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Figuring the Costs of Climate Change: A Reply

The contribution of David Demeritt and Dale Rothman is the latest in what has now become a long series of papers (Bruce, 1995; Fankhauser and Tol, 1995; 1998; Fearnside, 1998; Hohmeyer, 1996; Masood, 1995; Masood and Ochert, 1995; Meyer, 1995a; 1995b; Meyer and Cooper, 1995; O'Riordan,1997; D Pearce, 1995; F Pearce, 1995a; 1995b; Sundaraman, 1995; Tol, 1997a; 1997b; 1997c; Tol et al, 1996) on the merits and demerits of the 'social cost' chapter (Pearce et al, 1996) of the Second Assessment Report (SAR) of Working Group III of the Intergovernmental Panel on Climate Change (IPCC). The paper adds few new insights to this debate. Practically all the drawbacks the authors list have already been treated in the published literature. And unlike other critics, Demeritt and Rothman offer little in terms of solutions to identified problems. Nevertheless, we appreciate this opportunity to respond to their critique. The basic message of Demeritt and Rothman is that the monetary impact estimates as reviewed by the IPCC are shaky. Because the weak foundation of the numbers is likely to get lost in applications, there is a danger that policymakers will be incorrectly informed. Everybody agrees with the first statement. In all our papers—including the SAR—we emphasise the preliminary nature of our work and the need to improve current estimates, and others often repeat this. As to the second, it is true that the figures have been used too casually in some applications. But with one or two exceptions, we have never met a user unaware of the limitations of our work. A typical attitude is "it is not very good, but it is the best we have". Demeritt and Rothman probably also overstate the role damage estimates have played in the policy discussion. Policymakers appear to be far more concerned about short-term mitigation costs than about longterm damages, whatever their magnitude. Few of the proposed emission reduction policies can be supported by cost-benefit analysis. Beyond that, the authors often assign too deep a meaning to simple things. The writing team of the 'social cost'chapter reviewed avast amount of material (including the work of Hohmeyer and Gartner, 1992), but ultimately based its assessment on the best available sources, ignoring what had not been peer reviewed or was scientifically unsound. Not all papers passed this test, including some of our own. The work of Mendelsohn et al (1997), for example, was omitted because it was not available in peer-reviewed form at the time. The restriction of IPCC assessments to the peer-reviewed literature also explains why one of us has been able to revise (Tol, 1996a) and extend (Tol, 1996b) earlier estimates so soon after the publication of the SAR. Similarly, the IPCC mandate forestalled a detailed discussion of issues raised about valuation and aggregation. Such discussion can now be found in Fankhauser and Tol (1996; 1997) and Fankhauser et al (1997; 1998).