Bishop Hill For whom the blog Tols
Oct 26, 2011 Climate: WG2 Climate: WG3 Economics Readers will remember the post a couple of days ago about Sir Andy Haines' citation of a new paper by Ackerman and Stanton about the costs of carbon. The paper was much criticised in the comments. This is Frank Ackerman's response. Please could readers try to engage with the arguments rather than piling on.
Is it true that there’s no such thing as bad publicity? If so, we’re in luck. The paper that Elizabeth A. Stanton and I wrote on the social cost of carbon has been discussed by the author of the Bishop Hill blog, and in comments on that blog and on Twitter by Richard Tol.
Bishop Hill cites us as estimating that the social cost of carbon – the monetary value of the present and future damage caused by emitting one ton of carbon dioxide – could be $1,000 or more. Tol calls this estimate “complete nonsense,” and Bishop Hill refers to the increase from the U.S. government’s $21 estimate to $1,000 and higher as “fairly jawdropping.”
Feel free to pick your jaw back up; we never said that the social cost of carbon is $1,000. We did say that the value should reflect important climate uncertainties, and that our modeling of those uncertainties produced a range of possible values from $28 to almost $900 for emissions today, or from $64 to about $1,500 for emissions in 2050.
A wide range of possible values is the only reasonable economic representation of scientific uncertainty about climate outcomes. Since the science says that outcomes are uncertain over a wide range, but catastrophic risks cannot be ruled out, then the corresponding economic evaluation should say that the social cost of carbon (SCC) is uncertain over a wide range, but catastrophically high costs cannot be ruled out. The reduction of the range of potential outcomes to a single, precise value such as $21 (or $1,000) slips in a radical change in the structure of information; it implausibly asserts that economists can find certainty where scientists cannot.
What are the uncertainties we considered? Using William Nordhaus’ DICE model, we examined median vs. 95th percentile climate sensitivity, high vs. low discount rates, and high vs. low estimates of damages at low temperatures, and at high temperatures. The multiple combinations of high/low estimates on four parameters gave us 16 variants of the SCC, spanning that vast range.
Richard Tol, in a comment on Bishop Hill, suggests that his forthcoming literature review of SCC estimates should be used instead of our analysis. In that article, updating his similar, earlier review, he includes 311 estimates, of which 184 (59%) come from his own publications. Those who want a Tol-centric review of the SCC literature should certainly consult his periodic updates, although readers should realize that these articles are self-referential to an extent that is unusual in academic literature reviews.
In debates on Twitter sparked by the Bishop Hill discussion, Tol has raised a number of other complaints. I am accused of having received funding from Friends of the Earth. Guilty as charged. I have also done work funded by the European Commission, various United Nations agencies, national and state governments, and charitable foundations, as well as other environmental NGOs. Tol has, on the other hand, cited obscure legal grounds for failing to reveal anything about his own funding. But really, we should judge one another’s work on the basis of its content, not its funding.
Since the Bishop Hill discussion Tol has tweeted, more than once, his belief that Liz Stanton and I are “mediocre” economists – a very weak substitute for substantive comment on our work. Come on, Richard: hurling hostile epithets at those we disagree with does nothing for the quality of debate.
And Tol has tweeted quite inaccurately about my critique of his FUND model. In an article with another co-author, I found that:
- FUND estimates that the worst economic impact of climate change will be the increased cost of air conditioning
- FUND’s analysis of agriculture assumes a large net benefit from the first several degrees of warming, based entirely on research published in 1996 or earlier (the field has changed dramatically since then)
- Equation A.3 in the agricultural module (see the FUND documentation) of FUND versions 3.5 and earlier contains a serious risk of division by zero, for a plausible (relatively high-probability) value of one of the variables.
FUND version 3.5, containing that software error, was one of three models used in developing the U.S. government’s estimate of the SCC. When I recalculated FUND’s SCC estimate after attempting to correct the divide-by-zero error, the number more than doubled. If you’re interested in this, read my article, and the FUND 3.5 documentation – or if you’re truly fearless, the FUND 3.5 source code.
You won’t be surprised to learn that Tol disagrees. I’m sure you’re about to have a chance to read his response.
Reader Comments (78)
The 'Social' cost of carbon mitigation?....The John Hills report tells a story
Don't Shill for Shally....
http://fenbeagleblog.wordpress.com/2011/10/26/dont-shill-for-shally/
This is absolute nonsense they call it carbon when it is carbon dioxide?
If we stopped emitting CO2 the world would be in absolute chaos this then disproves their argument that there is a net cost to us in emitting CO2.
When will taxpayers money stop being wasted by bureaucrats but even more important when will they be stopped adding costs to the economy.
They should take being called mediocre economists as a compliment, as I wouldn't let them look after my sons piggybank.
1. Discussion is good.
2. Ackerman and Stanton are mediocre economists by objective standards.
3. Mediocre researchers are, of course, capable of useful research. I only raised the issue because Andy Haines exclusively referred to Ackerman and Stanton's unpublished work. If you cite one study only, then pick a published, highly cited one. If you cite one person only, then pick the highest pedigree. On those grounds, Haines should have cited Nordhaus.
4. My funding is audited annually by the Comptroller and Auditor General of Ireland. No irregularities were ever found. Sources include Ireland EPA, US EPA, Asian Development Bank, Ireland Department of Energy, Science Foundation Ireland, and EU DG Research. There is corporate money, from energy companies with interests in peat, coal, oil, gas, and wind. No NGOs.
5. The latest meta-analysis is published. A preprint is available here. The data are here. The results are corrected for author bias, and the data and algorithms are available for all to do their favorite sensitivity analysis.
6. Similarly, the FUND model is fully documented. The input data and source code are freely available. If you do not like our assumptions, you're free to change them. Mr Ackerman forgot to include the link to the Excel version for those who do not appreciate C#.
7. Mr Ackerman correctly characterizes the energy and agriculture impacts in FUND. This material has gone through peer-review again and again. That does not make it right, of course. Mr Ackerman is free to publish his own impact estimates, but has yet to do so.
8. The division by zero is a non-issue. This is done in a piece of model code that was never used by us, and therefore never properly tested. It affects Mr Ackerman's results from our model, but it does not affect our results.
"and that our modeling of those uncertainties produced a range of possible values from $28 to almost $900 for emissions today,"
That is amusing. So the German solar stuff is still pissing money away then ($1070 per tonne CO2 not emitted).
"we examined median vs. 95th percentile climate sensitivity, high vs. low discount rates, and high vs. low estimates of damages at low temperatures, and at high temperatures."
I think we can guess that $900 comes from the 95th percentile, low discount rates, high estimates of damages at high temperatures? That is, the extreme of every component?
You're also rather double counting. High temps mean high climate sensitivity. But you're already including that in using a 95 th percentile number for climate sensitivity. Tsk.
None of your models produce a negative value? There is no benefit to electricity? Ever?
Not freezing to death in the Winter has no benefits?
That tells us all we need to know.
"What are the uncertainties we considered? Using William Nordhaus’ DICE model, we examined median vs. 95th percentile climate sensitivity, high vs. low discount rates, and high vs. low estimates of damages at low temperatures, and at high temperatures. The multiple combinations of high/low estimates on four parameters gave us 16 variants of the SCC, spanning that vast range."
I am sorry, but if all you get is a vast range of numbers and you have no thought process that allows you to assess the most probable, then why bother to venture an opinion? It is like saying that I might die tomorrow or I might die in 40 years' time...who cares?
I thought I understood how to do links.
2. Mediocre economists by objective standards: http://ideas.repec.org/top/top.person.all.html.
5. The latest meta-analysis is published: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-083110-120028. Preprint is available http://ideas.repec.org/p/esr/wpaper/wp377.html. Data: http://dvn.iq.harvard.edu/dvn/dv/rtol
6. Excel version of FUND: http://dvn.iq.harvard.edu/dvn/dv/rtol
[BH adds: I've fixed the links in the original]
We never said that the social cost of carbon is $1,000. We did say that the value should reflect important climate uncertainties, and that our modeling of those uncertainties produced a range of possible values from $28 to almost $900 for emissions today, or from $64 to about $1,500 for emissions in 2050.
Very large differences between bottom and top figures, reads like a catch all MET Office forecast and just as useful. If the UN can use the top level number of the % of energy produced from renewables in the future then I see no problem with BH or RT using $1000 from the $64 to $1500 range.
Thanks Mr Ackerman for adding your perspective.
CO2 causes increased plant growth and some suggest, without any evidence, that it may cause warming. Warming is also a benefit to most plants and animals. Surely we should be paid for emitting CO2 and therefore "the social cost" of CO2 should be negative. I see no negative values in the article.
It's interesting to compare Sir Andy Haines' original quote - that some estimates of the social cost of carbon were around the $1000/t mark - to what Frank Ackerman says here - that he was saying no such thing.
This is the way foolish policy decisions are made I would say.
Frank
What do you say to Sir Andy Haines' use of $1000/t at the BMJ conference?
Mr Ackerman
In analyses like these, the reason for utilizing high estimates of climate sensitivity is two-fold:
[1] it is congruent with a catastrophism-precautionary principle outlook
[2] it enormously widens the range of the outputs (in the present case, the 'social cost of carbon'), such that it accomodates for catastrophism. In other words (notably, in your words), the ranges are nothing by the 'structure of information' in which alarmism resides.
Why should we adopt [1], or allow you to carry out [2]?
Your paper provides no rationale. The 95th percentile of climate sensitivity by IPCC estimates has been adopted by you, ad hoc, as a self-percieved counter-measure to consciously increase the caclulated metric - the social cost of carbon, in order to influence the Obama adminstration and the EPA. Your own document states as much.
In other words, the $1000 is in the range, just so it can be somewhere in there. To be used by those how wield power and know to pick up on such things, on cue.
The precautionary principle or the principles of catastrophist analysis are not universally accepted. I don't accept them, nor do a good number of my fellow readers here, I suspect. These types of tricks are practised almost daily in the climate community, in environmental sciences, and in the public health sciences, and many are quite familiar and easily hop over these pitfalls. The methodologic issues are therefore secondary.
@Bruce
In FUND, there are three major benefits of climate change: carbon dioxide fertilization a reduction in winter heating costs, and a reduction in cold-related mortality and morbidity.
Mr Ackerman takes issue with those benefits. In this paper, Mr Ackerman dismisses a large body of epidemiological research that cold is bad for your health. http://www.sciencedirect.com/science/article/pii/S0921800907005071
In the same paper, he complains that he cannot reproduce an earlier result of mine, even though I had pointed out to him earlier that his reverse-engineered model is incomplete.
Richard
There is a free version of the paper here.
Richard Tol | Oct 26, 2011 at 6:47 PM
Interesting first link.
I note you are significantly ahead of Lord Nicholas Stern in the rankings.
Way to go!
This is all irrelevant. Ackerman and Stanton accepted the consensus (IPCC) numbers on faith. Garbage in, garbage out. Just another waste of everyone's time. Mr. Ackerman, the consensus is incompetent, and there is no greenhouse effect, of increased atmospheric temperature with increased atmospheric carbon dioxide, whatsoever, as proved by a proper, and quite simple, comparison of temperatures in the atmospheres of Venus, with 96.5% carbon dioxide, and Earth, with just 0.04% (which I have done, and you should read it, and pass the word).
Has an analysis been conducted on the societal value of economists...
...I suspect they are a net negative, despite the Hayek-Keynes video, of course.
Frank Ackerman,
Your analysis suggests that you have actual evidence to believe that man's CO2 (not carbon) is capable of altering the climate in a way that is damaging to man. (If you did not have such evidence, why did you spend so much time looking at possibilities.)
Please share that evidence with us. (Keep in mind that unusual weather is NOT proof of CO2 or man being the cause. Same for melting ice and growing polar bear populations. And the inability of the IPCC to find another cause is NOT reason to blame CO2)
Thanks
JK
Agree with Bruce's point. What is the value of cheap and sustainable fossil energy over unaffordable unsustainable "renewable" energy?
If this is not included, you might just as well argue that insurance is worthless if you never claim on it, because it's a cost with no benefits. It is essentially the same argument.
"....A wide range of possible values is the only reasonable economic representation of scientific uncertainty about climate outcomes......"
So the outcome could result in zero cost, or an actual gain - but there's no mileage in projecting possible good news, is there?
@Oct 26, 2011 at 6:49 PM | Bruce
@Oct 26, 2011 at 7:53 PM | Richard Tol
So far as I am concerned you have both hit the nail straight on the head.
Whilst I'm not an economist (I'm a Civil Engineer), the idea that the "social cost" of "carbon" emissions today even might be $900 per tonne today or $1500 in 2050 is as far fetched as rocking horse shit from China. The fact that it is suggested that it equally could be "just" $28 today gives you a good feel for the Texas Sharpshooter game they are playing. but the fact that they really cannot imagine any scenario where there is a net benefit is proof positive that they are either totally incompetent (never mind 'mediocre') or are so blinded by their 'true religion' that their "results" must be considered the result of "noble cause" corruption and totally without merit.
The fact that they are funded by and active members of NGO activist groups is merely the icing on the cake. Who would have thought it?
' possible values from $28 to almost $900' sometimes the errors bars are so wide that anything in-between has virtual not meaning , this would seem to be the case in this instance 'uncertainties' indeed .
Meanwhile the authors seem to happy to enjoy how this paper was 'misused' when it brought them a degree of 'fame ' its only once people started asking questions that they became 'concerned '
As the old saying goes , if you sup with the devil make sure you use a long spoon .
"Using William Nordhaus’ DICE model, we examined median vs. 95th percentile climate sensitivity, high vs. low discount rates, and high vs. low estimates of damages at low temperatures, and at high temperatures."
How did you estimate the benefits?
The one, extremely simple question, that noone I've discussed the issue of global warming with can give a coherent and fact based answer to is: "What are the potential advantages of a warmer world containing more CO2?"
The answer to that question infallably start with "I guess...".
I simply find it unbelievable that with such a huge range between maximum and minimum values, that the lowest value should not be negative.
So, which benefits of a warmer world with higher CO2 level was accounted for in the paper?
The report contains the following:
If it is not an observable price it is nothing more than an opinion.
The report is clear enough that there are many and wide uncertainties but we already have an example of how the divined costs from the more extreme projections are casually inserted into others' claims and statements without the qualifying conditions that produced them.
@Gareth
"If it is not an observable price it is nothing more than an opinion."
Now, now. Very few things are directly observable. Most "observations" are either model or statistical constructs. This is true in physics, in chemistry, in medicine, and in economics.
For instance, you do not observe temperature. You observe the volume of mercury. You deduce the temperature -- or let the thermometer, a model that translates volume into temperature, do the work for you.
Yes, Richard, but you do not take a infra-red photograph of the medical ward every morning, and use a predictive computer model to find out who has fever every day, during rounds.
Three quick googles for, what is the value of a human life?
Orley Ashenfelter of Princeton University Chicago, place the value at $1.54 million.
Time magazine 2008, place the value at $129,000
EPA 2011 place the value at $9.1 million, and the same article says the FDA's value is $7.9 million.
So, how many people die from the cold (and not age) each year again?
Well the obvious question to ask is what has been the social cost of industrialisation up to this day? It would appear that CO2 emissions are not just a net positive, but indeed are the difference between prosperity and poverty. If you want to eradicate hunger & disease and create wealth it seems your best bet is burning as much CO2 as you can and putting that energy to productive use. The social cost of carbon is a median wage in the tens of thousands instead of the hundreds, and the associated societal benefit. For every tonne of carbon burnt you get productivity, you get jobs, you get food on tables and roofs over heads.
On the other hand, the cost of any carbon beuraucracy will be an enormous impost on this productivity and will hinder any country stupid enough to believe that trading permits will accomplish anything outside of enriching speculators. It certainly won't help the environment at all. Greetings from Australia.
"we can obtain a more accurate understanding of the welfare consequences of policy choices by incorporating that shadow price for emissions."
Given that the bounds on the guesstimated value of this unobservable price are so wide, how can it give an accurate understanding of anything?
@Shub
You could, but you don't, because there is a simpler, cheaper, and sufficiently reliable method.
In many cases, though, you can only "observe" things in a rather roundabout way. Dismissing all that as "opinion" would set back science by a couple of centuries.
In the absence of any evidence that there is a "cost" to emitting CO2, the real cost to the UK economy of the Friends of the Earth drafted Climate Change Act, may be estimated by how many billion pounds per page?
Richard Tol
Unfortunately climatologists have set science back by a couple of centuries.
I do not include you by the way!
True Richard, but we always (ought to) strive to let our models be closer and closer to reality, rather than stop at a convenient distance (just where the possibility of catastrophe cannot be excluded, for some people apparently).
If we were all Weitzmann's disciples, there would be no impetus to seek to diminish their beloved uncertainties simply because it could exclude preventive action!
Bishop
liked this odd comment from the link -
"Now that we know how much we could end up paying to endure the impacts of climate change, investing in reducing our emissions is clearly the prudent option," says Frank Ackerman, Ph.D., director of SEI's Climate Economics Group, who co-authored the report with senior economist Elizabeth A. Stanton, Ph.D. "It's the difference between servicing your car, or waiting for it to break down on the highway."
let them all break down Frank, as long as the bandwagon keeps rolling what could go wrong.
The Ackerman and Stanton paper (linked above) has very confusing phraseology, especially towards the end. The authors seem to be about to critique three "faulty assumptions" in Bosello et al, the first is "human populations are assumed to be unable to adapt to new climatic conditions, continuing to respond as they do today even as average temperatures gradually climb." Is that Bosello's "faulty assumption" or is that the A&S counter assumption or a mixture? I would wholeheartedly recommend that the paper be rewritten with clearer phrasing. I would also recommend reexamining the evidence for mortality from "extreme weather", for example Katrina was more of an example of a very poorly chosen and poorly maintained location for a large population than of a consequence of extreme weather, whether due to climate change or not.
Ah, so now we have Post Modern Economics to go with Post Modern Science and Post Modern Statistics.
Frank, 'tis all BS.
Remember, you need hockey puck statistics to get a hockey stick graph -- or should it be graft?
And I have a bunch of squirrels up in my pine trees telling me all summer and fall that we are in for a bad winter here in California. Could you please explain to them why they are wrong about going into a frenzy to fatten up.
And before you laugh too loudly, I would point out that an Irish mailman in Donegal has been predicting the weather in northern Ireland a good deal more accurately than either the Met or the Carbon Madness you propose.
Donegal Weatherman
I sympathize with Frank Ackerman. Deriving the social cost of a tonne of CO2 is horribly complex with many large uncertainties and a fair few complete unknowns. None the less policy makers demand an answer.
I'm familiar with producing these kinds of cost/benefit analyses and know that you can get pretty much any result you want by quite small changes in assumptions and input values.
IMO, these kinds of models are just confirmation bias on steroids. I'd find a cost benefit/analysis based on actual data from experiences to date much more persuasive, but then that would show huge costs of mitigation for minimal benefits (or even negative benefits, definitely the case for biofuels). Without large future costs, none of the CO2 reduction and mitigation efforts make economic sense.
One is curious to know Sir Andy's thoughts on the following scenario:
"Our company's profit margin, gross profit and net profit have been in decline for several years. In order to avert the possibility of the company going broke, we have taken a range of projections of inflation over the next five years, which range from 1% to 30% and have picked the high end just to be sure. Therefore, we propose to increase the fees we charge by 30% per p.a. over the next 5 years to ensure we cover all possible scenarios."
Would sir Andy's opinion change if he discovered that the company involved was the one managing his retirement funds?
This is really stupid.
It is completely obvious that there mut be a net benefit to humanity by any modest warming that is possible to envision.
Placing a single cost on carbon is also ridiculous as there are many different forms of carbon, each with its own charactaristics and values - think diamond, think graphite - think lamp black, bucky balls and so on.
The common dioxide of carbon is essential to life and its value is therfore infinite.
Don't these people have days jobs to attend to and after hours responsibilities to their family and community?
Idle minds do the devils' bidding.
Sheeze - whatever that means!
Does the fact that a warmer world has historically meant a flourishing of civilizations count at all in any of these alarmist conclusions? Should anyone even dignify responding to such mind numbing silliness?
Presumably Professor Tol was not a reviewer of the Ackerman and Stanton paper.
"we examined median vs. 95th percentile climate sensitivity..."
Wait just one cotton-picking minute. Shouldn't that be "5th percentile versus 95% percentile"? How is this not a perfectly transparent attempt to bias the perceived result towards that implied by the upward extreme?
Clearly, using the median didn't produce sufficiently extreme results. If the argument is that there's a wide range of values and we should take that range into account, you need to look above *and below* the median to see what that full range implies. People are pre-programmed to assume that if you give a range of results the true value is likely to be "somewhere in the middle", but in this case your low end is already our best estimate, the most common, the most likely result. If you can't exclude the 95th percentile it's just as true that you can't exclude the 5th percentile. So what does the 5th percentile sensitivity estimate imply? Showing the middle and the high cost but not the low cost estimate presents a false picture.
@Eric
I'm not sure what that sentence means. In our model, though, people acclimatize, taken away a lot of the potential impacts of heat and cold stress.
Why the discussion? Has someone finally given us empirical proof that CO2 is at fault?
"Now that we know how much we could end up paying to endure the impacts of climate change, investing in reducing our emissions is clearly the prudent option," says Frank Ackerman, Ph.D., director of SEI's Climate Economics Group, who co-authored the report with senior economist Elizabeth A. Stanton, Ph.D. "It's the difference between servicing your car, or waiting for it to break down on the highway."
Yeah.
Except when the price of the service starts at £100,000, a shiny new model like the one you have is £20,000, you know that serviced models only work in bright sunlight and steady winds and are way more unreliable than the car you have at present and the garage usually kills a couple of mechanics during servicing. Add the fact that the garage is owned by a greedy, arrogant crook.
So what you going to do, Frank?
Which way to go?
@Philip Bratley
This paper tests for confirmation bias and rejects it. See Figure 2.
http://ideas.repec.org/p/esr/wpaper/wp377.html
I have just carried out an opinion poll of 1000 people and my findings are that between 3% and 90% will vote conservative. As to my competence am I
A A crap statistician or B A crap statistician.
I'm not that bad because the Sun says the Tories are in the lead whilst The Mirror says Labour are in the lead?
"The price of shares and the income derived from them can go down as well as up and investors may not get back the amount originally invested. Investors should be aware that past performance is not necessarily a guide to future performance."
The estimation of "$64 to about $1,500 for emissions in 2050" could equally drop to below $21 if it becomes clear that the growth in atmospheric CO2 is not associated with industrial emissions.
Richar Tol
From your link,
Figure 2 shows that newer studies regularly challenge the conventional wisdom.
Indeed, the confidence interval is widening over time, rather than narrowing.
Confirmation bias is not something to worry about in this field.
With respect, a widening estimates aren't evidence for the absence of confirmation bias. Although you could argue they are evidence for decreasing confirmation bias. Which is a good thing.