What Should We Do about Global Warming?

The most controversial regulatory issue facing the United States today is the proposal to fight global warming by substantially reducing emissions of carbon dioxide (CO2), the leading greenhouse gas. Representatives of the United States and 150 other nations are scheduled to meet in Kyoto, Japan in December to sign a treaty requiring a rollback of CO2 emissions to the 1990 level.

How serious is the problem that is supposed to require reducing production and employment in our key manufacturing industries? Proponents of quick action rely for support on a quotation from a 1995 report of the UN's Intergovernmental Panel on Climate Change (IPCC): "the balance of evidence suggests that there is a discernible human influence on global climate." That modest and vague statement is preceded by a caveat that is far less widely quoted: "Our ability to quantify the human influence on global climate is currently limited because . . . there are uncertainties in key factors." The report goes on to tell about those technical uncertainties.

Knowledgeable scientists, including those who advocate tough action, admit that great uncertainty exists in the chain of causation from emissions of CO2 by human activities to the creation of greenhouse gases to increases in global temperature. For example, climate changes due to natural causes likely swamp the human influences. Clearly, global climate analysis is not a simple matter.

In this century, the bulk of the modest warming that has occurred preceded the bulk of the buildup of the greenhouse gases (logic would lead us to expect that the sequence would be the other way around). Moreover, weather satellites show a mild cooling trend since 1979. Thus, it is not surprising that, when the scientific contributors to the IPCC report were surveyed, about half did not support the policy makers' summary.

Let us consider the implications of the most popular proposal to address global climate change: a special tax to force CO2 emissions back to the 1990 level. Many public and private organizations have analyzed the likely impacts on the American economy. Most of them conclude that a carbon tax sufficient to roll back emissions to 1990 levels would slow down wage growth, worsen the distribution of income, and make Americans feel as if they were reliving the oil price shocks of the 1970s and early 1980s.

The major energy-using sectors would be hardest hit: petroleum refining, chemicals, paper, cement, steel, and aluminum. Electric utilities--most of whom use fossil fuel--would be most directly affected. Because they serve virtually every part of society, the results of a cutback in CO2 emissions would be pervasive.

When we examine the details of the UN proposal, we find a most worrisome loophole. Those CO2 "caps" would be limited to the industrialized nations. Developing countries will not be subject to limits on their fossil fuel usage for the foreseeable future. That ignores the obvious: global climate change is a global problem.

It will be futile to try to stop global warming by curbing our energy use if the developing nations will more than offset our costly contribution to a better global climate. That is exactly the prospect we face. In the next dozen years, China and India alone are expected to experience greater growth in emissions than the United States, Japan, and Western Europe combined.

In view of the serious economic impacts of a CO2 tax on American industrial production and employment, it is advisable to consider alternative responses to the issue of global climate change. The cleanest and most environmentally benign fuel is nuclear power. Surely, dealing with the most publicized obstacle to building new nuclear power plants--the location of spent fuel in secure bunkers--is a technological challenge that scientists and engineers are capable of solving. Indeed, some believe they have already done so.

Government policy makers should not adopt a stiff CO2 tax just to show that they care about the environment. We all do. But the heart is not a thinking instrument.

Murray Weidenbaum is chairman of the Center for the Study of American Business.