Following my blog post titled ‘Richard Lindzen on Hockey Sticks’ there was some discussion about Richard Tol’s views on various issues relating to economics and the Intergovernmental Panel on Climate Change. Various commentators at the thread where quoting Dr Tol in support of their position. Dr Tol has provided the following response:
“Ian Castles and William Connelley had a discussion about what I said and did not say. Here is my version.
If one assumes convergence of per capita income, and one measures income in purchasing power parity (PPP) exchange rates, then projections of global carbon dioxide emissions are lower than in case one measures income in market exchange rates (MER).
This is the original Castles and Henderson critique of IPCC SRES.
However, emission intensities are also assumed to converge, which partly offsets the above effect.
This was pointed out by Manne and Richels, and by Alfsen and Holtsmark, while Castles and Henderson admitted their initial omission.
As a result, switching from MER to PPP reduces global carbon dioxide emissions, but by an amount that is small compared to the uncertainty about future emissions.
That is, if one is interested in long-term, global climate change, the Castles and Henderson critique is of minor importance.
However, one should worry about the fact that the IPCC, first, made a very basic error and, second, is unable to admit that and correct its way.
If one is interested in climate policy, the Castles and Henderson critique does matter, because the small drop in global emissions is almost entirely due to China and India. The OECD thus shoulders a larger part of the responsibility. The argument of the US Senate, that climate policy without China makes no sense, cuts less wood.
If one is interested in climate impacts, the Castles and Henderson critique does matter, because projected economic growth is slower in developing countries, and vulnerability is larger as a result. Although warming would be slower, impacts may in fact be larger.
If one is interested in regional climate change, the Castles and Henderson critique does matter, because future emissions of sulphur would be different as well, probably higher.
In sum, Castles and Henderson raise five issues, only one of which is of minor importance.
By the way, my reading of the state-of-the-art in economics is that (a) income should be measured in PPP nor MER; (b) there is neither theoretical nor empirical support for the assumption of unconditional income convergence; (c) there is limited empirical support for the assumption on energy intensity convergence.
Dr Tol is the Michael Otto Professor of Sustainability and Global Change in the Departments of Geosciences and Economics at the Hamburg University, Hamburg, Germany.