Cost / Benefit Analysis of
Curbing the Use
of Fossil Fuels

Key Insight

"From a Libertarian standpoint, if one party is doing something that harms the property of another party, but the actor is gaining more than the injured party is losing, should the government conclude that, on a cost / benefit analysis, the activity should not be interfered with? That makes no sense whatsoever from a Libertarian view of private property. A responsible Libertarian government should intervene in some way to discourage such activity, or at least make the actor somehow compensate the injured party."
-- Jerry Taylor, formerly of the CATO Institute

Non-Climate Harm of Fossil Fuels

One thing about energy sources is that, even if you ignore climate change and carbon dioxide, the air pollution created by burning fossil fuels or biomass just kills a lot of people, a lot more than if you obtain the same amount of energy from nuclear, wind, solar, or hydro. And that's only the people who die, as opposed to the many more who just suffer poor health as a consequence. And that cost to society is not reflected in the price of fossil fuels. So we should at least address that, whether global warming is a problem or not.

Probability Distribution of Warming by a Doubling of CO2 Levels

Courtesy: MIT climate scientist Kerry Emanuel

Climate scientists are not certain about how much warming will occur due to a doubling of CO2 levels. CO2 levels in the atmosphere are already nearly 50% higher than they were 150 years ago, and we could easily reach or exceed a doubling by 2100 unless we act. The median is at about 2.9 degrees C (5.2 degrees F), and the mean is about 3 degrees C (5.4 degrees F), but there is a very fat tail at the high end, with 10% probability of 4.2 degrees C (7.5 degrees F) and 5% probability of 4.6 degrees C (8.3 degrees F).

Bear in mind that this is global temperature rise, and the temperature is rising much faster at the poles than at more moderate latitudes. Global wind patterns are largely driven by the temperature gradient as you change latitudes, so we are looking at drastic changes to wind and weather patterns, including precipitation patterns, which can wreak havoc with crop yields and water sources.

As is discuss in the evidence page of this website, insurance companies have already observed an increase in the rates of storms and flooding. The frequency of hurricanes have increased by only a barely detectable amount, but with several degrees of warming, we would be seeing a much more significant increase in such events.

Niskanen Article on Cost / Benefit Analysis

In 2018, an IPCC report came out predicting that the harm to global GDP in 2100 from climate change if we do nothing at all to curb CO2 emissions was 4%. That doesn't sound like much, especially given that we expect the human race to be a lot more prosperous by then. But it's not that simple:

  • There is tremendous uncertainty in that estimate, with a substantial possibility or the outcome being far worse. No investor worth their salt, when evaluating costs & benefits, restricts their analysis to only the most likely outcome.
  • A lot of the harm will be concentrated in poor, tropical countries, who will suffer a greater than 4% hit to the GDP, and who can ill afford such a loss.
  • Here is an analysis from the Libertarian Niskanen Center think tank. This article contains a lot of very good material that I am not repeating on this page. You're missing a lot if you don't read it.

    Jerry Taylor, Libertarian Climate Activist

    Here's a very short 3 minute, 15 second podcast of Jerry talking abou his evolution from a nationally famous climate skeptic at CATO to a staunch advocate of climate action, and the state of the climate debate, in 2020.

    Click picture for one-hour video of Jerry describing, in 2016, the same thing, in much more detail, and explaining to liberals the point of motivations behind conservative reluctance to cooperate with climate action.

    Background on Jerry Taylor:

    Jerry Taylor spent about two decades as one of the leading climate skeptics in the country. He was one of the leading climate skeptics at the Libertarian CATO institute.

    Sometime around 2014 / 2015, he changed his mind on the topic, and in the above, he explains why.

    Major Ideas Discussed:

    He mentions that pretty much all the famous scientists who are climate skeptics, including Patrick Michaels, Richard Lindtzen, John Cristy, Judith Curry, and Willie Soon, accept that:

    • The climate is warming.
    • Warming will continue in the future.
    • Human emissions of greenhouse gases are contributing to it.
    They just don't agree that future warming will be problematic enough to justify action. I would add Bjorn Lomborg and Oren Cass to this list.

    Jerry Taylor is a staunch Libertarian, and he believes that the legitimate function of government is to protect the life, liberty and property of individuals, who are to choose to live their lives as they individually see fit.

    To begin with, the likely harm from climate change is a spectrum of possibilities, ranging from a major nuisance to pretty catastrophic. When one is investing money, one doesn't think of the most likely outcome in isolation and bet everything on that, ignoring all other potential outcomes. For example, most years, stocks outperform bonds. But few saavy investors will put 100% of their portfolio into stocks, because some years the whole stock market crashes. Investors try to hedge their bets to play out well in a variety of scenarios.

    Doing nothing about climate change fails to hedge our bets across the full spectrum of possible future outcomes posed by global warming.

    Taylor goes on at length to describe the political landscape of the climate debate, mentioning that many environmentalists such as Al Gore or Naomi Klein say things that are downright horrifying to the average Libertarian. The Green New Deal didn't exist in early 2016 when he made this speech, but it would clearly fit into that category, here is what Jerry Taylor had to say to Green New Deal proponents 3 years after this speech.

    After leaving CATO, Taylor formed the Niskanen Center, a Libertarian think tank in Washington DC that supports climate action, and many Libertarian positions.

    In a one-hour keynote speech to Citizens' Climate Lobby (CCL) on June 12th, 2021, Taylor mentioned that part of his evolution from climate skeptic to climate activist was when he was unable to find a single economist who was regularly publishing in peer-reviewed journals who felt that the economic costs of curbing emissions exceeded the costs of failing to do so. There were some "economists" saying it, nobodies teaching at lousy, obscure schools, but not anybody who was regularly publishing in peer-reviewed economics journals.

    The Jordan Peterson - Bjorn Lomborg Interview

    Click image for video (87 minutes):

    Positions Taken By Both Peterson and Lomborg:

    • Neither Peterson nor Lomborg disagree with any of the science in the IPCC reports.
    • Both of them believe that the IPCC reports are not predicting human extinction or the collapse of civilization due to climate change in any timeframe, which to the best of my knowledge, is true. Lomborg makes it out that either of these things are remote possibilities, but not significantly more likely than the possibility of the planet being destroyed by an asteroid. I would disagree with this -- we have a very good idea of how frequently large asteroids hit this planet, and what the likelihood of its occuring in a century, and it is very remote, whereas the possibility of catastrophic sea level rise, crop failures, mass refugees, political destabilization, and warfare, possibly nuclear, due to climate change is much higher than that.

    Bjorn Lomborg, of the Copenhagen Consensus Center, an American think tank, has done a lot of research on how $75 billion could best be spent to do the most benefit for the most people. It turns out that a lot of people in the third world are so poor and unable to afford their most basic needs, that spending money on their health and nutrition would be spectacularly beneficial, per dollar spent, compared to money spent any other way.

    Curbing carbon emissions, on the other hand, is extremely expensive, and the anticipated harm done by global warming is not great enough to justify such spending in comparison with third world health and nutrition spending.

    There are a few flaws in this logic:

    • This sort of logic can be used to argue against doing nearly anything for any purpose. For example, one thing Lomborg's think tank decided is that building sewage systems in third-world cities that don't have them yet just isn't really worth it in comparison to their favored spending items, because sewer systems are expensive and in practice don't really save all that many lives. So if a new suburb is built in Kansas, should a sewer system be built for it, or should the money be spent on health and nutrition in the third world? According to Lomborg's analysis, no new sewer systems should be built anywhere.
    • Most western people respond to Lomborg's analysis with "We aren't spending that $75 billion, so clearly we should do that before we try to address global warming.". But this is just wrong. The GDP of the developing world is about $35 trillion, or 460 times as much, and you can bet the farm that they are spending a lot of that on the sorts of things that Lomborg advocates. Since China's adoption of free-market economic reforms and the global discrediting of the Soviet economic model, the prosperity of the third world has been growing by leaps and bounds. The things that Lomborg is advocating are being addressed! Asking "What is the best way to spend $75 billion?" is just not a relevant question.
    • Lomborg's analysis is global. Some people in the US, like Bill Gates and Effective Altruists, look at the whole world that way and think about where, globally, their philanthropy will get the biggest bang for buck. But the American public doesn't see it that way. Most of the public is very stingy about voting for foreign aid. They are willing to spend locally on things that create American jobs and solve American problems (and bear in mind that climate change is an American problem as well as a global problem), and the budget per person is far in excess of what America is willing to spend per person in the third world. So it is politically feasible for the US to spend a lot of money domestically on the problem of climate change, that the voters are not willing to spend on the well-being of foreigners.

    Conservative Climate Activists


    Email the Organizer,
    Bill Chapman