Josh Dowse writes: Environmental writer Bjørn Lomborg gave a thought-provoking talk at Sydney’s Lowy Institute yesterday. Lomborg is articulate and persuasive, has an international reputation and is an exemplary self-promoter. Unfortunately he is, once again, dangerously wrong.

Lomborg argues that putting a price on carbon is a waste of money, that instead we should be investing in low-emission research and development. But he presents this as though they were two alternatives. It’s a false dichotomy, because we need both. We should invest in low-emission R&D, because that is by far the best chance of solving the problem. But how do we pay for that? With a carbon price.

Lomborg, you may remember, published The Skeptical Environmentalist in 2001. The book was highly significant as, to that point, there was no published tract to counter the consensus of the 1800-odd scientists of the Intergovernmental Panel on Climate Change (IPCC): which was that human-induced climate change was well underway. The book therefore became a lightning rod for climate change sceptics. It was quoted heavily by certain industry groups, and was a telling influence in derailing attempts at global consensus on the response to what was, till then, the non-contentious reality of climate change.

Lomborg opened his talk yesterday by saying, with PowerPoint punctuation, that climate change was real and human-induced, and that the best authority on it is the IPCC. Nobody asked when and why he changed his mind on these matters. Wikipedia suggests it happened in 2010, in conjunction with the release of his latest book.

His Lowy Institute address was, unfortunately, not on that change of heart. Rather, it was on what we should now be doing about the reality of climate change. Having admitted he was completely wrong on the science of climate change, he has in a year become an expert on what to do about it. He will likely again be quoted by the usual suspects, but on this evidence, should this time be ignored.

Mr Lomberg notes research that says by 2100 the global cost of the negative effects of climate change will be $15 trillion. His argument runs that this is insignificant, being less than 1% of global GDP.

Which just goes to show how monetary valuations are often inadequate. Climate change impacts tend to be localized. $15 trillion equates to 1000 Christchurch disasters, which would be very significant to the people in 1000 such cities.

Because the cost of climate change is limited, he says, we should not overspend in seeking to avoid it. (Let’s agree on that.) And we should make sure that what we do spend is effective. (No argument there.)

Lomborg calculates that Europeans currently spend $180 billion a year on Kyoto-based policies, which if successful would avoid temperatures rising by just 0.002°C — translating to 3 cents of avoided costs for every $1 spent. Kyoto-based policies — i.e. a price on carbon — are therefore a waste of money.

Instead, argues Lomborg, we should invest heavily in low-emission R&D. If we spent just half the Kyoto amount doing so, we could bring in the technologies needed to keep emissions stable, and avoid global warming. People would use the new technologies not because they were being forced to, but because they would be cheaper than coal. As soon as we reach that point, the problem will be solved. For every $1 invested, we would get $11 worth of the benefit of avoided climate change costs. Isn’t that better?

Absolutely! But what makes Mr Lomborg dangerous is that he presents this as though they are two alternative paths. It’s a false dichotomy. We need a strong investment in R&D. But the way governments can pay for that — and encourage the private sector to invest — is through a carbon price.

The orthodox economic view is that when you put a price on carbon, the costs of high-emission energy and technologies go up. Low-emission alternatives become relatively cheaper, and so more commercially viable, and so more investment is attracted to develop them. In addition, if the government raises any funds through a carbon tax or an auction of carbon permits, those funds may be invested in early-stage R&D, accelerating the process. That’s what the tax or permit revenue is for. Transitional compensation is only to gain the political support to implement the scheme, without which nothing is possible.

The more that is invested in R&D, the sooner low-emission technologies emerge to offer the consumer practical alternatives. On that, I agree with Lomborg. But a carbon price is necessary for that public and private investment. As well, the carbon price is added to the cost of high-emission technologies, so that the low-emission alternatives undercut them more quickly, bringing forward the solution.

Kyoto-based policies are not in themselves the solution, but are a necessary part of it. They are also transitional. Implementing a carbon price in a sensible and effective way will bring on new technologies, which in the end will make the carbon price less of an issue.

In the words of many, the stone age didn’t end because we ran out of stone. We just found better ways of doing things. We may well do so again, as well as mitigate the worst effects of climate change. But not if we listen again to the likes of Lomborg.

Josh Dowse is an independent consultant on sustainable business and investment.

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