Water vapor is indeed a powerful greenhouse gas, but there is plenty of room for CO2 to play a role
(Part of the How to Talk to a Global Warming Skeptic guide)
Objection: H2O accounts for 95% of the greenhouse effect; CO2 is insignificant.
Answer: According to the scientific literature and climate experts, CO2 contributes anywhere from 9% to 30% to the overall greenhouse effect. The 95% number does not appear to come from any scientific source, though it gets tossed around a lot.
There is a very important distinction to be made, as you will read if you follow the link to Real Climate, between water vapour’s role in the Earth’s Greenhouse effect and it’s role in climate change. If you were to read through the table of climate forcings in the IPCC report or at NASA’s page about forcings in its GCM, you won’t find water vapour there at all. This is not because climate scientists are trying to hide the role of water vapour, rather it is because H2O in the troposphere is a feedback effect, it is not a forcing agent. Simply put, any artificial perturbation in water vapour concentrations is too short lived to change the climate. Too much in the air will quickly rain out, not enough and the abundant ocean surface will provide the difference via evaporation. But once the air is warmed by other means, H2O concentrations will rise and stay high, thus providing the feedback.
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