I am not a scientist, or an expert on greenhouse gases or the Kyoto protocol. Having said that, I must admit to having an opinion based on my best understanding of the greenhouse issues. My opinion is that, while global warming may be a problem – I have seen insufficient evidence on which to justify a huge government program. Given my pre-disposition to freedom and the track record of governments – I don’t think it unreasonable to ask pro-government people to justify their position before taking my money. But then, maybe I haven’t seen the case for Kyoto because I haven’t looked closely enough?
Consider the following assumptions. The world is going to get 2.5 degrees hotter between now and 2100 (a reasonable estimate based IPCC predictions). The cost of a world that’s 2.5 degrees hotter is estimated at US$560 billion/year (an IPCC number), starting immediately (which is a generous assumption). Kyoto can be expected to reduce the heating by 0.15 of a degree (from various sutdies), and so will prevent costs of US$33.6 billion/year. There will be no technological or private breakthroughs that will prevent global warming.
Discounting is always an interesting topic, so I’ve included a range. If we use a 5% discount rate, then the benefit of Kyoto would be US$666 billion – if we use a 10% discount rate, then the benefit of Kyoto would be US$336 billion – if we use a 15% discount rate, then the benefit of Kyoto would be US$224 billion. It doesn’t seem unreasonable from this to assume that the worldwide present value benefit of Kyoto could be around US$300 to US$500 billion – or about the annual GDP of Australia.
Some estimates of the cost of Kyoto are around US$1 trillion to US$4 trillion. I don’t know how good these are, but if they are even in the ballpark – it seems that Kyoto would fail a benefit-cost analysis. Given the uncertainty about these numbers, I would require more than a simple 1:1 benefit-cost ratio to convince me of the need for drastic government action. So my question to the Kyoto experts is – where have I gone wrong? Or is Kyoto another Iraq war – another huge government program based on fear where benefit-cost analysis is irrelevant?