‘Net Zero’ fails cost-benefit test at COP28

World leaders are gathering in Dubai for another climate conference, which will no doubt yield heady promises along the lines of the 2015 Paris climate agreement to keep the global temperature’s rise “well below” 2 degrees Celsius and pursue efforts to limit it to 1.5 degrees. But they’d be wiser not to. New research shows how extravagant climate promises are far more wasteful than useful.

As reported by Wall Street Journal, a new special issue of the journal Climate Change Economics contains two ground-breaking economic analyses of policies to hold global temperatures to 1.5 degrees and its practical political interpretation, mandates to reach net zero, usually by 2050. Though more than 130 countries, including most of the globe’s big emitters, have passed or are considering laws mandating net-zero carbon emissions, there’s been no comprehensive cost-benefit evaluation of that policy—until now.

"One of the Climate Change Economics papers is authored by Richard Tol, one of the world’s most-cited climate economists. He calculates the benefits of climate policy using a meta-analysis of 39 papers with 61 published estimates of total climate change damage in economic terms. Across all this, Mr. Tol finds that if the world meets its 1.5 degree promise, it would prevent a less than 0.5% loss in annual global domestic product by 2050 and a 3.1% loss by 2100.

If that sounds underwhelming, blame one-sided reporting on climate issues. While headlines tend to focus on stories of violent climate catastrophes and modeled worst case scenarios, the data reveal a far less frightening picture. Despite a drumbeat of stories this summer about rising heat deaths, higher temperatures also prevent cold deaths, and so far in much greater number. Globally, the result has been fewer overall temperature-related fatalities. Writ large, the damage the world experiences each year from climate-related disasters is shrinking, both as expressed in fraction of GDP and lives lost.

While media coverage tends to hype the benefits of climate policy, it plays down the costs, which Mr. Tol’s analysis shows are substantial. Based on the latest cost estimates of emission reductions from the United Nations climate panel, he finds that fully delivering on the 1.5-degree Paris promise will cost 4.5% of global GDP each year by midcentury and 5.5% by 2100. This means that likely climate policy costs will be much higher than the likely benefits for every year throughout this century and into the next. Under any realistic assumptions, the Paris agreement fails a basic cost-benefit test.

The reality would likely be worse than Mr. Tol’s estimate. He unrealistically assumes governments will implement policies that meet these temperature targets at the lowest possible cost, such as a globally uniform, increasing carbon tax. In real life, climate policy has been needlessly expensive, with a plethora of inefficient, disconnected measures such as electric-vehicle subsidies. Studies show that the policies actually being enacted to curb carbon emissions will cost more than twice the theoretical expense Mr. Tol outlines.

This is borne out in the second Climate Change Economics study. The peer-reviewed paper from MIT economists identifies the cost of holding the temperature’s rise below 1.5 degrees as well as that of achieving net zero globally by 2050. The researchers find that these Paris policies would cost 8% to 18% of annual GDP by 2050 and 11% to 13% annually by 2100.

Climate economic models all show that moderate policies make sense—initial carbon cuts are cheap and prevent the most damaging temperature rise—but net zero doesn’t. Averaged across the century, delivering the Paris climate promises would create benefits worth $4.5 trillion [in 2023 dollars] annually. That’s dramatically smaller than the $27 trillion annual cost that Paris promises would incur, as derived from averaging the three cost estimates from the two Climate Change Economics papers through 2100.

In other words, each dollar spent will avoid less than 17 cents of climate damage. The total, undiscounted loss over the century is beyond $1,800 trillion. For comparison, global GDP last year was a little over $100 trillion. Although well-intentioned, current climate policy would end up destroying a sizable fraction of future prosperity.

For the world leaders assembling in Dubai who actually wish to help the world, a sensible alternative is ramping up research and development in low-carbon technologies to innovate green energy that will be cheap enough to outcompete fossil fuels. That would protect the economy and ensure clean energy’s adoption not only in rich, climate-concerned countries but in places like China, India and Africa. The MIT study highlights that breakthrough technologies could dramatically lower climate policy costs. A study by a researcher for the Copenhagen Consensus shows that competitive government investment in green R&D would be 66 times as effective as Paris policies, while costing between 1% and 10% as much.

Unfortunately for the world, a serious cost-benefit discussion isn’t likely to make the Dubai agenda".