In a really good article in the New York Times, Eduardo Porter explains the economic end of the global warming debate in terms that even the most rabid green could understand. His starting point is the competing estimates of the social cost of carbon:
The estimate of $65 a ton is inspired by a moral stance: if warming will impose a cost of 1 percent of the world’s income in the future, we should spend about 1 percent of our income to prevent it — or perhaps somewhat less to account for the trend that people 100 years from now are likely to be much richer than people today.
By contrast, $13.50 a ton comes from the business world. Essentially, it requires that spending to prevent climate change should yield at least the same rate of return, in terms of reduced damages from warming, as any other capital investment.
The two outlooks lead to entirely different decisions. The government’s rendition of the moral approach implies that it is worth making every investment to reduce carbon emissions that has a rate of return of at least 2.5 percent, in terms of avoided damages. Businesss logic suggests that no investment should be made if the return — after taxes — is less than 5 percent.
He then takes readers through the science of discount rates and comes to a surprising conclusion:
...the burden American citizens and businesses will be called on to shoulder is likely to be modest — because business logic is likely to prevail.
Multiple challenges compete for the world’s resources, from economic development and ending poverty to eradicating AIDS and malaria. The climate is not the world’s only priority. Even if we were to agree that improving the well-being of future generations is worth an enormous investment, there might be better things to invest in than reducing greenhouse gas emissions.
If he's right then it may be that sanity has broken out in Washington. The Americans are going to reject Sternonomics out of hand. How long before politicians in Westminster follow suit?
[Whoops - not the WSJ - it's the NYT]