Commentators say those not following the recommendations of the Intergovernmental Panel on Climate Change are unethical. I disagree.
The Intergovernmental Panel on Climate Change (IPCC) has released a new report predicting that climate change is set to inflict “severe, widespread and irreversible impacts” on the world unless drastic action is taken on reducing carbon emissions. According to the report, the unrestricted use of fossil fuels should be phased out by 2100. So, oil producing countries and oil companies should pay attention: adapt or disappear.
As usual, after every report, the media pour scorn on the “climate change deniers”. In a recent editorial in the Financial Times, “An unethical bet in the climate casino”, Martin Wolf, lead economics editor, elevates this criticism to a new level by arguing that not fighting climate change is unethical because we have the ethical obligation to leave future generations with a better world than we have today. However, it is not obvious that my children are better off if I have to pay higher taxes to finance the 180 billion euro subsidies that the European Commission plans to spend on climate change initiatives during the next five years. It is also likely that future generations will suffer from the lack of competitiveness which results from higher energy costs as a result of the European Commission’s policies.
Finally the 826 member organisations of the European Platform against Wind Farms (EPAW) point out that that by trying to fight one externality (climate change) wind turbines create others. The organisation points to the destruction of flora, fauna, landscapes and human health as a result of their presence. So it is not obvious that our children will be living in a better world if we follow the prescriptions of the IPCC so I personally don’t believe I am unethical if I oppose the IPCC’s agenda.
Talking about ethics, it is highly unethical to publish a report warning of such severity when the IPCC is fully aware that there has been no statistically significant warming during the last 18 years. This fact is admitted in the report but dismissed because the period is too short. Although this period may be short, it is an “out of sample” predictive period, unlike the data from the 20th century which are used to estimate the parameters of the climate prediction models. A science that arguably can’t predict should not be used to justify massive government intervention in the economy. Ironically in the previous (2007) report (page 12 of the summary for policy makers) it is stated that:
“Since IPPC’s first report in 1990, assessed projections have suggested global average temperature increases between about 0.15 and 0.3 degrees per decade for 1990 to 2005. This can now be observed with observed values of about 0.2 degrees per decade, strengthening confidence in near term projections.”
So when data support climate alarmism, a 15-year horizon is not too short. In the meantime climate scientists have been busy justifying this pause in global warming by dozens of “explanations”. But this is not different from admitting that global climate is driven by so many factors that it is futile to attempt to control it. It may then be as likely that we will enter a period of global cooling as is now predicted by numerous scientists.
Furthermore, I question whether the IPCC represents the opinion of 99 percent of climate scientists. The IPCC is an intergovernmental organisation where the final summary for policy makers is approved and negotiated by politicians. There are numerous scientists who disagree with the IPCC conclusions. In 2010, a 321-page report endorsed by more than 1,000 dissenting scientists was presented at the Climate Change conference in Cancún, a much larger number than the 52 scientists who authored the 2007 alarmist report. Dissidents include previous IPCC scientists and IPCC lead authors such as Professor Richard Tol who created quite a stir by complaining on his website that lead authors of IPCC reports are chosen not on the basis of academic quality but on the basis of political colour. If the IPCC is controlled by politicians then is it obvious that they can’t be objective as they painted themselves in a corner.
Admitting today that the science is flawed would boil down to admitting to a huge waste of taxpayer’s money. The anger of the public at large against the political class would be unprecedented. Unlike the taxpayer’s money to bail out banks during the financial crisis, this money is not likely to be recovered. Indeed the U.S. Treasury reported in January 2014 that essentially 100 percent of all the TARP (Troubled Asset Relief Program) money has been recovered through dividends, interest payments and repayments of capital. Alternative energy companies are less likely to be able to reimburse the hundreds of billions of subsidies as they are not sustainable without subsidies.
A final ethical flaw is the lack of objectivity of the mainstream media who don’t question the conclusions of the IPCC, treating it as George Orwell’s Ministry of Truth. The role of an independent press should be to protect the public against political manipulation and attacks on its fundamental freedoms. While it is true that thanks to the Internet we now can get alternative views, for example, via websites that publish research by dissident scientists, such as climatedepot.com, the fact remains that most people attach a larger credibility to mainstream media than to the Internet. Considering the quality of climate change reporting, especially in Europe, this credibility is not justified.
Theo Vermaelen is a Professor of Finance at INSEAD and the UBS Chair in Investment Banking, endowed in memoriam Henry Grunfeld. He is also the programme director of the Advanced International Corporate Finance programme, one of INSEAD’s executive development programmes.