Promising to spend US$2 trillion on climate over the next four years, US presidential candidate Joe Biden is taking a path similar to that of politicians from many other rich countries, vowing costly policies to help address global warming. Along with his fellow Democrats, he pledges to end fossil fuels in the power sector by 2035 and cut net US emissions to zero by 2050.
Global warming is a real problem we need to tackle smartly. President Donald Trump has incorrectly suggested that climate change is a hoax and has offered almost no effective climate policy. Better approaches are definitely needed.
But climate panic doesn't help either.
Biden, like many politicians across the rich world, frequently claims that climate change is an "existential threat" to human existence. However, this is contrary to the central findings of the UN Climate Panel. It estimates that by the 2070s, global warming will overall have a negative impact equivalent to a reduction in incomes of between 0.2 and 2 per cent. By then, the UN expects the average person will be 363 per cent as rich as today. The negative impact from climate change means we will instead be 356 per cent as rich as today. That is a problem, but not the end of the world.
While well-intentioned, Biden's sprawling plan has few concrete cost points and contains many ideas of varying quality. He proposes to retrofit millions of homes for hundreds of billions of dollars, although the largest US study of 40,000 retrofitted homes shows that costs are twice as high as benefits.
Biden also wants to restore the full electric vehicle tax credit, although spending US$7500 for each electric car is one of the costliest ways to cut emissions. The International Energy Agency finds an electric car over its lifetime only emits about 10 tons less CO2 than a similar gasoline car. On the original US carbon market, the so-called RGGI, this reduction could be achieved for just US$60.
Much of the plan simply seems to rebrand other policies, often only tenuously related to climate, such as expanding access to wireless 5G broadband and modernising decrepit schools in low-income neighbourhoods. Some parts of his climate proposal could even increase emissions, such as massively rebuilding roads and bridges.
It is also questionable whether Biden's plan — and other countries' vastly ambitious climate plans — can keep their electoral backing.
While more than two-thirds of the US population finds that climate is a crisis or major problem, less than half are willing to spend even US$24 a year to fight it. Biden's plan will cost US$3500 per taxpayer each year.
And this cost will increase significantly.
Biden's plan doesn't specify the price for getting US emissions to zero. Only one nation — New Zealand — has been bold enough to request an independent cost estimate of cutting emissions to zero by 2050. They found that the optimistic cost would reduce GDP by a whopping 16 per cent. Translated to the US, this implies a cost of at least US$5 trillion in today's money. Not just once, but every year.
New Zealand found that the necessary gasoline tax increase for net-zero would be 90 USc per litre. For comparison, the French Yellow Vest protests ignited after just a US4c climate price hike.
Spending 16 per cent of GDP to fix part of a 2 per cent problem is a bad deal. Even if all OECD countries cut all their CO2 emissions tomorrow and remained shut down for the rest of the century, the standard UN climate model shows it would reduce temperatures by 2100 by just 0.4C.
This is because three-quarters of the expected emissions over the rest of the century come from China, India, Africa and the rest of the non-rich world. They are not about to implement unaffordable trillion-dollar climate investments. Their first goal is to get all of their people out of poverty, which means access to much more reliable and cheap energy, mostly from fossil fuels.
Instead, the solution has to focus on dramatically increased investments in green energy R&D. If innovations could push the price of zero-CO2 energy below fossil fuels, all nations would switch. Climate economics shows that this is the most effective, long-term climate policy.
During the Paris climate summit in 2015, former President Barack Obama and many other global leaders promised to double global green R&D spending by 2020. Unfortunately, actual spending has barely budged.
But Biden's plan could change all that.
He laudably suggests spending US$75 billion per year on green R&D, which would increase four-fold what the rich world is currently spending each year. While waste and mismanagement from such a drastic ramp-up are possibilities, Biden's direction is precisely right.
We are not sustainably going to fix climate change with expensive policies that are hundreds or thousands of times more costly than what people are willing to pay. Scaring people with false climate alarmism will backfire. But Biden's proposal to quadruple global green R&D investment is exactly what could fix climate change.
• Bjorn Lomborg is president of the Copenhagen Consensus and Visiting Fellow at the Hoover Institution, Stanford University. His new book is False Alarm - How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.