Murphy on Nordhaus versus the UN
By David Henderson
In light of Nordhaus’s calculations shown above, the apparently urgent need for “climate action” is not so urgent. It now looks more analogous to economists discovering the theoretical possibility of an “optimal tariff” but still understanding that free trade is the safest rule of thumb.
This is a key paragraph from Robert P. Murphy, “William Nordhaus versus the United Nations on Climate Change Economics,” the Econlib Feature Article for November. I think that’s a nice analogy.
A couple of other highlights follow. The first is the implications of the UN’s preferred policy for the gasoline tax, a calculation I had not seen elsewhere:
To translate this into plain English, the RFF [Resources for the Future] writers are explaining that the measures considered in the latest UN report are going to reduce particular units of emissions at a cost to the conventional economy of up to $5,500 per ton in 2030. (A carbon tax of $5,500 per ton works out to a gasoline tax of $48 per gallon.) In a standard cost-benefit approach, this would be economically efficient only if the estimated social cost of carbon were also in this range.
On how much higher than the Obama administration’s estimate the damage from carbon would have to be to justify the UN’s extreme goal:
What does the economics of climate change literature have to say about the social cost of carbon? The Obama Administration established an Interagency Working Group on the Social Cost of Carbon (SCC), in which it used leading models—including Nordhaus’s DICE, along with two others—to estimate the SCC through the middle of the 21st century. According to its last update, published in early 2017, the Obama EPA reported that the SCC in 2030, using the standard 3% discount rate, would be $50 per ton. Thus, the UN’s target of 1.5°C is implicitly treating the marginal units of greenhouse gas emissions as being anywhere from 1.6 to 100 times more damaging than the Obama Administration’s team estimated.
The whole thing is well worth reading.