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Climate Alarmism and the Poor

By Roger Bate - December 6, 2004 12:00 AM

Today (6th) the Tenth Conference of the Parties to the United Nations Framework Convention on Climate Change meet in Buenos Aires. Concern about the devastating consequences for humanity from impending change to our climate will be interspersed with attacks on the United States for being the only major industrialized country not to have ratified the Kyoto Protocol.

There are two problems with this viewpoint. The first is that although it is claimed that human emissions of greenhouse gases are altering the climate, some climate scientists and applied economists challenge the assumption that human emissions are causing significant, irreversible, or harmful effects. The second, and more important is that we are already exposed to nearly all the alleged negative impacts of climate change, and although any man-made climate change may make these dangers worse, there are policies that can be followed that reduce today's harm.

Knowledge of these two concerns leads one to the conclusion that what should be pursued are not methods to limit human emissions, but methods to reduce the problems that may be exacerbated by any future man-made or natural climate change. Restricting energy use is just one 'solution' to the climate change problem, but institutional changes will be more important to allow the poorer countries to develop and become more resilient to weather related events. To illustrate, it's worth remembering that the same strength hurricane killed hundreds in Haiti and a handful in Florida. A richer Haiti would be able to resist future hurricanes, even if they become more frequent or severe.

As a study that I undertook for the American Enterprise Institute[1] demonstrates, freer economies produce fewer emissions for each unit of growth produced. For example, freeing the Chinese economy will hasten development and lower emissions of greenhouse gases per unit of growth produced. Policies that freed the economy would have a greater impact on greenhouse emissions than the entire Kyoto Protocol, and would not need 100 years, but 8 years to take effect.

China is a relatively unfree country by most measurements, including those by the Economic Freedom Index. But China is economically open compared with the entire African continent, and many other developing countries. The correlations, which universally demonstrate that less free countries are poorer, are backed up by causal relationships based on lack of respect for the rule of law, property rights and the other institutions of free societies, which are so important to development. As a result of their lack of freedom, repressed economies, including Sudan, North Korea and Iran, also have worse health, as measured by life expectancy and child mortality, and also have dirtier environments, as measured by urban air pollution and water quality measurements.

It is often said that rich countries produce most of the greenhouse gases around the world; historically this was the case. But as developing countries have grown they have now overtaken total emissions from established OECD countries. And since their emissions are set to increase far faster in future, any realistic international policy has to include them; current policy, the Kyoto Protocol, does not.

A strongly statistically significant result was obtained from our analysis showing that freer economies produce less carbon dioxide for each unit of growth than do repressed countries. The undeniable conclusion of this analysis is that increasing freedom not only leads to faster growth but also lower relative emissions of a potentially dangerous greenhouse gas.

In the paper we analyse five developing and transitional economies to see how they compare in terms of freedom and emissions profiles. All the countries, China, India, Indonesia, Russia and South Africa, have freedom indices at the low to mid-range of economic freedom; Russia is the least free and South Africa the most. China's low score on economic freedom indicates pervasive market distortions, based around the large state sector that is impervious to market pressures, which noticeably does not encourage energy efficiency improvements. Furthermore China's successful enterprise zones do not encourage the diffusion of their newer technologies into the rest of the economy. India and Indonesia have price regulations and domestic industry protection that mirrors China's problem; Indonesia and Russia have political instability (at least in the energy sector), which puts all investments and new technologies at risk. Russia's corruption and regulatory inconsistencies make it the least free and most energy inefficient. South Africa has promise and given its deposits of dirty coal, it performs relatively well on carbon dioxide emissions, however, some political instability and government control of pricing means its technology adoption from overseas is not what it could be.

The implications from the analysis are significant. If China adopted US and Australian standard technologies in a power plant it was building today, by 2012 a greater reduction in greenhouse gases would be achieved just by China than by all action by all nations who signed up for the Kyoto Protocol. But to do so foreign and domestic investment in new technology must happen, and for this to occur these economies must become freer, because only then will the best technologies be adopted. China for one looks as though it may move in this direction.

Of course free nations produce more of everything consumers want, and total emissions may rise if repressed countries became free (a lot depends on population changes, too), but there is no doubt that the world will be richer and more able to adapt to any dangers (such as Caribbean hurricanes) from the climate if it changes dangerously.

Also, people in repressed nations deserve the chance to become wealthy and develop as we in the west have. If trying to combat climate change becomes the driver for change towards freedom then so be it. These countries will rightly resist any international efforts to curb their use of energy; what we must do is invest in new technologies with them, not export our anti-energy regulations.

Dr Roger Bate is a fellow at the American Enterprise Institute.


NOTES

[1] Roger Bate and David Montgomery, Beyond Kyoto, AEI Environmental Policy Outlook


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