A Changing Climate or a Hurricane of Hoaxes?

There is no irrefutable evidence of climate change. Most of the speculation about anthropogenic climate change (caused by humans) are based on computer models, which are improving but still rather difficult to validate. That's because even if we can approximate a history match of past climate conditions, we are now trying to extrapolate these models for carbon dioxide levels that have not existed for several millennia on the Earth, if ever. Computer modelling is sometimes considered as much of an art as it is a science because it requires so many assumptions. Good engineering assumptions produce good approximations but bad assumptions produce erroneous results. The only way to have confidence in a solution is consistency. The model must be consistent with historical data as well as with current data. The more data we have that turns out to be consistent with what the model forecasted, the higher confidence we will have that the model is valid. Click here for a recent article on climate change consistency. But some judgement is required to assess how much consistency is required to constitute irrefutable evidence. I don't think we've reached that point yet.


Any sound political and free market policy will be one that considers the economy, society and the environment as an inseparable whole rather than as independent entities. Ignoring the environment in favour of the economy allows the economy to flourish in the short term, but could be detrimental to the longer-term economy. On the other hand, undue and overly-aggressive environmental policy would be crippling to the near-term economy. A sound policy would strike the correct balance between the economy and the environment such that strong but sustained economic growth can be achieved. I don't propose to know where that balance lies, but it certainly won't be reached without international cooperation and commitment. There is no broader a public interest than billions of molecules of air pollution that refuse to adhere to any regional, national or geographical boarders.

It is this mobility of global pollution that makes it such a challenging issue. For example, the U.S. and Australia refused to commit to the Kyoto protocol because it would put them at an economic disadvantage to developing nations like China, who were given a more liberal license to pollute--they had a valid complaint. At the same time, China and other nations still only produce a tiny fraction of pollution per capita compared to developed nations--this view is also valid.

While there is no consensus on the magnitude and scale of anthropogenic climate change, there is a growing belief that regardless of the extent, climate change beliefs will dictate both public and corporate policy.

John R. Fanchi, a petroleum engineering professor, writes:

One [oil and gas] industry response to environmental and social concerns in the context of sustainable development is the triple bottom line (TBL). According to this view, sustainable development must integrate social and environmental concerns into a development plan that optimizes economic profitability and value creation. The three components of sustainable development, and the three goals of the TBL, are economic prosperity, social equity, and environmental protection. The focus of TBL is the creation of long-term shareholder value by recognizing that corporations are dependent on licenses provided by society to do business.

He also states that (Royal Dutch) Shell has taken strongly to this approach. Many other large corporations are advertising themselves as 'green' including all six oil & gas 'supermajors' (ExxonMobil, Royal Dutch Shell, BP, Chevron Corporation, Conoco Phillips and Total S.A.), as well as the two largest North American automakers (GM and Ford) to name a few.

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The Cost-Benefit analysis of climate change
Given the massive uncertainties of climate change, it makes sense to do a cost-benefit analysis to assess risk. It could well be that climate change reports have been prompted by alarmist environmental extremists and sensationalistic news reporting, or they could be genuine. The probable scenario is somewhere in between. There are essentially three scenarios that would come out of such an analysis:

Scenario 1: (best case scenario) Climate change predictions turn out to be totally wrong. There is no consequence to inaction and any mitigation steps taken would do nothing but harm global economies.

Scenario 2: (worst case scenario) Dire climate change predictions are mostly right. The consequence to inaction would ultimately devastate global economies and strong mitigation action plans would be the only way to keep long-term economies afloat.

Scenario 3: (best guess scenario) Climate change predictions are partially right. A balanced approach should be taken to mitigate emissions in such a way that economies are able to achieve long-term continual growth.

An economic/environmental success story was the phasing out of CFC's. It was found in the seventies that the ozone layer was being depleted. The culprit was found to be CFC's, were are used as refrigerants and aerosol propellants among other uses. Global agreements were made to phase out the chemical and it is now estimated that the ozone layer will approach natural levels by the year 2050. Suitable alternative chemicals were found with few negative consequences, if any, to global economies. Unfortunately, the climate change issue is much more complicated and far-reaching than the ozone layer was...

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And finally, a primer to the next post--Stephane Dion's proposed environmental policy..

What is the logic behind a carbon pricing?
The logic is that because world economies are driven by free-market capital, we should try to estimate and apply a price of an intangible cost (the adverse effect of GHG emissions on our environment). As I've said, nobody has any clue what the environmental and ultimately financial cost of 1 tonne of CO₂ is. If indeed severe weather events can be induced by climate change, then ideally those who created the greenhouse gases would be charged proportionally for the damages it caused. Now, it's unrealistic to think that we will ever know for sure if climate change causes sever-weather damages, let alone how much and get the polluters to pay proportionally. Re-Insurance companies have taken note of the issue some time ago. Re-Insurers are those who insure the insurers--often in the case of natural disasters. For example, in the months following the Mississippi river flooding, a local insurance company might go bankrupt without the reinsurance provided by a company like Swiss-Re. Swiss-Re is the worlds largest reinsurance company, and it has taken note of the climate change issue. They also realize that there is no way to deny insurance claims to large CO₂ emitters on the basis of negligence (they would need irrefutable proof that doesn't exist).

What is the logic for a Carbon Tax?
The basis for a carbon tax is that the environmental cost of greenhouse gases should be priced in monetary terms (again, no one has any idea what that cost is). Then this cost can be added to the price of emission sources via a tax to create artificial disincentives. This is the opposite of fuel subsidies to artificially encourage economic growth (but can also have adverse consequences). It's similar to the logic for taxing cigarettes. Especially since Canada has a public health care system, smoking adds to the financial burden of hospitals with the health issues it causes. By taxing cigarettes, these revenues can be recycled back into the health care system. No one really knows what that incremental financial burden is, even in the comparatively simple case of cigarettes. Add in all the complexities of a global phenomenon like climate change and you have yourself an analogous carbon tax shift.

Next post: Green Shift or Red Shaft? Some Q&A on Stephane Dion's climate change proposal.