Copyright Forbes
Shortly before COP30, Bill Gates urged the global community to focus primarily on improving human welfare, health, and agriculture in the developing world. This message represents a major shift from his previous view that climate change is an urgent, existential threat, requiring that the global community’s primary focus be on making large immediate investments in emission reduction technologies. Gates’ two views, previous and current, respectively correspond to the positions articulated by economists William Nordhaus and Sir Nicholas Stern in a famous debate which took place in 2007. Gates’ current view is close to the position advocated by Nordhaus while his previous view is close to the position advocated by Stern. If Gates’ new view is right, then the economic analysis underlying the Nordhaus-Stern debate provides some stark conclusions. Specifically, the analysis suggests the following: By continuing current rates of emissions, at the end of the century, atmospheric temperatures will approach 4 degrees Celsius above pre-industrial levels; however, because of technological advances, standards of living will be 3.91 times greater than they are today. By following Nordhaus’ recommended rates of emission, at the end of the century, atmospheric temperatures will exceed 3 degrees Celsius above pre-industrial levels; however, because of technological advances, standards of living will be 3.93 times greater than they are today. By following Stern’s recommended rates of emission, at the end of the century, atmospheric temperatures will exceed 2 degrees Celsius above pre-industrial levels; however, because of technological advances, standards of living will be 4.27 times greater than they are today. The above three points are all premised on Gates’s new view being correct, because the implications are monumental for emissions policy. A key takeaway from the analysis, and it is traditional economic analysis, is that technological advances will dominate damages from climate change. In particular, emissions policy exerts only minor effects on standards of living at the end of the century. For this reason, the premise of Gates’ argument is critical; and it becomes crucially important to understand the nuances of the Nordhaus-Stern debate. Integrated Assessment Models And The Historic Nordhaus-Stern Debate An economic integrated assessment model brings together the models of climate science and economic analysis. In 2018, economist Nordhaus received a Nobel prize for his work developing the first IAM. His model provides a coherent framework for analyzing the different perspectives, such as those of Nordhaus and Stern, and the current and previous views advocated by Gates. MORE FOR YOU Nordhaus’ IAM generates forecasted trajectories for several basic variables such as emissions, gross domestic product, consumption per capita, atmospheric concentration of carbon, and atmospheric temperature. As such, the IAM is central to analyzing how different policies might impact the co-evolutions of economic growth and atmospheric temperature for the remainder of this century. In 2007, Nordhaus and Stern offered sharply differing recommendations for future emissions trajectories and associated forecasts for atmospheric temperature increases. The emissions trajectory favored by Nordhaus featured temperatures rising by 3.5 degrees Celsius, whereas the trajectory favored by Stern featured temperatures rising by 2.3 degrees Celsius. The difference in Nordhaus’ and Stern’s recommendations potentially boil down to differences about three issues: the importance the current generation attaches to the welfare of future generations; the magnitude of the damages which higher temperatures impose on economic output; and Improvements to productivity stemming from technological advances. In the debate, Stern emphasized the first two issues. Compared to Nordhaus, Stern attached much greater emphasis to the future damages that current emissions would bring because of climate change. In this respect, Nordhaus attached much greater emphasis to future productivity gains, including gains in emissions reductions and the removal of carbon dioxide from the atmosphere. Notably, Nordhaus forecast that at the end of the century, technological advances would lead people to be much better off than they had been in 2007, in spite of climate change. Technological advances are a crucial component of IAMs. Under the assumptions Nordhaus makes about climate damages, his IAM implies that technological advances will lead people to be better off at the end of the century than they are currently. Under the same assumptions about damages, at the end of the century, people will be a bit better off under Stern’s recommended policy than under Nordhaus’ recommended policy. However, the difference in standard of living between the two is small, because technological advances dominate climate damages. Even more important is that maintaining current high emission rates will, in the model, produce about the same standard of living at the end of the century as implied by Nordhaus’ recommended policy and Stern’s recommended policy. Assumptions Underlying Gates’ Basic Argument With the above discussion in mind, consider Gates’ new view. In this regard, passages within quotation marks below indicate statements Gates made in his blog post explaining his new view. Gates’ new view features “three truths,” which are as follows: Climate change is a serious problem, but it will not be the end of civilization, even if the global temperature rise (above the pre-industrial period) reaches 3 degrees Celsius by the end of the century. Indeed, “between now and 2040, we are going to fall far short of the world’s climate goals. One reason is that the world’s demand for energy is going up—more than doubling by 2050.” Temperature is not the best way to measure our progress on climate. A better metric is quality of life. Health and prosperity are the best defense against climate change. In this respect, Gates states: “Quality of life may seem like a vague concept, but it’s not. One useful tool for measuring it is the United Nations’ Human Development Index… The 30 countries with the lowest HDI scores are home to one out of every eight people on the planet, but they produce only about one third of 1 percent of global GDP. They have the highest poverty rates and, tragically, the worst health outcomes.” Catastrophic Climate Risk The situation described by the three truths are consistent with the features in Nordhaus’ 2016 IAM, especially in regard to climate damages and technological progress. The “end of civilization” view described in Truth #1 is encapsulated in the assumption of much larger climate damages than those built into Nordhaus’ 2016 IAM. The late environmental economist, Martin Weitzman, provided what is arguably the most important critique of the Nordhaus-Stern debate. Weitzman contended that reducing emissions was less about standard of living and more about managing catastrophic climate risk. Nordhaus had great respect for Weitzman, publicly stating that he himself had mused, before being awarded the economics Nobel, that he might be sharing the prize with Weitzman. Weitzman’s contention that emissions rate reduction is a risk management issue was consistent with the views of climate scientists such as Tim Lenton, the founding Director of the Global Systems Institute at the University of Exeter. Lenton has long emphasized the importance of risks attached to crossing dangerous climate tipping points, for example associated with the Amazon jungle or polar ice sheets. He has been vocal in criticizing the global community for failing to treat climate change as a risk assessment. Lenton is critical of Nordhaus for failing to incorporate tipping points into the climate damage component of his IAM; and he is especially critical of Nordhaus for using his, meaning Lenton’s, research to justify the omission. The Weitzman-Lenton catastrophic tipping point issue represents the most serious concern with Nordhaus’ recommended emission trajectory, and by implication with Gates’ new climate view. Taking catastrophic risk into account shifts the balance of the argument from Nordhaus’ position to Stern’s position. Likewise, it shifts the balance from Gates’ new view back to his previous view. Reducing emissions is a risk management strategy to manage the risk of catastrophic climate risk. Failing to reduce emissions leads to an increased risk of incurring significant climate damages, and sharply reducing expected standards of living at the end of the century. In contrast, setting emissions in line with IAM recommendations, in the face of catastrophic tipping point risk, still leads to the following prediction: Standards of living at the end of the century will be much higher than current levels, just not nearly as high as under Nordhaus’ original assumptions. If Gates’ new view is valid, then emission rates, carbon taxes, and fossil fuel subsidies are relatively minor issues. On the other hand, if Gates’ new view is invalid, because of catastrophic risk, then emission rates, carbon taxes, and fossil fuel subsidies are critical. Gates new view is centered on his statement: “People will be able to live and thrive in most places on Earth for the foreseeable future.” This is a belief, rooted in the confidence that technological advances will dominate climate damage. Moreover, it is Gates’ current subjective belief, presented without identifiable support from the mainstream climate science community. The failure to address the risk management perspective articulated by experts such as Weitzman and Lenton is a serious weakness in Gates’ argument. Conclusion The “end of civilization” view represents an extreme assumption about climate damage. In Nordhaus’ IAM, it is possible to make damages more severe than those in the 2016 IAM, and yet not imply the “end of civilization.” In this respect, going from one extreme assumption to another can be dangerous. Gates’ recommendation to focus on technology is supported by IAM analysis, but only up to a point, and that point is the management of catastrophic climate risk. Gates’ statements about thriving in a world that is warmer by 3 degrees Celsius requires support by mainstream climate scientists. In the absence of evidence that the climate science community has significantly revised its position about the threat of damage to the climate from high temperatures, it would be wise to take Gates’ newly adopted view with caution.
