Does Fashionable Beat Rational When It Comes to Solving the World's Biggest Problems?

The third dispatch from the 2008 Copenhagen Consensus Conference

Copenhagen, May 27—Ranking proposed solutions to global warming, air pollution, disease control, and clean water were on the agenda today at the Copenhagen Consensus 2008 (CC08) conference. Leading public policy researchers proposed to a panel of experts, including five Nobel Prize-winning economics, what they would do with an "extra" $75 billion over five years to solve ten of the world's biggest challenges. The mantra of CC08 is "where in the world can we do the most good?"

Another maxim often heard at the conference is that the Copenhagen Consensus process "is not about doing what's fashionable, but doing what's rational." And what could be more fashionable than the problem of man-made global warming? The question to presenter and Economic and Social Research Institute economist Richard Tol was whether or not spending $75 billion over five years trying to fix man-made global warming would be rational?

Tol opened with a standard recitation from the Intergovernmental Panel on Climate Change (IPCC) detailing the evidence for man-made global warming and climate model projections of future warming. Then Tol declared that spending $75 billion dollars over so short a period of time would do nothing to ameliorate any effects from global warming. Thus he and his colleagues decided to reinterpret the Copenhagen Consensus challenge by looking at spending the net present value of $15 billion dollars annually (roughly 0.05 percent of global GDP) addressing global warming for the next 100 years. That sum comes to around $800 billion. They ran this through some climate and econometric models (see their analysis here) in three different scenarios.

Spending $800 billion on just cutting (mitigating) greenhouse gas emissions would provide just $685 billion in benefits by 2100. Not very good. Their next scenario looked at devoting all the money toward low-carbon energy supply research and development. In this case spending $800 billion would result in $1717 billion in benefits by 2100. Their third scenario included a mix of energy R&D, a carbon tax of $20 per ton, and direct spending on efforts to control malaria and diarrhea which are projected to get worse as the world warms. The analysis places a tax on carbon as a way to motivate energy suppliers and users to adopt the new low-carbon technologies turned up by R&D. This portfolio approach would boost benefits to $2129 billion by 2100.

According to their calculations, this third scenario does not "solve the climate problem" since it only lowers future warming from 3.5 degrees Celsius in 2100 to about 3 degrees Celsius. At the end of his presentation, Tol told the Youth Forum that if he had to choose whether to spend $100 on global warming or malaria, he'd spend it on malaria. If he could allocate between malaria and global warming, he'd spend $90 on malaria and $10 on energy research.

McGill University economist Chris Green then offered a sobering perspective paper strongly dissenting from what he regards as the IPCC Working Group III's happy talk that the technologies needed to stabilize emissions are currently available or under development. In April, Green and his colleagues argued in a Nature article entitled, "Dangerous Assumptions," that IPCC future greenhouse gas emissions scenarios presuppose the development of low-carbon energy technologies, but those technologies don't exist. That means that cutting greenhouse gases is likely to be much harder to cut than many policymakers think.

Green noted that "on-the-shelf technologies" such as wind and solar power can be deployed now, but the problem is that they suffer from intermittency—the wind doesn't always blow and the sun doesn't always shine. To compensate for this failing, researchers need to develop some baseload utility-scale ways of storing electricity to tide us over when those renewable sources are offline. There are some ideas for technologies to do this, but none even close to being proven. In addition, carbon capture and sequestration technologies that would allow humanity to continue to burn coal while storing emissions safely underground are nowhere near commercialization. Furthermore, the U.S. has no capability for safely reprocessing and reusing spent nuclear fuel.

"My view is that economists should spend a lot less time talking about carbon taxes and much more time thinking about what an incentive compatible energy technology race would look like," declared Green. He added, "People in developing countries want to live the good life and it's going to take a large amount of energy for them to do that. There are not enough low carbon sources of energy to achieve that."

Tol later suggested that the world will get real results from energy technology R&D only if climate policy is perceived as being solid and credible in the long term. But how to achieve that? Before he stepped down, British Prime Minister Tony Blair established an escalating petrol tax as a climate change measure. This week British truckers, pinched by higher oil prices, are demanding that petrol taxes be cut or they'll block the country's refineries. The betting is that current Prime Minister Gordon Brown will blink. So much for credible long term climate policy.

Turning to less fashionable topics, let's briefly look at the costs and benefits of some of the proposed solutions to the global challenges of air pollution, disease control, and clean water. International development aid consultant Bjorn Larsen dealt with the challenges of indoor and outdoor air pollution. Larsen cited figures showing that more than 3 billion people are exposed to indoor air pollution from indoor fires using wood and coal for cooking and heating. Outdoor air pollution affects over 2 billion people living in cities. This air pollution causes 2.5 million deaths per year and is responsible for countless cases of respiratory disease. Over 90 percent of these deaths and illness occur in developing countries.

What to do? Replacing traditional open hearths with inexpensive rocket stoves could reduce indoor air pollution by 80 percent and perhaps cut fuel use by 50 percent. Providing these new stoves could save up to 700,000 lives annually. Solutions to outdoor air pollution, e.g., requiring the use of ultra-low sulfur diesel and diesel particulate control technologies on vehicles, are much more costly. Larsen calculated that for many poor people in developing countries their benefits do not outweigh the costs.

As an aside, a Youth Forum representative from China claimed that many electric power plants in her country are now required to have pollution control equipment. The problem is that pollution control uses up to 30 percent of the plant's output, so managers generally turn off pollution controls in order to supply more electricity. They turn the controls on when inspectors are about to show up.

Controlling diseases was the next global challenge considered. Dean Jamison, a public health professor from Harvard University, was the lead author of the Copenhagen Consensus challenge presentation on the topic. He began by noting the enormous progress made in improving human health globally in the past 50 years. To illustrate this, Jamison pointed out that in India the average life expectancy in 1950 was only 44 years. By 2005, this had risen to 64 years implying a rate of improvement of 4.4 years per decade. Jamison suggested that income and economic growth are not closely correlated with improvements in health arguing that "science has given us powerful, yet inexpensive tools for improving health." While infectious diseases remain the biggest killers in poor countries, Jamison did note that 29 percent of death in developing countries are caused by cardiovascular illnesses which is more than the total number of deaths caused by tuberculosis, HIV/AIDS, and malaria combined.

Jamison listed seven health interventions with benefit-cost ratios ranging from 30-to-1 to 12-to-1. These interventions are: (1) expanded tuberculosis treatments; (2) low cost "polypill" heart attack treatments; (3) malaria prevention and treatment; (4) expanded immunization against childhood diseases; (5) tobacco taxation; (6) combination strategies to prevent HIV transmission; and (7) increased surgical capacity at district level hospitals.

In his perspective presentation, Harvard public health economist David Canning asked if the benefit-cost ratios where so high for these interventions why then aren't people paying for them themselves? Perhaps they have other higher priorities. Or perhaps there is some kind of "market failures," so might it not be more effective to attack the market failures directly in order enable people to get access to these treatments? This might include policies to encourage insurance and micro-financing.

The last major challenge considered was the provision of clean water and sanitation presented by University of North Carolina public health professor Dale Whittington. He noted that about 1.1 billion people lacked improved water supplies, and more than 2.7 billion had no sanitation service. Whittington immediately disabused the audience of the notion that networks of piped water and sanitation were cost effective for many poor people in the world. He pointed out that "the incremental benefit of improved water supply may simply not cover the large cost of providing it, since by definition everyone has some access to water in order to live, and the willingness to pay for an improvement may be low." The full economic costs of such systems range between $40 and $80 per month which is vastly more than many people's monthly incomes. Networked sewage systems cost even more.

Whittington did offer some cost-effective solutions, including deep borehole wells combined with hand pumps. Such wells could supply water to 60 households. Until recently, even this was not considered economically feasible, but Whittington claimed that the costs of boreholes in Africa have now been halved to about $6,000 because of recently increased competition, especially from Chinese contractors active in the region. Adding up the capital costs implies a monthly cost of $2.26 per household.

With regard to sanitation, Whittington recommended financing Community-Led Total Sanitation (CTLS) campaigns. CLTS programs aim to ban open defecation by explaining disease transmission routes and mobilizing social pressure to encourage community members to use low-cost latrines. Whittington estimated that the overall monthly cost of CLTS per household is 32 cents.

The final three big global challenges—women and development, subsidies and trade barriers, and education—will be presented on Wednesday. The Youth Forum will announce its ranking of solutions on Thursday and the 2008 Copenhagen Consensus panel of experts will announce its rankings on Friday.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

Disclosure: Danish taxpayers are paying my travel expenses to attend CC08. There are no conditions placed upon my reporting.