(distributed before the Q&A session with President Klaus at the Wall Street Journal ECO:nomics Conference in Santa Barbara)
Many thanks for the invitation to participate in this important and timely gathering of business people, economists, environmentalists and politicians. In this rather confused era, the organizing institution, the Wall Street Journal, remains one of the last pillars of reason and of healthy and so much needed stability and continuity of thoughts and attitudes.
As someone who spent most of his life in a communist regime, I am getting nervous when I see a serious-looking article with the title “Rethinking Karl Marx” in a January edition of the Time Magazine, attempting to convince us that Marx’s analysis of capitalism was correct and that we should, therefore, study it very carefully right now.
For me, one of the main symptoms of unreason in our era and of our returning before the Age of Enlightenment is the current global warming debate and the futile ambitions to control climate. In its arrogance and immodesty, it reminds me of many unrealistic and all of us damaging and hurting plans and projects the communist propaganda kept supplying us with all the time. My answer to the question in the title of this session “Is environmentalism a bigger threat to humanity than global warming?” is clear and straightforward: Environmentalism is a much bigger threat and what is endangered is freedom and prosperity, not climate. Climate is OK. This is also expressed in the subtitle of my book devoted to this topic, published two years ago.1
I have spent years studying this issue, which is only a new variant of the many times discredited and disproved Neomalthusian pessimistic and interventionistic environmentalist doctrine. This ideology, if not religion, should not be confused with scientific climatology in spite of the fact that it uses, or better to say, misuses some of its terms, concepts, hypotheses. Structurally, they belong to two, totally different fields. One is science, the other is politics.
It is difficult to quickly summarize my rather complex views about this issue in just a few sentences. For those who want to get acquainted with them in more detail, I recommend my book which is also available here. Nevertheless, a few most important points can be made:
1) science does not give us clear and strong evidence that dangerous and even measurable human-caused global warming is occurring. Besides the views of the IPCC, which is a group of people for several reasons fully committed to the idea of man-made global warming, there exists a more balanced, non-alarmist view held by thousands of serious scientists. The claims made by the alarmists about an undisputable scientific consensus about global warming and about the factors influencing it are not justified;
2) before discussing the currently circulated and – among politicians and some business people – very popular alarmist policy prescriptions, everyone should carefully study the economics of global warming, a field of economics which uses elementary tools and concepts of economic science such as
– the cost-benefit analysis,
– the risk aversion analysis,
– intertemporal analysis based on the idea of discounting,
– standard price theory and microeconomics, etc.
to be able to put the global warming debate into a proper perspective;
3) human experience, “deposited” and assembled both in our knowledge and in serious social sciences, tells us that human behavior is sufficiently adaptive, that both wealth and technical progress change the parameters of our decision making in the direction of environment protection, that spontaneous reactions of billions of people are better than political governance and centralized masterminding of human fates. It warns us against attempts to introduce radical, extremely costly, human freedom and prosperity endangering mitigation measures based on a totally futile idea of changing the climate by limiting CO2 emissions.
I am surprised to see that many Americans support cap-and-trade legislation to reduce greenhouse gas emissions. I am convinced this is a wrong project for both the uncertainty about the real dangers of global warming and the certainty of the damage done by this policy.
Europe is several years ahead of the US in implementing these policies. The EU member countries all ratified the Kyoto Protocol and have undertaken a wide range of policies to lower the emissions and meet the promised targets. These policies include a cap-and-trade program known as the Emissions Trading Scheme, very high fuel taxes and ambitious programs to build windmills and other renewable energy sources. These policies were undertaken at a time when the EU economy was doing well and the irony is that emissions were not going down now as a result of these policies, but started to decrease as the economy moves into recession.
This is not a surprise for someone like me, who was very actively involved in the transition from communism to a free society and market economy. The old outmoded heavy industries that had been the pride of our Communist regime were – practically overnight – shut down because they couldn't survive the introduction of rational economic policies. The secret behind cutting emissions was economic decline. As the economies of the Czech Republic and other central and eastern European countries were rebuilt and began to grow again, emissions have naturally started to go up. It is clear to everyone who looks that there is a very strong connection between economic growth and energy.
Cap-and-trade can only work by raising energy prices. Consumers who are forced to pay higher prices will have less money in their pockets to spend on other things. While the individual companies that provide the higher-priced "green" energy may do well, the net economic effect must be negative. It is necessary to look at the bigger picture. Profits can be made when energy is rationed or subsidized, but only within an economy operating at lower, or even negative, growth rates. This means that over the longer term, everyone will be competing for a piece of a pie that is smaller than it would be without energy rationing.
Being often with many leading politicians, I feel frustrated that they do not listen. They already know. They fully subscribed to the idea that talking about “saving the planet” is an effective way to show their “caring” for humanity and that it is the easiest way to maximize votes irrespective of any relevant activity which would aim at the real needs of people. The global warming dogma has become a very easy form of escapism from the current reality. We should keep resisting it.
Václav Klaus, Wall Street Journal ECO:nomics Conference, Bacara Resort, Santa Barbara, California, March 6, 2009
1 - “Blue Planet in Green Shackles. What is Endangered: Climate or Freedom?” Competitive Enterprise Institute, Washington D.C., 2008. Originally published in Czech language in 2007 under the title „Modrá, nikoli zelená planeta. Co je ohroženo: klima nebo svoboda?”, published by Dokořán, Prague, Czech Republic.
Autor: Václav Klaus