 10 percent," roughly a nickel a gallon at the gasoline pump.

In light of both President Clinton's reluctance to do much without the participation of the developing world and the resistance of Congress to any increases in energy prices, the hurdles to any consensus on swift action appear formidable.

That will please analysts who see nothing good coming from on-again, off-again hysteria over climate warming. But it worries Dr. Nordhaus, who wonders how we will ever learn to walk without a few baby steps.

"Let's do something modest," Dr. Nordhaus urged, "but let's really do it."