An economic analysis that just doesn’t add up

I was pleased to spot economist Prof John Fitzgerald among the audience at the recent EPA lecture in the Mansion House, Dublin, presented by Prof Myles Allen. As it transpires, Fitzgerald was doing some field work for an opinion article that appeared in the business section of the Irish Times earlier this week, under the headline: ‘Solution to global warming is technology’ (authors rarely get to write the headline, so we won’t hold that one against him).

This is one of only a handful of articles the otherwise prolific Fitzgerald has dedicated to the topic of climate change. It is always welcome to see a senior Irish economist to turn his quill to this vast, challenging topic (two fairly strong critiques of Fitzgerald’s piece, by Profs Barry McMullin and John Sweeney appeared in the Letters Page a week after publication)

To be fair, it started well enough, with phrases such as: “If urgent action is not taken the world’s climate will get worse at an accelerated pace”. That’s as good as it gets, alas. “Governments rarely choose to go to their electorates and tell them they are going to make life more expensive and that there will be no go financial reward for their pain” is how Fitzgerald sums up moves to address climate change.

You will note he repeats uncritically the standard canard that addressing climate change is all about costs and ignoring it is a rosebed of benefits. Had he read and absorbed the 2006 Stern review for the UK government on the economic costs of action versus inaction on climate change (our failure to tax carbon pollution was famously described by Lord Stern as “the greatest market failure in history”) Fitzgerald might have had an altogether more nuanced approach to the topic.

“It is our grandchildren and great grandchildren who would benefit from applying the brakes today to bring the momentum of climate change to a slow halt. Like development aid, action on climate change involves an appeal to altruism on the part of voters – there is little in it for people living in Ireland today.”

This quite staggeringly inept summary shows Fitzgerald to be hopelessly out of his depth, a figure from another era who has simply been unable (or just not bothered) to keep up with the science of climate change, as well as its rapidly unfolding physical realities. Perhaps he failed to notice last year’s €100 million Irish ‘once-in-a-century’ flooding event, and the one before that, and the one before that. And as for the virtually unprecedented 2012 fodder crisis, news clearly didn’t make it as far as the ESRI. And as for the once-in-a-lifetime freezing events of 2010 – and 2011 – well that’s weather for you, right, John?

To describe tackling climate change as ‘an appeal to altruism’ makes about as much sense as my not bothering to tackle a smouldering fire under the stairs in my house on the grounds that, by the time it becomes a conflagration, I’ll be at safely at work and it’ll only be my kids/grandkids who’ll be killed and my house burned down. Unless, of course, I was feeling particularly altruistic that morning and decided to tackle the fire…

While Fitzgerald’s ethical framework resembles a colander, it’s when he starts trying to work out the economics, his arguments unravel even more spectacularly. He starts with the (not unreasonable) point that shifting economic activity from, say, Europe to China could be counter-productive from an emissions standpoint. This is not, however, news.

Fitzgerald then joins the ever-lengthening line of Irish pundits queuing up to make the case for Irish dairy products as being somehow uniquely carbon-efficient. Given the slippery nature of emissions (including the emissions embedded in the goods we import from China, India, etc.), Fitzgerald points out the obvious: “in theory this pattern of trade would suggest that, instead of taxing producers of goods for emitting carbon, we should tax consumers based on the carbon embodied in the goods they consume. This would mean that there would be no incentive to relocate production and consumers would be encouraged to reduce consumption”.

No sooner had he uttered the vile heresy (“reduce consumption”) than Fitzgerald poo poohs the very notion of taxing carbon as “utterly unworkable”. And that two-word analysis is about as deep as he goes in explaining the utter unworkability of simply applying a market price on pollution that, left unchecked, will quite certainly destroy human civilisation and most of the natural world in the coming decades.

Maybe Fitzgerald is simply so completely out of touch that he is unaware of the crystal clear warnings and time frames set out by the world’s scientific community on our countdown to carbon armadeggon as global average surface temperatures smash through the +2C ‘red line’ in the next two to three decades, leading to climate collapse, regional and global famine, water and food wars and the evisceration of international trade so beloved of economists like Fitzgerald (you can read what those lefties over at the World Bank have to say here).

But wait, he has an answer! “In the long run the solution to global warming will have to be found in new technologies”. Hurrah! Technologies that don’t exist will somehow magically appear in a matter of years to ‘solve’ global warming. A report issued by no less a body than the US National Academy of Sciences last month stated bluntly: “current technologies would take decades to achieve moderate results and be cost-prohibitive at scales large enough to have a sizeable impact.” There is, the NAS reiterated, “no substitute for dramatic reductions in greenhouse gas emissions to mitigate the negative consequences of climate change”. No ifs, buts or maybes.

And of course, we don’t have decades to wait for some technological rabbit to be pulled from the hat. The ‘long run’ that Fitzgerald mistakenly believes our unfolding ecological disaster is unfolding over, is in fact quite a short trot…right off a cliff edge.

In Fitzgerald’s world, it is just too crazy a notion to even imagine that our current (and utterly unsustainable) global consumption binge could be reined in, or that the pollution that is destroying our shared atmosphere might actually carry a price tag for the polluters. And heaven forbid that this is “unlikely to prove acceptable” when governments meet later this year to ponder the fate of the world.

In a delightful piece of unintended irony, an article adjacent to Fitzgerald’s piece from Clifford Coonan pointed out that “10-15% of all China’s infant milk formula comes from Ireland”. Here, in a nutshell, is the mad logic of globalised food production: use marketing to persuade and embarrass Chinese mums to abandon breast feeding, then import powdered milk from 12,000km always, from the ‘greenest little country in the world in which to flog just about anything’, then tell the public and fool yourselves that this madhouse logic is necessary to ‘feed the world’.

I said at the outset that I was pleased to see Prof Fitzgerald attending a climate change lecture. Every public official and elected representative should be fully informed on the science of climate change before opening their beak in public, or drafting papers such as the Department of Food, Agriculture & the Marine’s recent discussion document on GHG mitigation in agriculture & forestry (An Taisce’s full-blooded response/rebuttal is here).

The DAFM, with more than a little help from its friends in the IFA, has dreampt up something called ‘sustainable intensification of food production’ to paper over a policy that has little to do with sustainability and everything to do with promoting its favoured model of ramping up the most emissions-intensive forms of export-oriented agriculture, namely intensive dairy and beef production.

But back to Prof Fitzgerald and his late, late outbreak of interest in climate change. Given that, on the evidence of his Irish Times article, he has nothing but his misconceptions to bring to the discussion, why the sudden interest? People far more cynical than me might suggest that he is in fact brushing up his CV to be in the running for a spot (possibly as Chair) of the forthcoming Government-appointed Expert Advisory Council to oversee the roll-out of Alan Kelly’s shambolic ‘Climate Action and Low Carbon Development Bill 2015’.

The Climate Act is set to become a toothless paper tiger beloved only by the assorted special interest groups who lobbied so tirelessly to ensure that none of what Australian PM, Tony Abbott memorably called “that climate crap” gets in the way of Irish industry and agriculture raking in the cash while steering the Good Ship Planet Earth straight for the rocks.

FOOTNOTE: There is a line where tragedy slopes into farce, and here it is Prof Fitzgerald’s referencing in his article of the ill-starred ‘ESRI Medium Term Review, 2008-2015’ – this is the ‘expert report’ that completely and utterly failed to spot that the Irish economy was a gigantic building boom-cum-pyramid scheme of crooked bankers lending to crooked builders and preparing to drop the tab on the entirely uninformed Irish public. (What kind of wilful blindness or wishful thinking leads seasoned experts to miss a bubble that size is a topic will doubtless keep economic historians busy for years to come).

This underlines the capacity for eminent economists to screw up spectacularly when projecting in the very areas they profess actual in-depth expertise. There have been fewer more comically awful reports ever produced by a Government think tank, in this country or elsewhere. Its two most senior authors: Prof Fitzgerald and…Prof Richard Tol, the Panglossian climate economist who has single-handedly pedalled the fantasy that climate change is about good as well as bad outcomes. This author sincerely hopes that Prof Fitzgerald is not depending too much on his former ESRI colleague for his views on the actual economic costs of dealing – and not dealing – with climate change.

ThinkOrSwim is a blog by journalist John Gibbons focusing on the inter-related crises involving climate change, sustainability, resource depletion, energy and biodiversity loss
This entry was posted in Economics, Global Warming, Irish Focus, Sceptics. Bookmark the permalink.

13 Responses to An economic analysis that just doesn’t add up

  1. autofac says:

    Hey John –

    Nice to see you holding back there anyway. 😉

    I think the most egregious element of the article is the idea that we (or, worse, our poor offspring) might still be able to “… bring the momentum of climate change to a slow halt.” That might have been possible had we acted before we went (well) into overshoot; but that opportunity is long gone IMHO. This is not rocket science – the most elementary dynamical systems (with positive feedback and delayed reaction to warning signals) behave this way. The surprise is that a “professional” economist, who has lived through the great Irish property bubble, can profess, with a straight face, to still believe in “soft landings”. The coming climate change landing will be hard; very hard indeed. What we CAN still do is at least fasten our seat belts, apply the brakes (as hard as we can!!), and then brace. Or we can just close our eyes and wait for the iron law of technological innovation to save us just in the nick of time. (Hey: it always worked in the movies didn’t it???)

    Cheers – Barry.

  2. johngibbons says:

    Barry, your point about Prof Fitz engaging in the physics fantasy of “bring(ing) the momentum of climate change to a slow halt” again underpins just how deeply he doesn’t understand the science. From that core non-understanding flows his erroneous logic and wildly implausible ‘solutions’. And yes, had I had the misfortune to have been an author on the ESRI’s disastrous ‘2008-2015 Medium Term Review’, the lesson I’d hope to have taken away is: beware of bottomless pits that, at first glance, look like soft landings.

    It has long been a gripe of mine that the ‘social scientists’ aka economists, appear to think the physical laws of nature are as pliable as their own mathematical modelling assumptions. This of course is a gross misunderstanding of how reality works, yet these Ivory Tower experts are the very folks our politicians and policy makers turn to for informed advice. JG

  3. Simon Whelan says:

    Hi John,
    Thanks for above, To go with your figures on climate change costs in Ireland a useful financial figure to use has just come into the public sphere with regards storm costs: last year Storm Darwin cost the ESB a mere €25 million warranting a significant mention in their annual report published here.

  4. johngibbons says:

    Thanks Simon, wasn’t aware of the scale of impacts of Darwin on the ESB, as you say, a big enough hit to feature prominently in its annual report. Underlines how the costs of severe weather are spread so widely across the economy. What happens, I wonder, when more and more insurance companies start to refuse to cover the so-called ‘acts of god’, as climate-fuelled severe weather events intensify? JG

  5. Paul Holden says:

    ‘In the ground floor lobby of Ireland’s Agriculture Department in Dublin, a flat-screen TV displays a digital clock counting down the seconds until April 1.’

  6. Paul Holden says:

    I was at the second of the Climate Conversations last night, where the subject was ‘A New Economy’ and, having listened to a number of speakers including Rory O’Donnell, Director of the National Economic & Social Council, and Robert Watt, Secretary General of the Department of Public Expenditure & Reform, I made the point that they seemed to be talking about the existing economy with a few Elastoplasts applied — all we need to do is find a better source of energy and we can continue business (i..e. consumption) as usual. I pointed out that the whole edifice of the current economic system is built on the — illogical — idea that continuous, perpetual growth is possible and indeed desirable (and, of course, ‘sustainable’); that what we need is an orderly programme of radical degrowth in this part of the world in order to facilitate some modest growth in poor countries; that this means finding new ways of sharing wealth and sharing the means to create wealth (i.e. work), and that this could be realised with a move to a shorter working week.
    Needless to say, the economists didn’t think this was a very good idea. Watt was pragmatic — he didn’t think it would be politically acceptable — in which, unfortunately, he may be right.
    As for the technological optimists, the best quote I’ve come across (can’t remember from whom — it might have been you!) speaks of trying to fix problems we don’t understand using technologies that haven’t been invented yet.

  7. johngibbons says:

    April 1, aka April Fools’ day! I wonder how many farmers have stopped to consider that milk quotas also meant protected milk prices? From April 1st, they join the scary global commodities market, as just A.N. Other milk producer. All the ballyhoo about green, grass-fed, sustainable etc. etc. is completely irrelevant for milk, a simple commodity. The Jan 2015 average milk price for Northern Irl. dairy farmers was 22.3p per litre, 34% down on the 2014 price. Even in euro, that’s barely 33cent/litre. How many farmers would be solvent at these levels? Welcome to the jungle!

  8. johngibbons says:

    Paul, I didn’t attend either Climate Conversation, but I did watch an extended online clip of some of the speakers…and what I heard was part psychobabble, part wishful thinking, part sound sense. Your description of the ‘New Economy’ above is exactly right…just like Prof Fitzgerald, O’Donnell et al. are stuck in a time-warp where they believe that the future will be exactly like the present, only we’ll all be somewhat richer, and this climate/ecological problem, whatever it might be, is a sideshow that you can deal with in the footnotes. It is simply inconceivable to these folks that the whole edifice may be about to come crashing down into a million pieces, beyond any hope of ever functioning again. Since the logic of growth is the common denominator that binds everyone from our bankers and politicians to our business people and trade unionists, take away the certainty of infinite growth and you have kicked the legs clean under them. Fitzgerald’s answer to intractable ecological problems is to assume an (entirely improbable) solution will just magically appear. It is honestly about as hopelessly groundless as that. JG

  9. econroy says:

    John, Well done again – a very good read. I’m wondering if I may have been involved in this as I had a couple of phone conversations with Prof. John (given my Influencing the Influencers role in ATCC) about climate change and economic growth (alluded to by Paul H. here). He would not agree that economic growth plays a role in carbon emissions and was not in favour of targets. Maybe my prompting helped him write this article, given that he has not written on CC before.

  10. Polarity says:

    I too was surprised to see Professor Fitzgerald writing about global warming this week. I was even more surprised to find his article in the Irish Times Business section, as that newspaper has almost entirely, at least as far as I can see, stopped covering environmental topics since the recent retirement of their Correspondent – and it was thin enough prior to that. Like John, I was pleased to see a high profile academic throw his hat into the ring, so to speak, but sorely disappointed at what he actually wrote. Is it really possible, in 2015, for an academic to be this ill-informed?

    I’m no expert, but I do have a decent primary degree in science and could, in the space of an hour, visit all the major climate change websites (Nasa, IPCC, NOAA, UK Met Office, AAAS, etc) and get a thorough understanding of the basic science, the quite unprecedented scale of the climate crisis, and our very limited options in order to avoid disaster. For Prof Fitzgerald to have written such a piece without undertaking such a rudimentary tour of the science is at teh very least, careless in the extreme. And very disappointing.

  11. johngibbons says:

    Thanks Eric. The fact that Fitzgerald was lobbied and still produces something as downright poor as the above underlines the depth of the knowledge/awareness gap that has to somehow be breached before this issue starts getting the serious attention and focus it demands, rather than being kicked ‘down the road’ by vested interests and so-called experts.

  12. johngibbons says:

    Hard to disagree with any of the above. Overconfidence and confirmation bias probably plays a lot in explaining how articles like the above come to be written. And yes, the collapse in coverage, specifically, serious, no-nonsense coverage by the Irish Times in this field is a matter of great regret.

  13. Jay Elliot says:

    I heard your debate with the IFA spokesman on the radio earlier today, well done on speaking up for the science, it’s a rare enough event on RTE, it’s sad to say. I have some sympathy for the farmers in all this, our lot are probably not the worst, at least they’re not burning down rainforests to clear cut for cattle ranches, like in Brazil etc, but I do accept that the emissions problem from cows/beef is massive, and see also that if the entire world shifts to steaks and dairy products, then we really are up the creek without a paddle. Maybe the IFA know this too, but have decided to make hay, so to speak, while the sun shines.

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