Goals

• Recognize the role of human actions in determining the future of our climate
• Explain scientific concepts in language non-scientists can understand
• Find reliable sources of information on the internet
• Use numerical tools and publicly available scientific data to demonstrate important concepts about the Earth, its climate, and resources

Learning Outcomes

By the end of this module, you should be able to:

• Recognize that there is a cost to future society of emitting CO₂ to the air today.
• Describe how one might balance immediate needs against protection from future losses.
• Explain why growth cannot be infinite in a world of finite resources.
• Use an Integrated Assessment Model to determine the most economically beneficial approach to dealing with emissions and climate change.

Questions?

If you have any questions, please post them to Help Discussion. We will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.

Investments typically grow over time. But, if you don’t solve them, problems often grow too. And solving problems takes money, which could be invested now to solve problems later. Solve? Invest? Solve a little and invest the rest? Throw a party and worry about it later? What is a poor confused society to do? Call an economist!

Short version:

Using a calculation called discounting that is similar to interest-rate calculations, it is possible to estimate the present value or cost of future events. The discount rate, which is the real return you could get if you invested your money, is a function of the growth rate of the economy, as well as our preference for having things now rather than later (and thus us behaving as if our generation is more important than future generations). Actions to reduce CO₂ emissions have costs now but benefits in the future. Thus, discounting is an important part of the economic models, called "integrated assessment models," used to compare possible paths to the future. The path that optimizes the tradeoff between these costs and benefits calls for beginning now to slow global warming, but in a measured rather than panicked way.

Friendlier but longer version:

We all face choices between today and tomorrow. Should I buy an apple now, or invest the money and have enough to buy two apples in a few years? Should I throw a party, or save the money to help support future generations of my family? Should I pay off the dangerous person who has suggested that if I don’t pay him, he will punch my teeth out, or put the money into the hot new investment that will make me so wealthy that false teeth will seem cheap?

Economists have built a powerful intellectual framework for dealing with questions of this sort. The topic is usually discussed as discounting.

You can think of discounting as a tool to estimate the value or cost today of various future events. This allows you, or society, to compare the future results of possible decisions you could make today, and so choose the path that is least expensive or most beneficial overall.

Starting on the next page, we explain discounting with a little math. Note that we do not require that you master the math, or use it to calculate anything, but we owe it to you to show you how it goes. (And, we have found that knowing the math often helps, in many ways.) We then will apply the results to climate change.

We can choose to spend money now to head off future climate change. Or, we can ignore climate change and just go about our business, spending money on things we consume now, but also spending some money on investments for the future. Then, our descendants can use their great wealth from those investments to deal with the problems caused by climate change. We will find that the economically optimal path takes a middle road, spending some money to reduce climate change but investing some money to make our descendants wealthy and letting them deal with the problems of climate change. This raises many other questions, some of which we will address. But, hard-nosed economics recommends some actions now to head off climate change.

Suppose you go to a bank and deposit one thousand dollars (or euros, or yuan, or whatever currency you prefer), which the bank promises to return to you at some time in the future. You will expect the bank to return more than you deposited. Say they promise to give you $1040 in a year. The difference, $1040 - 1000 = 40$, is your interest. To get the interest rate, you need to divide the interest you received by the amount you put in the bank at the start, $40 / 1000 = 0.04$. Most people dislike talking about an interest rate of 0.04, so they multiply by 100 and say the interest rate is 4%. Your bank probably had a big sign out front advertising “4% interest rate on savings!” Clearly, if you had deposited more, you would have gotten more interest at the same interest rate—put in 1,000,000, get back 1,040,000, the interest is $1 , 040 , 000 - 1 , 000 , 000 = 40 , 000$, and the interest rate is $1 , 040 , 000 - 1 , 000 , 000 = 40 , 000$ or 4%, just as before.

But, there is no requirement that you compare the interest to the amount you started with. Suppose instead that you divided by the amount you finished with. Go back to your original investment of 1000 that becomes 1040 in a year, with interest of 40, and calculate $40 / 1040 = 0.038$ or 3.8%. That is the discount rate. (In the ENRICHMENT linked below we show that we could have set up the example so that the discount rate came out to be a nice easy number, with the interest rate harder to remember—a 4.17% interest rate gives a 4% discount rate, for example.)

Next, suppose you see a problem. Say, the roof on your house is leaking. Fixing the roof today will cost you the $1000 that you happen to have in your wallet. If you don’t fix the roof, then in 20 years the roof will still cost $1000 to fix. (We have ignored inflation because economists can correct for it before making the calculation, as described in the ENRICHMENT. And, you could spend the $1000 on many other things, including a party or a vacation, a point to which we’ll return soon. Just go along with us for now.) But, if you wait 20 years to fix the leak, the dripping water will cause another $1000 in damage to your house, so the total repair will cost $2000 in 20 years. Should you spend the money from your wallet to fix the leak now, or invest the money and fix the leak in 20 years?

To answer this question, you can calculate how much money you would need to invest now so that you have $2000 in 20 years to fix the roof—this is often called the present value of the future cost. If this present value is less than the $1000 needed to fix the roof now, then you could invest the present value in a “fix the roof in 20 years” fund, and have the rest of your $1000 to spend on other things; however, if the present value is more than $1000, you would be better off economically to fix the roof now.

In our example, with a 4%=0.04 discount rate and a future cost of $2000 in 20 years, the present value is $2000 / ( 1 + .04 {)}^{20 }= 913$. Hence, you can invest $913 in your “fix the roof in 20 years” fund, and use the rest of your $1000 for other things now. (If you prefer an equation with symbols, let the present value be P, the future cost F, the discount rate be D%, the number of years be t, and the equation is $P = F / ( 1 + D / 100 {)}^t$. D/100 turns the 4% into .04, add that to 1, raise the resulting 1.04 to the t ^th power, and divide F by all of that.)

The issue is similar for society dealing with fossil fuels. Fossil-fuel CO₂ emissions cause damages that are costly to us and to other people in the future, and those damages increase as more CO₂ is emitted. So, just as for your leaky roof, we could avoid future costs by spending money now to reduce CO₂ emissions. But, money spent reducing CO₂ emissions is money that is not used for other purposes, such as investing in growing the economy so that our grandchildren and their grandchildren are much wealthier than we are and can afford to solve the problems caused by the CO₂. The decision whether to fix the roof now or later is similar to the decision whether to reduce fossil-fuel emissions now or pay to fix the damages later.

If the discount rate is high, then the troubles our CO₂ causes for future generations of people have very little present value; then, if we behave in an economically optimal manner, we should spend only a little money trying to reduce our CO₂ emissions. If the discount rate is low, then optimal behavior now involves spending more to reduce CO₂ emissions.

We’ll discuss how this calculation is made later. But first, let’s take a closer look at what sets the numerical value of the discount rate—1% or 4% or 7%—because it is the most important control on what behavior is economically optimal if we look at the problem in this way.

The discount rate is usually taken to be equal to the real rate of return you can get from investments. And this is based on three parts: growth of the economy, how quickly more stuff satisfies our desire for still more stuff, and our preference for having stuff now rather than later. For a slightly more technical discussion, see the ENRICHMENT.

Economists know that sometimes recessions or depressions happen, the Dark Ages really did engulf Europe, and civilizations have fallen in many places. But, with a sufficiently broad view, the economy has always regrown even stronger from these setbacks, as people produced more and more goods and services. Some of this growth is linked to population growth—we have more workers—but some of the growth is the increase in economic productivity per person.

Video: World GDP Per Capita (1:17)

In mainstream economics, the assumption is often made that this growth per person will continue for a long time, so that we are so far from any limits on growth that they do not have a meaningful effect on economic activity now. If you expect the economy to grow rapidly, then the discount rate is high—your grandchildren will have the resources to address problems from climate change even if you don’t invest much to help them. (Some economists have explored alternatives to this; we’ll visit such issues soon.)

Next, a single apple is more valuable to a starving person than to an overfed billionaire; the apple may be as valuable to the poor person as a yacht is to the billionaire. If you believe that economic growth per person can continue for a long time, then investing now to help future generations means that you’re taking apples from you, a poor person, and giving apples or yachts or dollars to your incredibly wealthy grandchildren. If this transfer of money to wealthier future generations doesn’t bother us very much, then the discount rate is low and we try to help them; if we object to giving money to rich people, then the discount rate is high, and we tend to spend more on us now.

Finally, we tend to behave as if now is more valuable than later, and our generation is more valuable than future generations. We won’t give the bank a dollar unless they promise to give us more than a dollar back, and we demand a greater extra payment than can be explained by the expected growth of the economy and our objections to giving money to the wealthy, even if the “wealthy” person is just us getting our money back from the bank a year later. This extra demand is just us saying that we matter most. The more we are focused on us, the higher the discount rate, and the less we invest to help the future. This is sometimes called the “pure rate of time preference”. For a person, preferring a reward now to the same reward sometime in the future is well-known. But when we choose the reward rather than giving it to future generations, some people harrumph and refer to it as “selfishness”.

Economists do NOT tell us that this is good or bad; they tell us that they have watched people buying and saving in the real world, and this is how we behave. Rather clearly, this raises large ethical issues, which we will consider later in the course—regardless of whether you call it “pure rate of time preference” or “selfishness”, some people don’t like it. For now, please don’t worry about the ethics, or the limits to growth. Because, perhaps surprisingly, even if we assume that the economy can grow forever, and we don’t want to help the future generations very much because they will be so wealthy, and we are more important than they are anyway, we still should be spending money to head off global warming if we wish to be economically efficient!

So, we have a framework to help us choose today the path that gets the most economic value (the utility of consumption) by estimating the current value of various future events. With the appropriate numerical model, a skilled economist can test various possibilities to find the optimal path, the one that gives the most good from the things we use.

The modeling is normally done with integrated assessment models. We enjoy consumption today, but investing rather than consuming now gives more consumption in the future. Writing the equations for this, as they work through the whole economic system, is a well-developed branch of economics. The integrated assessment models add a representation of the climate system, its response to the CO₂ generated by the greenhouse gases that now power most of the economy, and how those climate changes, in turn, affect the economy.

Video: Earth System (1:29)

For example, if we decide to ignore climate change, then the economy will hum along making greenhouse gases, we will initially consume a lot (good, in the model). But, the damages from the CO₂ will cause economic losses that rise rapidly, so as the model is run into the future it projects greatly reduced consumption (bad, in the model). Hence, ignoring climate change is not an optimal path.

However, if we outlawed fossil fuels today, thus avoiding much future climate change and its associated costs, we would greatly reduce economic growth. (Actually, we would have an economic crash.) This would lower consumption (bad, in the model). So, the optimum must be somewhere between do-nothing and do-everything to stop climate change from our greenhouse gases. (We’ll return in Module 11 to the possibility that modern policies are actually serving to accelerate global warming by promoting fossil fuels, and thus are further from the optimum than simply doing nothing.)

Looking at all the possible choices (or at least a representative sample, using sophisticated techniques to narrow the search) between consuming, investing in actions that will slow climate change, and investing in other ways, the integrated assessment models can be used to find the best path. In the great majority of published cases, and including cases that explore the uncertainties in our knowledge, the models find that a measured response to reduce global warming is best. The result from William Nordhaus’ DICE model is probably the best known and is quite representative: put a small price on emitting carbon dioxide into the atmosphere now, and increase it at a specified rate per year (2-3% in recent work). In his book A Question of Balance (Yale University Press, 2008), this spends $2 trillion to avoid $5 trillion in damages but allows $17 trillion in damages to occur. (We will revisit these issues! Bear with us. And, all of this is in present value.)

Please note that because the model attempts to simulate the whole economy, other possible uses of that $2 trillion (curing malaria, or feeding starving children) are implicitly included in the assessment. If curing malaria is an investment (it would greatly increase the economy, for example), it is part of the investment portfolio; if we want to spend more on curing malaria than would be justified on purely economic grounds, that is a choice we make and so is a type of consumption. Any use of money, whether it is curing malaria or heading off climate change, can be treated in the same way, as long as the use is not a large fraction of the whole economy. Thus, use of the $2 trillion to head off climate change over the coming decades is appropriate because other money is available from the whole huge economy to do other things.

Whether or not to invest $2 trillion to reduce climate change more or less depends on the discount rate used. Let’s go back to your house, as a simpler case, and suppose instead of 20 years, we think about 100 years, a time-scale that matters in climate change. Suppose that there is a problem in your house that in 100 years will cost $1000 to fix. Our equation for calculating present value, from above, is $P = F / ( 1 + D / 100 {)}^t$. With t=100 years, and F=$1000, if the discount rate is D=4%, then the present value is $19.80. Bizarre as it may seem, spending $20 now to fix a problem that will cost $1000 is not a wise investment; better to invest the money and let future generations solve the problem with the wealth you give them. Raise the discount rate to 7%, and the current value is down to $1.15; if you have a pocket full of change, you would be economically inefficient if you spent it to head off a $1000 problem. But, drop the discount rate to 1%, and you should spend as much as $370 to head off the problem. Changing the discount rate from 1% to 7% changes the current value more than 300-fold. And, you can find reasons why either value might be used.

This highlights the reality that in these integrated-assessment economic-optimization exercises, the discount rate is typically the most important issue. We will look at that soon, including the perhaps surprising result that our uncertainty about the discount rate translates into a lower discount rate over longer times. But first, a word about costs of emitting carbon.

In most of the world, it is absolutely illegal to go to the bathroom in your neighbor’s yard. Instead, people are legally required to do such things in special places (bathrooms, loos, water closets, toilets, or whatever you want to call them), and pay for sewer or septic services to assure safe disposal. Similarly, most people are required to pay someone to haul away household trash (just under 1000 pounds or 500 kilos per person per year in the US), and businesses are required to pay to dispose of their wastes. Dumping your waste in your neighbor’s yard is strictly forbidden.

If your wind turbines or solar cells break and you can’t fix them, you must pay to recycle or dispose of them. But, the roughly 20 tons of CO₂ per person per year from the US economy are dumped into the air with no cost at all to the people or businesses that produce CO₂. The same is true for much of the world, although some places have used policy actions to place taxes or fees on CO₂ emissions, but still generally less than the damages caused (see below). And, we have high confidence that the CO₂ does hurt other people.

The ability to use discounting to estimate the present value of future events means that the costs or benefits associated with emitting CO₂ can be estimated. CO₂ does fertilize plants, and in especially cold places warming may be economically beneficial, but the costs come to dominate. The cost today of the damages caused by emitting CO₂ is called the social cost of carbon.

The 2007 IPCC (Working Group 2, ch. 20 and Summary for Policymakers) reported on more than 100 estimates of this social cost of carbon, running from $-2 per ton of CO₂ (very slight benefit) to $86 per ton of CO₂ (moderately large cost). For comparison, burning just over 100 gallons of gasoline will release 1 ton of CO_2. Recently in the US, this has been about $300-$400 in gasoline. A car getting 25 miles per gallon and driven 10,000 miles per year would make 4 tons of CO₂ per year, costing the driver about $1500 for gasoline and costing society perhaps 10% of that, if you take the average of the high and low values just above. (The numbers here are all in 2000-pound short tons of CO₂. You will see different numbers if you go look at the IPCC report because they were quoted in 1000-kg metric tons, and were for tons of carbon instead of tons of CO₂; we have made the conversions for you.)

Additional estimates noted by the IPCC were as high as almost $400/ton for the social cost of releasing CO₂. Many factors contributed to this large range; again, the discount rate is often the most important control. In 2013, the US government reevaluated the cost of carbon used in calculations, and found that the cost of emissions in 2020 (not that far in the future) would be $12/ton for a 5% discount rate, $43 for 3%, and $65 for 2.5% (in 2007 dollars) and rising for emissions further in the future. The government also checked what would happen if the parameters in the calculation are near their most-expensive end rather than in the middle of the possible range, and found with the 3% discount rate a cost of $129 per ton.

Video: Social Cost of Carbon Graph (1:44)

The IPCC also noted that it is likely that all of these estimates of the cost of carbon are too low (which would probably shift the slight benefit estimates to being costly as well), because many of the damages of CO₂ are not “monetized”. Suppose, for example, that climate change from rising CO₂ causes the extinction of species that are not being used commercially. Some of those species may have had economic value that had not yet been realized, and many people may have valued those species for other reasons. But, if those species are not contributing to the economy now, their loss is not a cost of global warming in these studies. Other issues, such as the possibility of long-term catastrophic events (making the tropics uninhabitable for unprotected large animals, for example) are also not included in the costs of global warming. The IPCC notes that the calculated costs are based on only “a subset of impacts for which complete estimates might be calculated” (ch. 20, WGII, p. 823, 2007).

Video: 10 Pikas (3:22)

The social cost of carbon, if it is not offset by a tax or other fee on emitting the carbon, is essentially a subsidy from society for fossil-fuel use. We will return to this topic when we consider policy options in the next module.

Recall that the discount rate is often taken as being large if the economy is expected to grow rapidly, or if we behave as if we don’t like giving money to future generations because they will be so much richer than we are, or if we prefer things now rather than later (so, essentially, we behave as if we are more important than future generations). The last of these is often the starting point for ethical critiques of such modeling, and will come up again in Module 12. We won’t say too much here about our willingness to transfer money to wealthier people in future generations; but, that willingness won’t matter if future generations aren’t wealthier than we are. So, let’s take a look at the assumption of continuing economic growth.

Economists are surely correct—if you take a sufficiently broad and long view, the economy always has grown, as we have become better and better at providing goods and services for each other. Local reversals occurred, but the broadest trend has been upward.

The mere existence of this trend does not prove it will continue—when Dr. Alley was 20, he had been getting stronger and faster his whole life, and merely extrapolating those trends to today would make him a world-record holder in numerous athletic events, which did NOT occur.

But, economists not only see the trend, but they understand how new scientific discoveries and commercial innovations make economic progress possible as we invent and build, and pass on to future generations the roads and buildings, and the knowledge. Think of a smartphone, which is nothing but a little sand, a little oil, and a few appropriate rocks, plus an immense amount of accumulated know-how. Even with the recent shortage of rare-earth elements, there is little doubt that the world can produce far more smartphones than have been made to date, with more apps, contributing to economic growth in many ways.

However, some parts of the economy, such as fishing and forestry and farming and fossil fuels, are supported by much larger parts of the Earth. We have already seen that our energy system is grossly unsustainable—if we keep doing what we’ve been doing, the highly concentrated fuels that yield more energy than needed to extract them will run out as practical resources, possibly in decades, almost certainly before many centuries pass. Economists will rightly point out that resources don’t really run out; as prices rise, substitutes are found. But, an energy system that looks a lot like our current one is almost guaranteed to become impractical within a time frame that is short compared to the written history of humanity.

Many other human activities are unsustainable as well. We rely heavily on phosphorus for fertilizer (as well as nitrate; see below). The Earth has huge amounts of phosphorus, but almost all of it is very widely scattered and not even vaguely commercial at modern prices. We are using the concentrated deposits very rapidly. With enough energy, we could re-concentrate phosphorus we have scattered, or that nature has scattered, but that takes us back to the unsustainable energy system.

Many scholars have attempted to calculate the “ecological footprint” of our lifestyle—how much land and ocean is required to grow the food we use or the fish we catch, process our wastes and provide the other things we rely on. Typically, these estimates find that with our current practices and technologies, the Earth cannot support the population already here with the lifestyle we are living. And, with expectations of improved lifestyle, and the population growing, many people expect this imbalance to increase.

Video: Rabbits - Exponential Growth (2:50)

Technology is surely improving, as it always has, helping us deal with such challenges. But, as we bumped up against limits in the past, we used improved technologies, but we also used unoccupied space. Thus, when a shortage of natural sodium nitrate made fertilizing crops difficult, Fritz Haber figured out a new technology, using energy to convert the nitrogen from the air into nitrogen fertilizer. But, when the Yankee whalers could no longer find right whales in the Atlantic, the fleet moved to the Pacific and then into the Arctic. And for whales, when the whole ocean was utilized, that option was no longer available. True, we might have some huge breakthrough and start mining asteroids, or we might get nuclear fusion working to provide power. But without major jumps in technology, we are increasingly finding that wherever we go, someone is already there and using the resources.

Suppose we ask the question “Are there practical limits to growth, that will cause economic expansion to slow down, soon enough to affect the present value of events considered in the integrated assessment models?” You could probably find well-respected scholars making convincing but conflicting arguments that would give different answers to this question. The correct answer might be “No, there aren’t”, or “Yes, there are very strong limits that cannot be breached and that will be reached soon.” Or, the correct answer may be somewhere in-between, with the limits making growth more difficult in some areas.

Economists are well aware of these issues, and many informative discussions are available. You may be interested in the essay by R.M. Solow, 1991, Sustainability: An Economist’s Perspective, presented as the Eighteenth J. Seward Johnson Lecture to the Marine Policy Center, Woods Hole Oceanographic Institution, and available at many libraries and at sites on the web when we checked. Also see Nordhaus, W.D., 1994, Reflections on the Concept of Sustainable Economic Growth, in Economic Growth and the Structure of Long-Term Development, L.L. Pasinetti and R.M. Solow, eds., Oxford University Press, p. 309-325.

Some integrated assessment models, such as the DICE Model mentioned earlier (which you will work with in the summative assessment for this module), do consider the influence of limits to growth on economic expansion.  Indeed, the version of the DICE model we will use has the global GDP growing at increasingly slower rates as we move through the next century. Uncertainty about how GDP will grow means that such models may overestimate or underestimate the present value of future damages from emitting CO₂. However, other models have worked with the assumption that there are no practical limits to growth that will affect us soon enough to be included, using a constant discount rate over a century, for example. If we do hit limits to growth before then, such studies are underestimating the optimal effort to reduce warming now.

An extreme application of discounting can lead to absurd results. For example, with a constant discount rate, you could show that investing a penny now to stop the destruction of civilization 10,000 years from now would not be economically efficient. Such apparent silliness again is recognized in the research community, and motivates interesting scholarship, including the work by R.G. Newell and W.A. Pizer, 2003, discounting the distant future: how much do uncertain rates increase valuations, Journal of Environmental Economics and Management 46, 52-71. They found that uncertainty about future discount rates translates into a lower discount rate over longer times. Importantly, this in turn almost doubles the estimated value of taking actions now to reduce global warming from fossil-fuel CO₂. See the Enrichment linked below.

As discussed earlier, the economic studies in this field often seek to identify the optimum path to maximize the utility of consumption. Consumption is often estimated by subtracting investment (in the economy or in avoiding climate change) from the Gross Domestic Product (GDP), the sum of the goods and services in the economy.

But, total consumption as estimated through GDP is a very imperfect measure of the good, or enjoyment, we get from the economy. Consider an odd example. If family A has children and raises them, and family B has children and raises them, then no economic activity has occurred. But if family A pays family B to raise the A kids, and family B pays family A to raise the B kids, then raising kids is part of the GDP. Many economic studies would find that people are better off in the second case because GDP has risen, but few people would agree, especially if taxes were extracted from the payments in the second case.

Perhaps more relevant, after a hurricane destroys a city, economic activity is lost because people are not working their usual jobs for a while, but economic activity is gained because people must clean up and rebuild. Very few people would agree that money spent fixing hurricane damage is good, but such money appears in the GDP. On the other side, if technological progress means you get a better computer for the same cost, GDP misses the improvement.

Video: Hurricane GDP (1:38)

Various alternatives to the GDP have been developed by economists, such as the Measure of Economic Welfare (MEW; Nordhaus, W. and J. Tobin, 1972, Is growth obsolete? Columbia University Press, New York), or the Genuine Progress Indicator (e.g., Lawn, P. and M. Clarke, 2010, The end of economic growth? A contracting threshold hypothesis, Ecological Economics 69, 2213-2223). These alternatives seek to more accurately characterize real growth, or sustainable growth, in some fashion. There is much interesting and important scholarship, and much more than we can cover here.

But, if a general conclusion can be drawn from this work, it is that the recent growth of well-being probably has been slower than indicated by the recent growth of GDP. And, if this general summary is correct, then economically optimal behavior now involves greater actions to reduce climate change than indicated because our descendants will not gain wealth and thus the ability to solve the problems from global warming as rapidly as indicated above.

One also might ask whether it is really accurate that wealth allows the solution of all problems. What if global warming generates crises that wealthy future generations cannot solve? The optimizations now generally assume that this will not happen, but if problems that resist money can arise, more action now to head off climate change may be economically justified.

Even bigger questions of whether economic growth is even desirable, or whether our future goals should be very different from our past, are beyond the scope of the instructional materials of this class. However, such questions are not beyond the scope of interest of the class participants—you might wish to think about it.

Modeling the Economics of Climate Change Activity

The global climate system and the global economic system are intertwined — warming will entail costs that will burden the economy, there are costs associated with reducing carbon emissions, and policy decisions about regulating emissions will affect the climate. In the language of systems thinking, this means that there are important feedback mechanisms in this system — a change in the economics realm will affect the climate realm, which will then influence the economics realm. These interconnections make for a complicated system — one that is difficult to predict and understand — thus the need for a model to help us make sense of how these interconnections might work out. In this activity, we’ll do some experiments with a model (a modified version of Nordhaus' DICE model mentioned earlier in this module) that will help us do a kind of informal cost-benefit analysis of emissions reductions and climate change. As with the other STELLA-based exercises you've done, this one will help you develop your abilities as a systems thinker.

Instructions

Read the following pages for an introduction to this model (this introductory material& is also on the worksheet you download below) and then run the experiment using the directions given on the worksheet. As before, there is a practice version, with answers on the worksheet, and a graded version. Once you have completed the graded version and entered your answers on the worksheet, go to Module 10 Summative Assessment: Graded to enter your answers.

Files to Download

Download worksheet to use when working on your assignment

Submitting Your Assessment

Once you have answered all of the questions on the worksheet, go to Module 10 Summative Assessment: Graded. The questions listed in the worksheet will be repeated in this Canvas Assessment quiz. So all you will have to do is read the question and select the answer that you have on your worksheet. 

Grading and Rubric

The part of economics dealing with climate change goes much deeper than we have covered here. If you are interested, check out some of the references in this module. But, you should now have a working sketch of many of the main results.

Because the climate changes driven by the CO₂ from our fossil fuels will make life harder for people in the future, as well as for at least some people now, there is a social cost of emitting carbon dioxide to the atmosphere. This cost can be understood by first discounting the future damages to their present value. But, if we spend money to reduce CO₂ emissions and thus lower the damages from climate change, we are not spending money on consumption today, or on other investments for the future.

By using integrated assessment models, economists can compare the economic costs and benefits of different possible divisions of money among consumption, investment in the broad economy, and investment in reducing climate change. The optimal path is almost always found to involve doing some of all of those. Thus, rather surprisingly to some people, hard-nosed economics motivates serious responses to climate change, beginning as soon as possible. Typically, this response involves small actions now, increasing over the next decades, and relying on consistency in policies.

Because some of the damages of climate change are not yet accounted for quantitatively in these studies, they probably underestimate the size and speed of the optimal response. Similarly, if future economic growth is going to be more limited by the finite nature of the planet than assumed in the models, or by other issues, or if current calculations are overestimating the good that comes from increasing economic activity, then it is likely that more action to limit climate change would be recommended now. On the other hand, if future economic growth is faster than expected, or if we are underestimating the good from increasing economic activity, less action would be recommended now to reduce climate change. However, the balance of the literature seems to suggest overall that following the optimal path from the models or doing a little more now to reduce climate change is the economically best path.

Reminder - Complete all of the Module 10 tasks!

You have reached the end of Module 10! Double-check the to-do list in the Module Roadmap to make sure you have completed all of the activities listed there before you begin Module 11.

Goals:

• Recognize the role of human actions in determining the future of our climate, except that by avoiding climate change, the shift will make the economy better and thus increase employment
• Explain scientific concepts in language non-scientists can understand
• Find reliable sources of information on the internet

Learning Outcomes

By the end of this module, you should be able to:

• Recognize the multitude of policy options available for our energy system and economy
• Explain how the effectiveness of emissions treaties and carbon taxes can be verified internationally using remote data collection
• Recognize that shifting gradually to renewable energy is likely to have little overall impact on employment rates
• Recall that energy policies and subsidies have been in use for decades, and some of these have promoted fossil fuels over renewable resources
• Research and evaluate an example of an energy subsidy reported by the IMF

Questions?

If you have any questions, please post them to Help Discussion. We will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.

Short Version:

A huge range of policy options is available, and many regulations likely would be required to implement some of them. Or, a price on carbon, such as a carbon tax, could be used to get the whole economy working on the problem. If paired with a tax swap to reduce more-intrusive taxes, this would have little impact on the economy and might cause growth, even if the benefits of avoiding global warming are ignored. International harmonization of carbon taxes could be used, with econometric and geophysical verification. Such an approach is likely to have collateral benefits through avoiding negative externalities of some fossil-fuel use, improving national security through avoided environmental problems, reducing rapid changes in energy prices, and possibly increasing employment. Current policy positions probably are serving to accelerate global warming, so a neutral stance or reduction in global warming would require policy actions. Clearly, effective responses require well-designed and implemented policies; it is possible to mess things up with poor policies.

Longer, but friendlier version:

On June 25, 2013, US President Barack Obama made a major speech introducing his administration’s Climate Action Plan.

The 21-page document that accompanied the speech sketched a series of policy actions proposed for the remaining years of the president’s term in office. By the time you read this, that speech will be old news. But, it is instructive even as it becomes history because despite the sheer number of proposals, and their great breadth and depth, this plan did not even mention the most commonly discussed policy option.

Consider some of the proposals. (Many of the words that follow are directly from the Plan, but some are paraphrased.) Don’t try to learn or memorize these; just notice how many there are:

Cut Carbon Pollution in America by:

• Completing carbon-pollution standards for new and existing power plants;
• Promoting renewable energy, including accelerating clean energy permitting, developing hydroelectric power at existing dams, deploying renewable energy through the Department of Defense, increasing federally installed renewable energy, and expanding and modernizing the electric grid, including streamlining transmission projects;
• Unlocking long-term investment in clean energy innovation, including increasing funding for areas ranging from advanced biofuels to emerging nuclear technologies such as modular reactors to clean coal, guaranteeing loans for projects to avoid, reduce or sequester human-produced greenhouse gases, and instituting a Federal Quadrennial Energy Review to assess and guide actions;
• Advancing transportation, including fuel-economy standards for heavy-duty trucks, buses, and vans, improving biofuels, and leveraging public-private partnerships to deploy cleaner fuels such as advanced batteries and fuel cell technologies;
• Reducing energy bills by increasing energy efficiency standards, reducing barriers to investment in energy efficiency by financing efficiency investments in rural America, and developing a new fund to allow testing of novel approaches to cost-effective residential electricity, and expanding programs for better buildings;
• Reducing emissions of other greenhouse gases, including various programs to curb emissions of hydrofluorocarbons and methane, and preserving forests;
• Providing federal leadership, including consumption of clean energy and energy efficiency, with initiatives such as (quoting from the bottom of p. 11 in the plan)

In the report, these proposals to cut carbon pollution were followed by proposals to Prepare the United States for the Impacts of Climate Change, and to Lead International Efforts to Address Global Climate Change, with similar detail.

Many people provided opinions about the plan in the days after it was released, but among those experts who favored policy actions to address climate change, there was widespread acceptance that these proposals were serious and moving in a useful direction. Standard contracts, synchronized building codes, and access to capital markets for investments are indeed important, as are many more policy options.

But recognize that 21 pages of this sort of text were needed just to sketch a suite of policy responses—the rules and regulations were not in the document, just statements committing the administration to working on those rules and regulations. And, this is just one level of government in just one country in a very big world. Furthermore, a price on carbon emissions was not even discussed (see below).

So, if you expect a truly comprehensive discussion of policy options in this chapter, you will be disappointed. The energy system is so huge and pervasive in our lives, and so strongly linked to release of CO₂, that almost everything we do, publicly or in private, can be changed to influence global warming.

Instead, we’ll look at a few of the most frequently discussed options. We’ll also look at additional motivations, and effects of policy actions.

Dr. Alley, your tour guide here, is a geologist by training, and a recognized expert on some aspects of glaciers and ice sheets. This does NOT make him a policy expert. Furthermore, a lot of what follows could be misinterpreted as an endorsement of some particular policy or policies. So, let’s get it out in the open right now: We are NOT endorsing any particular policy here. It is up to you to make up your own mind. We do hope that the evidence and reasoning presented here will help you with this. We are NOT telling you how to vote about issues such as synchronized building codes to reduce carbon pollution. But, we are trying to show you what the best understanding says about motivations and options for this often-contentious and very important topic. And again, because the topic is so vast, we will hit only a few of the high points.

Emitting carbon dioxide has a social cost, as we saw in the previous module, so any actions to reduce emissions give some benefit. But, making a measurably significant difference in the future of global climate will require major reductions in CO₂ emissions across large parts of the whole world’s economy, and really solving the problem will involve almost all of us. International cooperation thus is almost surely required to address global warming seriously.

Treaties

One possible approach is to use treaties or other agreements to limit the quantity of CO₂ that can be emitted. The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) takes this approach, setting limits on allowable emissions from many, primarily industrialized countries. The UNFCCC commits signatories (essentially the whole world) to “…stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (Article 2), and Kyoto attempted to start a strategy to achieve that objective (United Nations Framework Convention on Climate Change, Background on the UNFCCC.)

Kyoto can claim some successes among countries in reducing greenhouse-gas emissions. Overall, however, emissions have risen since the protocol was enacted. One could argue that the task is so difficult that we should not expect immediate success, but one could also argue that this approach is not working as well as it should.

Internationally Harmonized Carbon Taxes

Another possible approach is through internationally harmonized carbon taxes. (Again, we are leaning on the work of W. Nordhaus, among many others.) As this was being written, carbon taxes were functioning in many places including British Columbia and several European countries, and discussions were ongoing in additional countries including China. Suppose that the international community broadened this participation by negotiating use of a carbon tax in all countries. The tax rate might be targeted at the economically efficient level, possibly with variations in when it became fully active based on the status of economic development or other issues. Monitoring and enforcement would involve some discussions, as would issues of what in detail to include. For example, deforestation does contribute to global warming, so are trees included? Where Dr. Alley lives, in Pennsylvania in the USA, trees were cut down in previous centuries, and many trees have been growing back—is it right for Pennsylvania to get credit for regrowing trees when other countries are penalized for cutting down their trees?

The simplest carbon tax would charge fossil fuels where they are extracted from the ground or cross a border from a country that does not tax its own carbon. Consideration of carbon in soils and vegetation may be more difficult. Some countries are regrowing trees that were cut decades ago, while other countries are wondering whether to preserve or cut their trees. Here is an autumn shot of a region in central Pennsylvania that was deforested a century ago: Mount Nittany.

Photo Credit: Richard Alley © Penn State is licensed under CC BY-NC-SA 4.0

But, start with the simplest possible model: a tax on the extraction of fossil fuels, set at an initially small level for everyone and then raised at a rate such as 2% per year. Suppose that more than half of the world’s economy initially agreed to this. They could then, perhaps through the UN, offer a deal to countries not yet participating—participate, tax your own carbon, and keep the money for any purpose except stimulating fossil-fuel use; or, refuse to participate, and the participating countries will keep the funds raised from tariffs they will levy on all trade into and out of the nonparticipating countries, and set at a level equal to that for harmonized carbon taxes. (This probably would require changes to international trade rules, but changing such rules is not impossible.) Such an arrangement might turn out to be much simpler than extending the Kyoto Protocol to greatly reduce fossil-fuel emissions of CO₂. Many people will have many questions about such a plan, but it is an interesting alternative that is receiving serious if cautious support.

Problems with Treaties and International Carbon Taxes

Any international treaty runs into the issue of verification—how can a nation tell whether other nations are cheating? The US National Research Council looked into that question in 2010 (Verifying Greenhouse Gas Emissions: Methods to Support International Climate Agreements), and found that verification of compliance is practicable. This would include a combination of national inventories (econometric data; who is buying what), and geophysical techniques (satellite, airborne and surface-based monitoring of atmospheric concentrations and isotopic ratios). The small variations in concentration of CO₂ around the planet reveal sources and sinks of the gas, and the isotopic composition can separate biological (higher carbon-12 to carbon-13 ratio; either recently living plants or long-dead fossil fuels) from abiological (volcanic, for example) carbon, and modern-biosphere (lower carbon-12 to carbon-14 ratio) from fossil-fuel carbon. Combining the geophysical and economic data can provide a clearer picture than is available from either source by itself.

A carbon tax rising by 2% or 4% per year cannot be a solution for government funding forever because as decades become centuries, the cost per gallon would pass the cost of the car and continue onto huge values. Clearly, policies are reexamined before decades become centuries. The goal of ultimately reaching a sustainable energy system means that taxing fossil fuels cannot continue forever. But, for decades at least, harmonized carbon taxes could supply much government revenue while reducing global warming, having little direct effect on the economy, and improving the economy if the value of avoiding the global warming is considered.

In the previous module, we looked at the basic economic analysis showing that the world’s people will be better off if the solid scholarship on energy and environment is used efficiently. And, we mentioned that if we are close to being influenced by limits to growth, then the motivation to use the scholarship is stronger. Earlier in this module, we looked at some of the ways that policies can be used to address these issues. Next, we will briefly consider a number of issues that influence policy choices, including national security and price stability.

Extinguishing Externalities:

Any energy source that supplies a significant fraction of human use is almost guaranteed to have “externalities”—unintended consequences for people and other living things. Solar farms in the desert may shade the habitat of cacti and tortoises, wind turbines kill some birds and interrupt views, nuclear plants require long-term storage of potentially poisonous waste, fracking produces “flow-back” fluids containing possibly harmful chemicals that must be disposed of, and so on. Realistically, we have no practical hope of an energy system that doesn’t involve unintended costs and “Not in My Back Yard” (NIMBY) issues.

But, several studies have found that wind turbines are not nearly as deadly to birds as cables on radio towers, skyscrapers, cats, or the climate changes from fossil fuels that will be avoided by use of wind turbines (see Enrichment on the next page).

Want to learn more?
Read the Enrichment titled Living with Wind Turbines and Coal Exhaust.

In general, the externalities of renewable energy are quite low—covering the desert with solar cells does not use the most productive landscape, and covering roofs with solar cells replaces one human-made surface with another that has essentially the same effect on neighbors, except it generates electricity.

In contrast, recent scholarship shows that coal-fired electricity as currently practiced in the US and some other places (parts of China, for example) has very high negative externalities, from issues such as particles and mercury causing health problems. Some studies for the US (see Enrichment) have indicated that for each dollar spent by consumers on coal-fired electricity, society spends a similar amount, or more, in lost health and environmental quality. Hence, these studies indicate that there would be economic gains from additional regulations or other policy actions to clean up or reduce coal burning, even if the effects on climate change are ignored.

"If you find yourself in a hole, stop digging.."

We hope it is clear to everyone that inappropriate policy response can make this problem, or any other problem, worse—the discussion above assumes efficient policy responses. But, this raises the question of the current policy response—how much are we doing now to stop global warming?

Subsidies:

One measure might be to look at subsidies because their cost is probably much easier to estimate than the impact of regulations. The International Energy Agency (IEA), an intergovernmental organization established through the Organization for Economic Co-operation and Development (OECD), estimated subsidies for their World Energy Outlook 2012. They found world-wide subsidies for renewable energy in 2011 of $88 billion, or just over 0.1% of the world economy. (International Energy Agency World Energy Outlook 2012, chapter 7,). However, IEA also found that direct fossil-fuel subsidies worldwide totaled $523 billion, almost six times more, and just over 0.7% of the world economy (World Energy Outlook, Executive Summary, 2012).

The International Monetary Fund (IMF) provided a more comprehensive estimate of subsidies for fossil-fuel energy (Energy Subsidy Reform: Lessons and Implications, 2013). The IMF considered pre-tax and post-tax subsidies. Pre-tax subsidies are primarily payments or other ways that allow consumers to spend less than the market rate for fossil fuels, and are mostly found in the developing world. Post-tax subsidies include lower tax rates on sales of fossil fuels than on sales of other goods and services, and failure of tax rates to recover the externality damages from fossil-fuel use to health, environment, etc.; this includes climate change, which was calculated at the social cost of $25 per ton of CO₂, perhaps on the low end but within the range typically seen in such studies.

The IMF estimated global pre-tax subsidies in 2011 as $480 billion, similar to the IEA estimate; this is about 0.7% of global Gross Domestic Product (GDP, which is roughly, the size of the whole global economy), or 2% of total government revenues. Total subsidies, including lower tax rates and externalities, were much larger, globally $1.9 trillion in 2011, about 2 ½ % of world GDP, or 8% of total government revenue. Post-tax subsidies were more concentrated in the developed world, with the US the single largest subsidizer ($502 billion, to China’s $279 billion).

Worldwide, these reports indicate that direct subsidies for renewables and fossil fuels per kilowatt-hour are very roughly equal, with subsidies relatively larger for renewables in the developed economies and smaller in the developing countries. Including the full subsidies with externalities, the data suggest fossil fuels are much more subsidized than renewables per kilowatt-hour in developing and developed economies, including the US.

Research:

Public support for research is also relevant because it helps produce the technologies that enter the market. For example, the fracking boom was commercialized by private companies, but development received notable support from funding of the US Department of Energy and other sources (see, for example, Begos, K., Decades of federal dollars helped fuel gas boom, Sept. 23, 2012, Associated Press).

Estimates of research funding are available from the IEA. As of 2010, IEA member nations (most of the big players in worldwide research) had increased funding for Energy RD&D (Research, Development and Demonstration projects) to about 4% of their total research portfolio, still a very small fraction (research on topics such as health and medicine tends to be much bigger) (IEA, Global Gaps in Clean Energy RD&D 2010, International Energy Agency). Over decades, the energy research portfolio has been dominated by fission, fusion and fossil fuels, with fossil-fuel research exceeding research on all renewables combined. By 2010, increasing research on renewables had almost caught up with fossil fuels if stimulus funds during the recent widespread recession were omitted, although fossil fuels benefitted more from stimulus funds than did renewables. Thus, over the time during which much of the research was done that is now contributing to economic activity, fossil fuels have been favored over renewables in publicly funded research (Figure 1, p. 6 in Global Gaps, IEA, 2010).

You can be confident that many people, on many sides, would argue about the discussion here. Where the IMF has identified subsidies because fossil fuels are taxed at a lower rate than, say, computers, the fossil-fuel industry is likely to view any tax above zero as a subsidy for non-fossil-fuel energy sources. In the US, money is collected from fuel sales for cars and trucks, and used to build and maintain roads. Is this a tax, serving to reduce fossil fuel use? Or, a user fee, with no net effect on fossil-fuel use? Or, a subsidy, enhancing fossil-fuel use? (By having the government build new roads, “eminent domain” can be used to force private landowners to sell property for roadways, allowing more roads at lower cost and thus more car and truck transport than would be possible under private funding with “normal” landowner rights. Similarly, when the interstate highway system was started under the administration of President Eisenhower, it was authorized by the National Interstate and Defense Highways Act of 1956, with an explicit tie to national defense; this likely made funding easier, and the roads served to greatly increase truck and automobile traffic, and “suburban sprawl”, at the expense of trains.

Video: Road Subsidy (1:06)

Discussion Question

Objective:

Learn about energy subsidies using information provided by IMF. Explore the International Monetary Fund (IMF) website's information on reforming energy subsidies and find something interesting to share.

Goals:

• Find reliable sources of information on the internet
• Communicate scientific ideas in language non-scientists can understand

Description:

The International Monetary Fund has many resources on energy subsidies. We would like you to explore them and share what you found most interesting.

First, surf on over there and have a look around the website, International Monetary Fund.

A lot of useful information is available in the left-hand column. Click to download the paper Case Studies on Energy Subsidy Reform—Lessons and Implications. Read about subsidies in one of the countries described there, and give us a brief synopsis. Be sure to describe the country you read about, what subsidies were used, how the subsidies were reformed, and what lessons were learned from making these reformations. At the end, include your own opinion on whether or not these subsidies (in their reformed versions) are a good idea, and explain your thinking.

Instructions

Your discussion post should be 150-200 words and should answer the question completely. In addition, you are required to comment on one of your peers' posts. You can comment on as many posts as you like, but please make your first comment to a post that does not have any comments yet. Once you have an idea of what you want your post to be, go to the course discussion for your campus and create a new post, including the name of the country in the title of your post.

Scoring Information and Rubric

The discussion post is worth a total of 20 points. The comment is worth an additional 5 points.

Summary

If we decide to take action to reduce climate change by altering our energy system, many options exist for policies. As with any issue, it is possible to pass laws that fail to reach their goals on climate and energy. However, much scholarship shows that the policy actions available on this topic include efficient options that will improve the economy.

Governments could enact regulations reducing or outlawing some fossil-fuel emissions. Or, governments could choose to send a “price signal”, making it more expensive for people to do things that change the climate.

The most commonly discussed price-signal policies involve cap and trade, or carbon taxes. Under cap and trade, a government legally limits the amount of CO₂ or other greenhouse gases that can be emitted, selling (or giving away) permits for such emissions; the permits then can be traded or sold, allowing the market to reduce greenhouse-gas emissions as efficiently as possible. The most commonly discussed form of a carbon tax would simply tax the amount of carbon in a fossil fuel when it is extracted from the ground or imported to a country.

You can find a wide diversity of opinions on all aspects of this. Overall, economists seem to prefer the efficiency of price signals over regulations, and prefer the simplicity of a carbon tax over cap and trade, although in the broadest sense cap and trade can be viewed as a sort of carbon tax.

If a price signal is used, the effect on the economy depends very strongly on how the money raised is then spent. A tax swap that reduces taxes on things we like (wages, for example) would cause the impact of a carbon tax on the economy to be small, with the possibility that the tax would actually accelerate economic growth a little, even if you ignore the benefits of avoiding climate change; including those benefits in the calculation makes a carbon tax with tax swap more beneficial to the economy.

Carbon taxes can be harmonized across countries to gain international cooperation. The trade system might be used. For example, suppose that some countries decided not to tax their carbon. Other countries might convince these nonparticipants to change their minds and cooperate by offering the nonparticipants a choice: Tax your own carbon and keep the money in your own country to do good things, or have the participating countries keep the money from a tax on all trade with the nonparticipants.

If we go to the effort of developing and implementing efficient policies to deal with climate change, there are likely to be many related benefits, including greater national security, reduction in economic recessions caused by oil price swings, reduction in unintended damages from the energy system, and perhaps increased employment.

However, the available scholarship suggests that the current policy position for the world as a whole, and for many or most countries, is serving to accelerate rather than to reduce climate change and that this has been true over the previous decades. “Business as usual” then is not neutral on this topic, but serves to accelerate fossil fuel use and climate change.

Reminder - Complete all of the Module 11 tasks!

You have reached the end of Module 11! Double-check the to-do list in the Module Roadmap to make sure you have completed all of the activities listed there before you begin Module 12.

Goals

• Recognize the role of human actions in determining the future of our climate
• Explain scientific concepts in language non-scientists can understand
• Find reliable sources of information on the internet

Learning Outcomes

By the end of this module, you should be able to:

• explain that decisions about energy and environment have important but very complicated ethical implications.
• recognize that relying more on natural resources does not always correlate with greater wealth or higher quality of life.
• recall that if we value our grandchildren's quality of life as much as we value our own, then it is worthwhile to do more now to avoid climate change.
• assess what you have learned in Unit 3.

Questions?

If you have any questions, please post them to Help Discussion. We will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.

Billions of people follow religions with strong statements on right and wrong, addressing what we should do as well as what we can do. Billions more people have moral codes developed in other ways. Maximizing the utility of consumption is probably not the only motivation, and arguably not the main motivation, for many people. We want to stay alive and have some fun, raise our children, help other people, and do the right things for the right reasons.

How do we do deal with problems as big as energy and environment, when there is so much good on many sides? Let’s look at a few more issues. This is not a complete list, and we cannot tell you what to do, but some of the “obvious” arguments may not be quite as clear as they first seem, and other arguments provide useful guidance.

Short version:

Perhaps the greatest challenge in energy and environment is to help people now and in the future, and no single action can be best at doing both. Business-as-usual is highly likely to bring an inefficient economy and natural disasters that motivate government intervention, so many libertarians may wish to support some intervention now to avoid that greater future intervention. Even many ardent environmentalists deeply dedicated to helping future generations recognize our dependence on fossil fuels and the dangers of changing too rapidly. But wise policy action will help people now and in the future, while helping preserve endangered species, and taking out insurance against possible if unlikely extreme disasters.

Friendlier but longer version:

As an Earth scientist, Dr. Alley suspects that he took the easy way out, leaving the hard problems for economists, political scientists, and ethicists. Consider the two short discussions below, only slightly tongue-in-cheek, “Libertarians for Government Intervention?” and “Environmentalists for Economic Growth?”

Perhaps the most common argument about the philosophy of global warming and fossil fuels comes from those who favor libertarian principles and the free market. Many individuals and groups argue that “solutions” to the climate-change problem will cause government growth, but “that government is best that governs least” (Thoreau, Civil Disobedience, 1849), and that the government should not be in the business of picking winners and losers.

Reading the 21-page document from US President Obama’s administration outlining policy responses to CO₂ and climate change, as introduced in the previous module, may suggest how many regulations could be written to deal with this issue. And, more regulations generally bring more government.

Despite such a clear example, however, this argument really is more nuanced. A libertarian's desire for less government may actually recommend response now to fossil-fuel CO₂.

Enrichment: To learn more about how government intervention was implemented in our pioneering past, see the Enrichment titled Scarcity and Government Intervention in Colonial Massachusetts.

First, as described in the previous module, there is no requirement for complex regulations to respond to climate change. Indeed, a carbon tax on fossil fuels, at the point where they are extracted from the ground or imported into a country, could be simpler than some of the taxes it might replace. Most fossil fuels currently have some tax or impact fee levied on them, so many of the mechanisms to implement a carbon tax already exist. And there are far fewer producers of fossil fuels than there are people earning wages, so replacing wage taxes with carbon taxes could make many things easier.

An additional issue is that, in times of shortage or crisis, governments often become more active or intrusive—the recent recession led to “stimulus” activities in many countries, as did the depression of the 1930s, and natural disasters frequently motivate government efforts. Thus, careful actions to avoid shortages and natural disasters may limit government rather than promote it.

The strong scholarship showing that ignoring climate change leads to a suboptimal economic path, and that rising CO₂ is likely to increase natural disasters of many types, is surely relevant. The statements from the US military that global warming is expected to make more work for them also suggest that ignoring climate change may increase government intervention.

Hence, free-market proponents or libertarians might argue that their goals are better served by guiding simple and transparent policy responses to climate change rather than by opposing all responses.

An argument often coupled to limiting government is that responses to climate change should be avoided because governments should not be in the business of picking winners and losers. This argument might be applied to favor government actions that are general rather than specific. For example, people who do not want the government to specifically promote certain groups might favor a carbon tax rather than loan guarantees to start-up companies.

More generally, a little careful reflection will show that any significant government action gives arelative advantage to some people or groups over others. And, deciding to continue with current policies is a significant government action, which also gives arelative advantage to some people or groups over others. Thus, governments cannot avoid “picking winners and losers” at some level.

A silly and extreme example of government actions benefiting some people more than others may be a useful starting point. Suppose government-supported doctors stop an epidemic and save the lives of millions of people. In the short-term, the government has caused money loss for gravediggers, undertakers, shop owners selling sympathy cards and flower arrangements, the real estate agents and auctioneers who would have disposed of the property of the deceased, lawyers who would have handled the estates, and many others.

Perhaps more seriously, consider the history of the construction of modern storm and sanitary sewers, and clean water supply in London in the latter 1800s and in many other cities. This massive effort ended cholera outbreaks that had brought huge death tolls, and otherwise greatly improved public health and well-being. But, modern sanitation also ended whole professions such as “night-soil hauler” (those who gathered human waste and sold it to farmers as fertilizers), while making new professions—the government actions unequivocally created winners and losers. Furthermore, the transition to modern sanitation was greeted with many of the same arguments about government intervention, individual liberty, and natural processes that now address climate-change issues, including The Economist editorializing against aspects of the transition, as mentioned earlier.

Pushing this analogy a little further, suppose that after scientific arguments were brought forward linking poor sanitation to death from cholera, the lawmakers of London had decided to do nothing to improve the sewers, and a huge cholera epidemic had then engulfed the city. (One additional and somewhat outlying epidemic did occur before the cleanup was completed, but no more epidemics occurred after the full system was in place.) It seems highly likely that the families of the deceased would have viewed the decision, which favored business-as-usual rather than cleanup, as a policy decision with very clear losers. And, it seems highly likely that the families of the deceased would not have been happy with that decision.

The analogy to the modern situation with CO₂ is not exact. When London was deciding about sewers, the scientific knowledge showing that human waste in drinking water spread cholera was not nearly so strong as the scientific knowledge we now have showing that CO₂ from fossil fuels in the air changes the climate; the Londoners did not have knowledge of the mechanism causing the illness, for example. But, “clean this up or you might die next week” tends to provide a stronger motivation than “clean this up or risk a suboptimal economy over the next decades”. The issues of attribution of extremes are very relevant here, though; people now are dying in disasters that cannot be said to have been caused by climate change, but that are being made more likely or worse by climate change.

Enrichment: For more on the history of winners and loses from interactions with governments, see the Enrichment titled Public-Private Partnerships in Oklahoma.

Grossly oversimplified, considering the use of fossil fuels and the damages from the resulting climate changes, the big winners today are wealthy people living in places with winter, air conditioners and bulldozers who are changing the climate a lot, and the big losers today are poor people living in places without winter, air conditioners and bulldozers who are not changing the climate much.

With winter, the warming may hurt ski areas, but warming up the uncomfortably cold times may have relatively little cost or even overall benefits. Air conditioning allows people to work during hot summers and saves them from heat-related illness, thus greatly reducing the damages from excess heat. And bulldozers (and all the other machines) allow building walls against the rising seas or otherwise dealing with problems arising. People lacking winter, air conditioners and bulldozers are endangered by rising heat stress and sea level without the means to deal these problems.

The main religions and traditions of the world all include some principle or law functionally equivalent to the “Golden Rule”, which is often stated as “Do unto others as you would have others do unto you”.

The Wikipedia entry, Golden Rule, is fascinating to read for the remarkable universality of this “ethic of reciprocity”. You also might look at Vogel, G., 2004, The evolution of the Golden Rule, Science 303, 1128-1131 for a bit on the science of this, and how it extends beyond humans.

And, it is very clear that if the people causing the most climate change are suffering the least from it, and the people causing the least climate change are suffering the most from it, the Golden Rule is not being followed. No one can legally dump their human waste in your yard, but people can dump their fossil-fuel waste into the atmosphere you live in and change the climate where you live.

This is an important ethical argument that concerns many people. However, the answer may not be as simple as stopping the waste-dumping. Because the winter air conditioner-bulldozer people can help the have-nots get air conditioners and bulldozers to deal with the changing climate.

Suppose, as a thought experiment, that by continuing with business as usual, climate change will increase the economy by 2.5% in a high-latitude industrial country, and reduce the economy by 25% in a low-latitude agricultural country of similar size and similar population, but that today the economy is 20 times bigger in the high-latitude country. Or, the high-latitude country could spend 2.5% of their economy to stop climate change. If you poke around with those numbers, allowing the climate change to occur gains the high-latitude country more money than the low-latitude country loses, whereas working to stop the climate change prevents the relatively large loss from the low-latitude country but leaves the countries combined with a smaller economy. Allowing the climate to change, and taking some of the extra money from the high-latitude country and giving it to the low-latitude country, could leave both countries better off than working to stop the climate change.

Lots of questions arise. Maybe the biggest one is whether the high-latitude country will really transfer that money. And, can the transfer be efficient, and will the low-latitude country be happy with charity rather than their traditional lifestyle, and more. But, the economically optimal path allows much climate change to occur because the use of fossil fuels is so valuable to people now. The tendency for many low-latitude poor countries to subsidize fossil fuels for their people may be viewed as showing how much those people want the energy from the fossil fuels.

Perhaps the most direct interpretation of this these two brief studies is to provide support for the idea that wise response involves both helping people now, and heading off future changes, and that these may occasionally work at cross purposes.

Many other issues are ethical or include ethical elements. Some are quite complex, but others much simpler. Let's take a look at a few more as we move forward in this module.

The world’s governments have agreed, through the United Nations Framework Convention on Climate Change (UNFCCC), to avoid dangerous anthropogenic influence on the climate system. What exactly that means was not spelled out in the Convention, but many people have tried to interpret it.

Perhaps the easiest interpretation is that, as global average temperature rises, damages rise faster, so temperature change must be limited to some chosen value. Some groups have advocated for 2°C above the average for some specified time before the bulk of human-caused global warming. As discussed in Unit 1, stopping the warming at 2°C would require considering many human-caused changes, including the warming effects of methane, nitrous oxide, and other gases, such as chlorofluorocarbons, the effect of soot on the reflectivity of snow, and more, although CO₂ is still the biggest issue. If we go too far beyond 2°C, we are fairly confident that CO₂ dominates, because it has the biggest source and stays around long enough to really accumulate in the atmosphere. And, in that case, it doesn’t matter where the CO₂ was emitted, and it doesn’t matter very much when the CO₂ was emitted because it mixes around the globe and accumulates in the air. Thus, if we were to accept a number such as 2°C warming, or 3°C, or 4°C, then we have essentially specified the total amount of fossil-fuel CO₂ we can emit to the atmosphere.

But, who gets to emit that CO₂? The people who got started first? The people with the biggest economy? The people who pay the most for the right to do so?

If you looked at the Enrichment earlier in this module about Eastham, Massachusetts, you saw a tiny bit of the long history of people negotiating over rights and responsibilities of “commons”, those parts of the Earth that we control together rather than individually. The atmosphere and ocean are the greatest commons of all, spreading whatever we do around the globe and thus linking all of us.

Per nation, China is now the biggest emitter of CO₂ per year. But, per person, China still falls far behind many other countries including the United States. And, if you include emissions in the past, China is not even close to much of the developed world. But, is a modern Briton really responsible for the industrial revolution?

We might decide to divide the allowable emissions by country, or by person and might use future emissions only, or include past emissions back some time to be determined. (R.T. Pierrehumbert, 2013, Cumulative carbon and just allocation of the global carbon commons, Chicago Journal of International Law 13, 527-548.) This is a quite different approach than the economic optimizations, and strikes many people as being inherently fairer—each person (or perhaps each country) gets a share. One could even set up a program of trading the shares, in a cap-and-trade system.

Additional issues arise, however, and, history may matter in additional ways. A sustainable future seems likely to involve solar cells and a smart grid with a lot of computer power. The solar cells and transistors for the computers were invented at Bell Labs, in the USA. One might make a case that some fossil-fuel burners have used the energy to contribute to the valuable intellectual commons. Indeed, it is almost impossible for a person to live without having some negative impact on the carrying capacity of the planet, so one might balance the negative against the positive—did someone, or some country, contribute more than they took?

This issue can become rather personal. Dr. Alley travels a lot to do research and communicate about energy and environment. Personally, he has taken actions such as bicycling rather than driving to his office, and his family works in other ways to reduce emissions. But, those efforts don’t fully offset the effects of his travels. He tries hard to “phone in” talks and meetings rather than traveling, but he still travels. Is he wrong to travel to do the research and communicate the results? You might argue that he is.

A poster session at the American Geophysical Union Fall Meeting, Moscone Center South, San Francisco, California, USA, December 2013. Many scientists who are very concerned about the climatic effects of greenhouse-gas emissions traveled to this meeting, and travel to similar meetings elsewhere. Some of these scientists buy “offsets” or take other actions to reduce their CO₂ emissions, but others may not. You could argue that these scientists are somehow hypocritical to worry about greenhouse warming while contributing to it, but you also could argue that they have a moral obligation to travel to such meetings to learn about the dangers of climate change and how to address them, and then communicate this information to the broader community.

Photo Credit: Richard Alley @ Penn State is licensed under CC BY-NC-SA 4.0

But, if all of the scholars who understand the problem were to sit down and shut up the moment they understand, would the rest of the world ever gain the knowledge needed to reach a sustainable future? A stunt biker trying to jump over an obstacle will accelerate to hit the ramp hard, and many people believe that in studying and communicating about the Earth, scholars are doing the same thing, accelerating towards a possible problem so that we can jump over it.

Indeed, most people, if they see a person in danger, will provide warning and try to help, and will disapprove strongly of someone who fails to warn an endangered person. (In certain circumstances, failure to warn or failure to report can be a crime.) So, are scientists and engineers morally obligated to travel and communicate and invent and build to warn and help fellow humans? A firefighter battling a dangerous blaze may set a small fire to control a big one; are the CO₂ emissions of some travelers fully analogous? And, does such CO₂ count against the “fair share” that started this section?

We won’t answer any of these questions for you. But, we suspect that in thinking about them and discussing them with others, you will gain interesting insights that might help many other people. Instead, we’ll move on to some topics that may prove a little easier.

Whether or not the limits on growth and measures of growth (from Module 10) are treated properly in economic models, the other part of the discount rate is easier to discuss ethically. The economically efficient path typically allows much global warming to occur in part by treating people today as being more important than people in the future—the pure rate of time preference. In the extreme, if you could spend a penny now to stop a problem that would cause the end of civilization ten thousand years in the future, it would not be economically justified under the simplest application of the optimizations. (Economists do understand such issues, as discussed briefly in Module 10, but reducing them to absurdity is sometimes useful to start a discussion, just as long as everyone remembers what was done.)

We do often behave as if we are more important than future generations, as observed by economists. But when we are discussing what policies we should adopt, is that an ethically justifiable stance? Especially when considering future generations, rather than just ourselves in a few decades, many people are very uneasy assuming that we matter more than they do. And, if this pure rate of time preference does not apply to future generations, or applies at a lower level, then more action is justified now to avoid climate change than is calculated in the economic optimizations.

For more on the ethics of the Pure Rate of Time Preference, and how using a lower value motivates much more effort now to reduce global warming, see the Stern Review (Stern Review on the Economics of Climate Change, 2006, Her Majesty’s Treasury, United Kingdom,).

Many scientists have speculated on the possibility that we can use genetic engineering to bring back extinct species. But, so far, we can’t. And, we don’t know whether we will be able to. Furthermore, a lot of rare species in remote rain forests or deep in the sea are very unlikely to ever leave us samples that we could use to bring them back, and extinction may come before we even discover many of those species. Some of those species may have genetic diversity that would improve our food crops, or in other ways help us—the mere fact of their existence means that they are unique in some way, and do some thing(s) well. Others may offer no commercial prospects, but they raise the question of whether it is right for us to cause extinction. Many people and many religions have rather strong views about being stewards of the Earth and the creatures on it, and causing widespread extinctions is often not viewed as good stewardship.

If we value the other species on the Earth, climate change is a real challenge that risks widespread extinction. Simply switching back to burning trees rather than fossil fuels is not a good answer. Finding ways to sustainably generate power while not changing the atmosphere is a better answer. So, greater efforts to reduce global warming than the economically efficient path would be justified if we value biodiversity, or traditional lifestyles, or natural ecosystems, more than they are currently reflected in measures such as GDP.

Video: 10 Pikas and Climate Change (3:22)

If you already watched the pika video back in Module 10, you don’t need to watch it again. But, if you didn’t, or you want to review, here it is because it is relevant in both Modules.

“As mining, oil, and gas profits have soared, living standards and overall economic growth in many resource-rich developing countries have remained flat or have even declined. This ‘resource curse’…” (United States Agency for International Development, 2010, Alliance Industry Guide: Extractives Sector, p. 4)

Video: Earth 104 Module 12 Resource Curse (1:41).

Video: Earth 104 Module 12 Resource Curse Math (1:56).

The two graphs here don’t answer questions but ask them. The first, from the well-known 2001 paper by Sachs and Warner (Sachs, J.D. and A.M. Warner, 2001, Natural resources and economic development, European Economic Review 45, 827-838), shows, for a wide range of countries, how much they depended on exporting natural resources (oil, coal, gas, diamonds, iron, etc.) in 1970, and how much their economies grew in the next 20 years. You will see a lot of variability, but no fast-growing countries that relied heavily on natural-resource exports, and many fast-growing countries that exported few natural resources. The second figure, from the Organization for Economic Co-operation and Development, 14 March 2012), compares student performance on a standardized test to their country’s reliance on “rents”; in economic-speak, the money that goes to a property owner for the oil pumped out from under their land is rent, so the horizontal axis in this plot is actually quite similar to the horizontal axis in the previous plot. You will again see much variability, but with the countries that rely most heavily on rents having poor student performance, and the countries with the best student performance having little reliance on rents.

The mere fact that we showed these plots and brought up this topic will make some people mad. A few people may argue that the data are somehow not representative. Many more will argue that correlation is not causation, and that some additional factor that correlates with reliance on natural resources is controlling economic growth and student performance. The extra factor might be a history of colonial oppression, or extreme initial poverty, or something else.

But, consider the possibility that reliance on selling oil or other natural resources does lead to economic difficulties. Turning oil, or diamonds, into money, requires controlling the resource and access to a trade route, and some knowledge and ability to get the valuable thing out of the ground and into the trade system. Extraction of a hard-to-get resource may be expensive and high-tech, requiring many people and great cooperation. However, for the most efficient producers of the easiest oil, the costs of production may be as low as $5 for a barrel of oil that sells for $100. That translates into a need for few people with few jobs, with huge profit (“rent”) available for controlling the resource.

Contrast that with the task of turning sand and red rocks into cell phones, which requires a complex web of technical, economic, social and political interactions, and a vigorous educational system. Selling a readily available, concentrated natural resource is a quicker and easier way to make money than is generating an integrated economy capable of doing a variety of high-tech, artistic, educational and other things. But, the integrated economy might just make a better place to live. And, the effort to control a scarce resource might just lead to the people in control taking actions that don’t make everyone happy.

Suppose that there is at least a little reality in this “resource curse”. A slow, predictable reduction in the concentrated high value of the fossil-fuel resource over a few decades in the regions relying heavily on it just might be the way to shift toward development of integrated economies, with greater economic growth and educational achievement. People looking at the two plots shown above often get a little nervous about betting the future on oil, or gas, or any other single, concentrated natural resource, which would move their region to the right on these plots—that doesn’t prove that their economy or their students will trend downward, but it does raise questions. And with the evidence, that for now, fossil fuels are more subsidized than a diverse portfolio of renewables, that nervousness may motivate more effort now to move away from fossil fuels than in the economically efficient path.

We all know that building things is more difficult than breaking them. No one could construct a college classroom or a computer or cell phone with just a hammer, but any of them can be broken with a hammer (a big hammer—a wrecking ball—for the classroom).

By analogy, we see no plausible way that simply raising CO₂ in the atmosphere can turn the Earth into Eden, a paradise for all of us. But, the worst possibilities from global warming are rather scary—tropics too hot for unprotected large animals including us, farm fields too hot for our crops to grow, all of the ice sheets melting and raising sea level roughly 200 feet, poison gases belching out of anoxic oceans. We don’t think that any of these are likely, and they would be well into the future if they happened, but even a slight possibility of such outcomes is not balanced by a similar possibility of highly beneficial outcomes.

Taking Extensive Precautions

When faced with similar situations in everyday life, we take extensive precautions. Driving a car includes the slight chance of being killed by a drunk driver, so we use seat belts and put kids in especially safe child seats, buy cars with air bags and crumple zones, pay for road improvements and police surveillance, and support Mothers Against Drunk Driving. If we think that it is unethical to risk hugely damaging events in the future and that instead we should treat climate change like many other aspects of our lives and take out insurance, then more action would be justified now to slow the changes.

The extensive precautions we take in many ways to avoid possible large disasters are consistent with the Precautionary Principle. This is a generalization of the old medical principle “First, do no harm”.

The United Nations Rio Conference put it this way: "In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” (United Nations Environment Programme Rio Declaration on Environment and Development, 1992).

We discussed earlier how actions have “winners” and “losers”, or at least help one group more than another. Some people have argued that the precautionary principle means that we should slow our changes to the environment until we understand better. But, other people have argued that moving away from fossil fuels might harm the economy, so we should continue with business as usual until we understand better.

In such a situation, one way forward is to assess our experience with similar changes in the past, both environmentally and economically. And, such a comparison suggests that we have successfully negotiated larger economic changes, but have no experience with changes so large in the atmosphere, as discussed next.

Moving Toward the Optimal Path

Looking first at the economics, moving towards the optimal path is often estimated to cost a few months of economic growth over a few decades if you ignore the value of the climate changes avoided, and to improve the economy if you count those changes. Suppose for a moment that all of the climate science proves to be wrong. (Yes, this is a crazy supposition, but just suppose.) If so, then shifting away from fossil fuels is not needed for climatic reasons.

Eventually, the shift still will be needed for supply reasons, so starting to shift now would be an exercise in getting to a sustainable energy system while there is still a fossil-fuel safety net. The fossil fuels not burned would still be there, and could be burned if desired. The economy would have slowed slightly. Some people would have lost jobs, and others gained them. But the big-picture costs of experimenting with a sustainable energy system for a few decades are projected to be small relative to the size of the whole economy.

Governments frequently change their portfolio of taxes and subsidies, so a policy response such as a partial switch from wage taxes to carbon taxes over a few decades would not be far outside of experience. Moving away from fossil fuels would not even lose the technical know-how in the industry, both because serious plans do not envision a complete end to fossil-fuel use releasing CO₂ for at least decades, and because most of the skills likely would be needed for geothermal energy or carbon-capture-and-sequestration uses.

The extra costs of running a fully sustainable energy system, with its larger changes than for the economically optimal path, are often estimated as roughly 1% of the economy.

Energy is now about 10% of the economy, so this is an increase in energy costs, but less than some of the oil-price shocks that the economy has experienced in the past. And, this ignores the benefits of slowing and then stopping the warming and other changes from the CO₂.

The extra cost of the optimal path, and even of a fully sustainable system, is similar to the extra cost of the modern water-and-sewer sanitary system, as opposed to a minimal system such as existed in London in the days of cholera. Humanity has surely done bigger things, both bad (think of a world war) and good, including building the current energy system. We probably have never agreed to do something this big, but we have muddled through larger changes.

In contrast, atmospheric CO₂ is now higher than ever experienced before by modern humans and may be heading for levels not seen in tens or possibly even hundreds of millions of years. Thus, if one subscribes to the precautionary principle, striving first to do no harm, the economic effects of response are well within experience, whereas the climatic effects of failure to respond are well outside of experience. Thus, if you think that the precautionary principle is useful, you probably would recommend more action now to slow fossil-fuel emissions of CO₂.

Reminder!

After completing your Self-Assessment, don't forget to take the Module 12 Quiz. If you didn't answer the Learning Checkpoint questions, take a few minutes to complete them now. They will help you study for the quiz and you may even see a few of those question on the quiz!

Learning Outcomes Survey

We have now come to the end of Unit 3. The purpose of this exercise is to encourage you to think a little bit about what you have learned well, and just as importantly, about what you feel you have not learned so well. Think about the learning objectives presented at the beginning of the Unit, and repeated below. What did you find difficult or challenging about the things you feel you should have learned better than you did? What do you think would have helped you learn these things better?

For each Module in Unit 3, rank the learning outcomes in order of how well you believe you have mastered them. A rank of 1 means you are most confident in your mastery of that objective. Use each rank only once - so if there are four objectives for a given module, you should mark one with a 1, one with a 2, one with a 3, and one with a 4. All items must be ranked. For each Module, indicate what was difficult about the objective you have marked at the lowest confidence level.

Module 10

Rank the following statements from 1 to 4.

• Recognize that there is a cost to future society of emitting CO₂ to the air today.
• Describe how one might balance immediate needs against protection from future losses.
• Explain why growth cannot be infinite in a world of finite resources.
• Use an Integrated Assessment Model to determine the most economically beneficial approach to dealing with emissions and climate change.

What did you find most challenging about the objective you ranked the lowest?

Module 11

Rank the following statements from 1 to 4.

• Recognize the multitude of policy options available for our energy system and economy.
• Explain how the effectiveness of emissions treaties and carbon taxes can be verified internationally using remote data collection.
• Recognize that shifting gradually to renewable energy is likely to have little overall impact on employment rates.
• Recall that energy policies and subsidies have been in use for decades, and some of these have promoted fossil fuels over renewable resources.
• Research and evaluate an example of an energy subsidy reported by the IMF.

What did you find most challenging about the objective you ranked the lowest?

Module 12

Rank the following statements from 1 to 4.

• Explain that decisions about energy and environment have important but very complicated ethical implications.
• Recognize that relying more on natural resources does not always correlate with greater wealth or higher quality of life.
• Recall that if we value our grandchildren's quality of life as much as we value our own, then it is worthwhile to do more now to avoid climate change.
• Assess what you have learned in Unit 3.

What did you find most challenging about the objective you ranked the lowest?

Scoring Information and Rubric

The self-assessment is worth a total of 25 points.

Summary

Unchecked, climate change is highly likely to bring widespread extinctions and ecosystem disruptions, which will make traditional human lifestyles difficult or impossible, with at least a slight danger of hugely damaging disasters. Ethical concern about such issues, and about the well-being of future generations, motivates more response now than the response that is already economically justified. Although responses can involve intrusive government actions, they do not need to, and a wise response may actually reduce government intrusions.

Reminder - Complete all of the Module 12 tasks!

You have reached the end of Module 12! Double-check the to-do list on the Module Roadmap to make sure you have completed all of the activities listed there.

Video: Capstone Project Step 1 Instructions (4:06)

Video: Capstone Project Step 2 Instructions (3:24)

The video below, Capstone Project Step 3 Instructions, will take you through the steps involved in this part of the project.

Video: Capstone Project Step 3 Instructions (4:24)

See the video, Capstone Step Four Instructions for some guidance on how to do this.

Video: Capstone Project Step 4 Instructions (4:22)

Video: Capstone Project Step 5 Instructions (2:11)

Video: Capstone Project Step 6 Instructions (3:18)