Select Committee on Economic Affairs Minutes of Evidence

Examination of Witnesses (Questions 220-231)

Professor Richard Tol


  Q220Lord Lawson of Blaby: Professor Tol, you apologised for giving a very long answer to the first question you were asked by our Chairman. You need not have apologised at all. In my judgment, it was one of the most important and illuminating answers that we have received, and it is something which, as a committee, I think we will wish to ponder very carefully, so thank you for it. Coming on to the general approach to this problem, going beyond the technical points, would you agree that maybe in some quarters there has been excessive alarm generated about the likely climate change over the next hundred years, in the sense that this is not the end of the world? It is something that is likely to cause, in addition to some benefits perhaps, considerable difficulties, and including in some cases death. But of course that is something that governments have always dealt with. You yourself said that in the case of transport policy. All the time you have to accept that you could have a rail system—and this is a very topical thing in the United Kingdom—that has a much higher degree of safety, but the cost would be enormous compared with the number of deaths that you would be likely to prevent. This is not new, and not something that only applies in the area of climate change. You listened to the previous witness, Professor Lomborg, who was suggesting that of course you can spend a very large amount of money to reduce somewhat the likely greenhouse gas emissions, and as a result of that you will mitigate a number of hardships and prevent some deaths; but that there are other policies quite outside cutting back on greenhouse gas emissions which, for the same amount of money, you could do far more work in mitigating the damaging effects of climate change and save many, many more lives. Since resources are always finite, resources are limited, and governments have to choose how they are going to deploy their resources—and it is not an entirely unfettered choice because public opinion will impact in a democracy—there is that choice. What is your view? Do you think that there is a risk that maybe governments have become blinkered and are on a track that is not entirely rational, and that maybe sometime in the future when they have to spend large amounts of money they will wake up to it, but it might be better if they woke up to it now?

  Professor Tol: That is a long question! Let me start by saying that climate change is a real problem, or I believe that it is a real problem. It is a clear global externality, and therefore we have a problem that we should do something about. Then the question is: how much, and could we not spend the money more wisely? If people come with arguments that climate change will increase malaria in Africa and therefore we should reduce our greenhouse gas emissions, I think that is hogwash because if you are really interested in malaria then you should go after malaria, and you could do it much more effectively and do more good. The same goes if you are interested in air pollution or something; that is not a reason to do something about climate change. Coming back to the example of malaria, there is a risk of over-spending. If you spend money on greenhouse gas emission control, then economies grow less fast, and that happens particularly in Africa. You should not think that the growth rate of African countries is unrelated to what we are doing here; it is simply not true. Of course, if they grow less fast they spend less on healthcare. We can clearly spend too much. We should make the trade-off very carefully. That is not to say that we should not spend money also on greenhouse gas emission control. The reason I say that is two-fold. If I do my model calculations then I find that the marginal damage cost of climate change is something like $7 per tonne of carbon or something of that order of magnitude. It is a very small one but it is still positive. That is a rational scientist's answer, but as a human-being I am worried about the fact that climate change does not stop at 2100. Our models and scenarios stop at 2100 but hopefully the world does not. If we are still on an upward trend in 2100, then it will continue to get warmer and warmer and warmer, and at some point we must run into real trouble because we are a species that has evolved in a relatively cold period, and all the plants and animals that we rely on have evolved during rather cold periods. At some point we will run into the limit, so we have to stop climate change, global warming, at some point. In that sense, starting slowly now—because we do not really know how bad it will be—is a wise policy.

  Q221Lord Lawson of Blaby: But you only have to stop it at some point, in so far as you can stop it; and the balance of evidence is that you can just slow it down but you cannot stop it. The first point is that you are thinking now of 200 years ahead, but all you have done is still bought only a little time. The second thing is that it is not really legitimate to make a straight line of projection, is it, indefinitely? We know that there are all sorts of different climate changes that have taken place in the world at various different times for various reasons, some of which we completely understand and some of which we do not really understand. It is a rather heroic assumption that the thing will go shooting off in a straight line for ever, particularly since the cosmologists believe that the universe will end when it gets too cold for human life.

  Professor Tol: I completely agree. Professor Lomborg said the right things there. If you just look at the physical resources of coal, oil and gas in the world—and then I am not talking about conventional oil and gas but the unconventional ones, methane clathrates and tar sands and so on and so forth—if we were to burn it all, and there is a physical possibility we could burn it all, then it would get very warm indeed. Then I think it would be fairly uncomfortable. We still have to make that choice; it is not that the problem will solve itself because we will run out of fossil fuels to burn. I think we do not want to go that far. Therefore, I think policy efforts should focus on making a transition away from fossil fuels to other sources of energy, whatever they may be, whether nuclear or solar; but I think we should start the transition.

  Q222Lord Lawson of Blaby: But you somehow ignored the effect of market forces, which, whether you approve of them or not, are a fact. If the fossil fuels—oil, natural gas and coal—get scarcer and scarcer and scarcer, then the price will rise, and it will be economic to use less and less of them and then go on to other sources of energy like solar, of which there is unlikely to be any shortage. In fact, the very scarcity, as it grows—this is the great error of the Club of Rome, probably before you were born—the very scarcity creates a corrective because prices rise and people use less. This is amply evidenced and I do not think I need to argue this.

  Professor Tol: Actually, I was in kindergarten! At a certain point we will run out of conventional oil and gas, and that will probably be in this century, I absolutely agree, and then we will have to switch to something else. The current market suggests that that something else will be unconventional oil and gas, for the simple reason that if you do that you have to make less of a drastic technological change than if you were to switch to solar or hydrogen or that sort of thing. I think the best bet at the moment is that as soon as we run out of oil in Saudi Arabia we will turn to oil in Siberia and oil in Canada made from tar sands.

  Q223Lord Lawson of Blaby: Which will be much more expensive, so less will be used.

  Professor Tol: Less will be used.

  Q224Lord Sheldon: There is a number of integrated assessment models. Can you describe the influence that they have, particularly on the IPCC?

  Professor Tol: In some areas these models have had a lot of influence; in other areas they have had very little influence. The results of these models have been basically more or less well described in the IPCC report. Some of the messages have got through to policy-makers and others have not. For instance, the whole idea that one needs flexibility and the international flexibility mechanisms as put in the Kyoto Protocol is a message that came originally from the integrated assessment models and has been taken up by basically everybody. Integrated assessment models have also shown—and this relates to the discussion we have just had—that the real solution to the climate change problem is not mandatory caps on emissions but it is developing alternative technologies for the market to take up. That message has been largely lost or taken up in some circles, but in international negotiations it is not there. Integrated assessment models also do cost benefit analysis and game theory and look at what the structure of an international climate policy should be. Those issues have been rather avoided by the IPCC and have not been taken up by any policy people. For instance, Kyoto does not stand the cost-benefit test, something that has been known in the literature since 1991; but we still have Kyoto. Also, the whole idea that you could base an international treaty on legally-binding targets and timetables is something that has been studied by many game theorists, and they look into this issue using integrated assessment models. Well, you can try, but at one point some big player will walk away from the table. That prediction has been around and written in very prestigious journals since 1993, and still we had to wait for Bush to do it before people started believing it. So some messages have been taken up and others have not been promoted.

  Q225Lord Sheldon: Is there a way in which assessment models are widely different from each other?

  Professor Tol: They come in three groupings and within the groups they are basically similar, and between the groups there are a lot of differences. Some models start from natural science models that have been grown and grown and grown, and also include some of the social aspects. Other models are based on simple representations of the economy but are designed for a very long run, and other models are short term—economic models that have bells and whistles environmentally. These three groups of models differ quite substantially in what you can do with them, more than what the results would be, particularly if you are talking about comparing growth models with general equilibrium models—basically these are economic models, and they agree up to a certain point on things, but they are really designed for different purposes. The more natural science-based models tend to disagree but also because they emphasise different things. For instance, you have the whole debate there between the top-down and bottom-up cost estimates that we have seen before. In that sense, the models disagree quite a lot, yes.

  Q226Lord Macdonald of Tradeston: On the IPCC process, you told us about your concern at the way that political pressures had led people to assume that convergence would mean the countries of Africa would have the same standard of living as the countries of the OECD in a hundred years' time. Do you still participate in the IPCC processes? Do you think they are representative of economic opinion; and, if not, how would you improve them?

  Professor Tol: I was a lead author in the second assessment report and a convening lead author in an intermediate report and again a lead author in the third assessment report. I am not involved in the current assessment report, which also comes back to the discussion with Pachauri. Essentially, I am not involved in the current assessment report because I have not been nominated by my government, my adopted government—I am not German—please do not think that. Essentially in Germany, for working groups 2 and 3—only people with close connections to the Green Party have been nominated to the IPCC, and that excludes me immediately. What will come out of the fourth assessment report I do not know. The second and third assessment reports themselves were a reasonable and balanced reflection on what is going on in climate and energy economics communities. Whether energy economics are representative for the economic community as a whole is a different matter, and it is not something that I can answer. No-one has really looked into it. In the past, the reports themselves were a fair reflection of what people were thinking on the issues that we were allowed to talk about. As I said, there were some issues like national planning policy that we were not allowed to talk about, and therefore we did not reflect in the literature. What will come out of the fourth assessment report is something we have to wait for. Over the years, I have been involved with the IPCC from the second assessment report, from 1994 onwards. Things have become more and more politicised.

  Q227Lord Skidelsky: Can I take you up on that last point, because what you have said casts quite considerable doubt on the objectivity of the IPCC process. You made two statements, one right at the beginning of your evidence, when you said that the convergent growth assumption was heavily influenced by the reluctance of African countries to accept that they would not become as rich as wealthy countries. There was a clear case, I would have thought, of political correctness coming into play, and you used that term. Now you say that to the IPCC—the nominations of governments to committees of the IPCC—that the German government only nominates Greens. What credibility is left in the process when you have such blatantly politically correct assumptions built in to the process, because the other evidence we have heard is that this is all very objective and there is a consensus of all the leading scientists in the world, there is a sense among economists, and that people who challenge this are crackpots or have some evil intentions, and are conspiring to destroy the planet?

  Professor Tol: I was not quite finished with my answer. I think that the reports themselves are a reasonable reflection of the literature. What is then filtered into summaries is a completely different story. I do not think the summaries are a reasonable reflection, let alone what the IPCC bureau in public says about these things. We heard Pachauri say, against very credible evidence from a process that he himself is chairing, that there will be negative costs. Coming back to the point of who is in the IPCC, certain governments are actively trying to influence who is nominated and put in there, and therefore will influence how the literature is summarised. There is a difference between summarising the literature in a neutral way and summarising the literature with a particular conclusion in mind. Other countries are of course nominating different types of people to the IPCC, so in that sense I think there is still a balance of opinions in the IPCC. Some countries actually only nominate credible scientists to the IPCC. Of course, the debate within the IPCC becomes more and more unpleasant because 10 years ago it was all basically even-handed and more or less neutral scientists. Now there are larger and larger groups of people who are either defending the green position or the brown position because there are 180 member countries of the IPCC. So we have all sorts, and the debate becomes more and more politicised and less pleasant.

  Q228Lord Macdonald of Tradeston: Can you suggest how we could improve the process?

  Professor Tol: I think that the most important thing would be to take control of the IPCC away from environment ministries and give them to national science foundations[3].

  Q229Lord Macdonald of Tradeston: Why not give them to the finance ministries because they will be the hard-headed people picking up the bill.

  Professor Tol: One could argue that finance ministries also have a stake, so I would give control of the IPCC to the national science foundations.

  Q230Lord Lawson of Blaby: I slightly agree, perhaps not surprisingly, with Lord Macdonald that to have treasuries as well as scientists might increase the objectivity. Would it be possible, pending this transformation, that some institution—maybe your own and your own department—could provide a great service to the world by providing an even-handed neutral objective summary of the various studies that have been done, so that politicians who only read the summaries are reading something which has some relationship with what the IPCC is actually doing?

  Professor Tol: I know the situation in the Netherlands better than in other countries. There climate policy is in the hands of—it is the environmental ministry, the finance ministry and foreign affairs, but it is clear that the environment minister is in control there because that is the internal power-sharing deal. Could an independent academic body do something to counterbalance this? It is very hard, because as an academic I do not get credits for advising on policy; I get credits for writing papers in academic journals. That is how I get promotion. One of the things that the IPCC has established, to its credit, is that a lot of academics are interested.

  Q231Chairman: If you looked at us, as politicians looking at it, it seems to me that if you decide as a politician where you think the answer is, you are going to find some scientific evidence to back up what you think are your particular prejudices. That is extremely difficult, to know how you decide on public policy, is it not? If you wanted to be objective as politicians, where do you look amongst this range of options?

  Professor Tol: Then again I would turn to the national science foundations, which are probably or should be furthest from policy. We were also discussing funding a little bit before. One of the issues that is a sore point in a lot of climate change research is that most of this is applied research. The money comes from Defra; it does not come from the National Science Foundation or the research councils. That, I think, also steers who is selected to do what and what is really researched. I would try and put it in the research councils.

Chairman: We are very grateful to you for coming along and for answering the questions, and for giving us an insight into some of these issues, which will help us enormously in the process we are about. Thank you on behalf of all of us.

3   I make this point here again below. Giving control over the IPCC to national science foundations, makes sense for Germany and the Netherlands, but not necessarily for other countries. Back

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