C
Captain Compassion
Guest
Fixing Climate Change Is Cheap
Or so says a new United Nations report
Ronald Bailey | May 4, 2007
http://www.reason.com/news/show/120026.html
Preventing dangerous man-made global warming? It'll be cheap,
according to the Intergovernmental Panel on Climate Change (IPCC).
That's the conclusion of the Summary for Policymakers (SPM3) from the
IPCC's Working Group III on "Mitigation of Climate Change" that was
issued in Bangkok earlier today.
Even the most stringent goal of following a greenhouse gas (GHG)
emissions reduction trajectory that aims to stabilize greenhouse
concentrations at around 535 parts per million (ppm) would reduce
annual GDP growth rates by less than 0.12 percent per year by 2030. In
that scenario, global GDP in 2030 would be 3 percent lower than it
would otherwise have been without emissions reductions. The current
world GDP is around $47 trillion, and in 23 years, at 3 percent per
year growth rate, it would double to about $94 trillion without any
emissions reductions. A 3 percent GDP reduction in 2030 implies that
world GDP would drop to $91.3 trillion. In other words, putting
humanity on a path to stabilizing GHG concentrations to below the
equivalent of 535 ppm of carbon dioxide in the atmosphere would cost
humanity an average of $117 billion per year in lost economic growth
for the next 23 years.
The report lays out other possible and less expensive emissions
reduction paths. For example, if the limit on eventual GHG
concentrations were set at 590 ppm, the IPCC projects that that would
reduce annual GDP growth by less than 0.10 percent and reduce global
GDP in 2030 by less than 2.5 percent. An even looser goal of
stabilizing GHG concentrations at below 790 ppm would cut annual GDP
growth by 0.06 percent and reduce overall global output in 2030 by
less than 0.2 percent.
The summary projects that keeping GHG concentrations below the
equivalent of 535 ppm of carbon dioxide would eventually raise global
average temperatures by about 2 degrees Celsius (3.6 degrees
Fahrenheit) above current temperatures, keeping in mind that average
global temperature today is estimated to be 0.8 degrees Celsius (1.4
degrees Fahrenheit) above what it was in 1850. In order to stabilize
GHG at 535 ppm, emissions will have to peak before 2020 and must fall
by 2050 to 30 to 60 percent below what they were in 2000.
Global average temperature are projected to rise by 2.4 degrees
Celsius (4.3 degrees Fahrenheit) above the 2000 average if GHG
concentrations reach 590 ppm. Stabilizing at below 590 ppm implies an
emissions peak by 2030 and GHG emissions in 2050 between 30 percent
below to 5 percent above the 2000 level.
If GHG concentrations rise to 790 ppm, the global average temperature
is projected to increase eventually by 3.2 degrees Celsius (5.8
degrees Fahrenheit) above the 2000 average. Holding GHG concentrations
below 710 ppm, means emissions peaking sometime before 2060 and allow
an increase in emissions by 10 to 60 percent by 2050.
Contrast the relatively low IPCC SPM3 cost estimates for abating GHG
emissions with the Stern Review of the Economics of Global Climate
Change which projected in November 2006 that it would cost 10 times
more-1 percent of global GDP per year-to stabilize the concentration
of GHG at "safe" levels. Since the SPM3 report is a summary of the
results of various econometric models run in conjunction with climate
models, independent economists have not had a chance to evaluate the
reported results. The summary reads like a list of good ideas rather
than real policy proposals. For example, it suggests that cars be made
more fuel efficient, fewer forests be cut down, more nuclear power
plants be built, more research and development subsidies for
carbon-free energy technologies like wind and solar power, and so
forth. The summary does not assign any specific costs for the new
energy technologies it recommends such as solar, wind, carbon capture
and sequestration, nuclear, transport and building fuel-efficiency.
Those very interesting and crucial details will no doubt be in the
full mitigation report that will be released later this year.
But for the moment, let's assume that the IPCC has it right-that
mitigating dangerous human-made climate change will only cost 0.12
percent of annual growth in global GDP. Is that a bargain? Without
going into arcane details, most economists who have been working on
climate change have dismissed the conclusion of the Stern Review that
unmitigated climate change would reduce global GDP by between 5 and 20
percent of what it would have been in 2100. For example, in 2004 study
Yale economist Robert Mendelsohn and his colleagues found "the
aggregate net impacts [of climate change] for the globe are
surprisingly small for the next century across all scenarios." They
note that regional impacts of climate change would differ but they
calculate that climate change overall would reduce global GDP by
between 0.08 percent and 0.24 percent by the year 2100. "These
estimates are considerably smaller than the earlier estimates in the
literature that predict impacts of 1-2 percent of GDP," notes the
Mendelsohn study. If Mendelsohn is right about the future damage
caused by unmitigated climate change (and it's all iffy when making
projections 100 years out), reducing global GDP by 3 percent from what
it would otherwise have been 2030 to keep GHG concentrations below 535
ppm doesn't seem like a very good trade-off.
Most integrated assessment models (combined econometric and climate
models) project gradual increase in temperatures and a gradual
increase in the damage caused by climate change. To most economists
this implies paying relatively less now and more in the future to
abate man-made greenhouse warming. For example, Yale economist William
Nordhaus suggests that the optimal carbon tax trajectory balancing
costs and benefits would start with a tax of about $17 per ton of
carbon rising to $84 per ton in 2050 and $270 in 2100.
But what if climate change is not predictably gradual? As the SPM3
notes, "if the damage cost curve increases steeply, or contains
non-linearities (e.g. vulnerability thresholds or even small
probabilities of catastrophic events), earlier and more stringent
mitigation is economically justified." Doesn't the remote chance of
climatic catastrophe suggest that humanity might want to purchase some
extra insurance against that possibility? Harvard economist Martin
Weitzman accepts that we should pursue a "gradualist climate-policy
ramp up of ever tighter GHG reductions" such as that proposed by
Nordhaus and most other economists. But Weitzman also argues the
uncertainties about the probability of a future climate catastrophe
means that governments should put "serious research dollars into early
detection of rare disasters" and begin "a major public dialogue about
contingency planning for worst-case scenarios." For example, since the
possibility of rapid sea level rise as a result of melting ice caps in
Antarctica and Greenland is one of the chief climate change worries,
perhaps governments should spend more on research that aims to narrow
the probabilities that such rapid melting might occur.
In any case, the range of proposed policy interventions in the SPM3
report including renewable energy mandates, producer subsidies,
mandatory fuel economy standards, subsidies to public transportation,
appliance and building standards, energy efficiency tax credits, and
so forth leave a lot of scope for counterproductive government
meddling and rent-seeking. The simplest policy aimed at reducing GHG
emissions would be an internationally harmonized carbon tax.
Increasing the price of carbon-based energy would encourage transport,
industry, and residential fuel efficiency. There would be no need to
set appliance or building code standards or offer subsidies to
companies and consumers to switch to low-carbon sources of energy.
Furthermore, subsidies or tax credits for companies to develop new
low-carbon technologies would not be necessary-higher carbon energy
prices by themselves will encourage energy supply innovation.
Furthermore we must be on guard against creating institutions that
could damage our capacity to respond to unanticipated catastrophes.
But let's leave that full discussion to a later time.
Finally, if claims by the IPCC Working Group III Summary for
Policymakers are right about the low cost of mitigating climate
change-and analysts will have to wait to see the full report before
thoroughly assessing their accuracy-then big sacrifices from consumers
and massive changes in lifestyles will not be necessary. Even better
news is that the economies of all countries, especially those of poor
countries, can grow rapidly throughout this century. And that's
especially good news because the best insurance against
catastrophe-climatic and otherwise--is increased wealth and
technological progress.
--
There may come a time when the CO2 police will wander the earth telling
the poor and the dispossed how many dung chips they can put on their
cook fires. -- Captain Compassion.
Wherever I go it will be well with me, for it was well with me here, not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS
"Civilization is the interval between Ice Ages." -- Will Durant.
"Progress is the increasing control of the environment by life.
--Will Durant
Joseph R. Darancette
daranc@NOSPAMcharter.net
Or so says a new United Nations report
Ronald Bailey | May 4, 2007
http://www.reason.com/news/show/120026.html
Preventing dangerous man-made global warming? It'll be cheap,
according to the Intergovernmental Panel on Climate Change (IPCC).
That's the conclusion of the Summary for Policymakers (SPM3) from the
IPCC's Working Group III on "Mitigation of Climate Change" that was
issued in Bangkok earlier today.
Even the most stringent goal of following a greenhouse gas (GHG)
emissions reduction trajectory that aims to stabilize greenhouse
concentrations at around 535 parts per million (ppm) would reduce
annual GDP growth rates by less than 0.12 percent per year by 2030. In
that scenario, global GDP in 2030 would be 3 percent lower than it
would otherwise have been without emissions reductions. The current
world GDP is around $47 trillion, and in 23 years, at 3 percent per
year growth rate, it would double to about $94 trillion without any
emissions reductions. A 3 percent GDP reduction in 2030 implies that
world GDP would drop to $91.3 trillion. In other words, putting
humanity on a path to stabilizing GHG concentrations to below the
equivalent of 535 ppm of carbon dioxide in the atmosphere would cost
humanity an average of $117 billion per year in lost economic growth
for the next 23 years.
The report lays out other possible and less expensive emissions
reduction paths. For example, if the limit on eventual GHG
concentrations were set at 590 ppm, the IPCC projects that that would
reduce annual GDP growth by less than 0.10 percent and reduce global
GDP in 2030 by less than 2.5 percent. An even looser goal of
stabilizing GHG concentrations at below 790 ppm would cut annual GDP
growth by 0.06 percent and reduce overall global output in 2030 by
less than 0.2 percent.
The summary projects that keeping GHG concentrations below the
equivalent of 535 ppm of carbon dioxide would eventually raise global
average temperatures by about 2 degrees Celsius (3.6 degrees
Fahrenheit) above current temperatures, keeping in mind that average
global temperature today is estimated to be 0.8 degrees Celsius (1.4
degrees Fahrenheit) above what it was in 1850. In order to stabilize
GHG at 535 ppm, emissions will have to peak before 2020 and must fall
by 2050 to 30 to 60 percent below what they were in 2000.
Global average temperature are projected to rise by 2.4 degrees
Celsius (4.3 degrees Fahrenheit) above the 2000 average if GHG
concentrations reach 590 ppm. Stabilizing at below 590 ppm implies an
emissions peak by 2030 and GHG emissions in 2050 between 30 percent
below to 5 percent above the 2000 level.
If GHG concentrations rise to 790 ppm, the global average temperature
is projected to increase eventually by 3.2 degrees Celsius (5.8
degrees Fahrenheit) above the 2000 average. Holding GHG concentrations
below 710 ppm, means emissions peaking sometime before 2060 and allow
an increase in emissions by 10 to 60 percent by 2050.
Contrast the relatively low IPCC SPM3 cost estimates for abating GHG
emissions with the Stern Review of the Economics of Global Climate
Change which projected in November 2006 that it would cost 10 times
more-1 percent of global GDP per year-to stabilize the concentration
of GHG at "safe" levels. Since the SPM3 report is a summary of the
results of various econometric models run in conjunction with climate
models, independent economists have not had a chance to evaluate the
reported results. The summary reads like a list of good ideas rather
than real policy proposals. For example, it suggests that cars be made
more fuel efficient, fewer forests be cut down, more nuclear power
plants be built, more research and development subsidies for
carbon-free energy technologies like wind and solar power, and so
forth. The summary does not assign any specific costs for the new
energy technologies it recommends such as solar, wind, carbon capture
and sequestration, nuclear, transport and building fuel-efficiency.
Those very interesting and crucial details will no doubt be in the
full mitigation report that will be released later this year.
But for the moment, let's assume that the IPCC has it right-that
mitigating dangerous human-made climate change will only cost 0.12
percent of annual growth in global GDP. Is that a bargain? Without
going into arcane details, most economists who have been working on
climate change have dismissed the conclusion of the Stern Review that
unmitigated climate change would reduce global GDP by between 5 and 20
percent of what it would have been in 2100. For example, in 2004 study
Yale economist Robert Mendelsohn and his colleagues found "the
aggregate net impacts [of climate change] for the globe are
surprisingly small for the next century across all scenarios." They
note that regional impacts of climate change would differ but they
calculate that climate change overall would reduce global GDP by
between 0.08 percent and 0.24 percent by the year 2100. "These
estimates are considerably smaller than the earlier estimates in the
literature that predict impacts of 1-2 percent of GDP," notes the
Mendelsohn study. If Mendelsohn is right about the future damage
caused by unmitigated climate change (and it's all iffy when making
projections 100 years out), reducing global GDP by 3 percent from what
it would otherwise have been 2030 to keep GHG concentrations below 535
ppm doesn't seem like a very good trade-off.
Most integrated assessment models (combined econometric and climate
models) project gradual increase in temperatures and a gradual
increase in the damage caused by climate change. To most economists
this implies paying relatively less now and more in the future to
abate man-made greenhouse warming. For example, Yale economist William
Nordhaus suggests that the optimal carbon tax trajectory balancing
costs and benefits would start with a tax of about $17 per ton of
carbon rising to $84 per ton in 2050 and $270 in 2100.
But what if climate change is not predictably gradual? As the SPM3
notes, "if the damage cost curve increases steeply, or contains
non-linearities (e.g. vulnerability thresholds or even small
probabilities of catastrophic events), earlier and more stringent
mitigation is economically justified." Doesn't the remote chance of
climatic catastrophe suggest that humanity might want to purchase some
extra insurance against that possibility? Harvard economist Martin
Weitzman accepts that we should pursue a "gradualist climate-policy
ramp up of ever tighter GHG reductions" such as that proposed by
Nordhaus and most other economists. But Weitzman also argues the
uncertainties about the probability of a future climate catastrophe
means that governments should put "serious research dollars into early
detection of rare disasters" and begin "a major public dialogue about
contingency planning for worst-case scenarios." For example, since the
possibility of rapid sea level rise as a result of melting ice caps in
Antarctica and Greenland is one of the chief climate change worries,
perhaps governments should spend more on research that aims to narrow
the probabilities that such rapid melting might occur.
In any case, the range of proposed policy interventions in the SPM3
report including renewable energy mandates, producer subsidies,
mandatory fuel economy standards, subsidies to public transportation,
appliance and building standards, energy efficiency tax credits, and
so forth leave a lot of scope for counterproductive government
meddling and rent-seeking. The simplest policy aimed at reducing GHG
emissions would be an internationally harmonized carbon tax.
Increasing the price of carbon-based energy would encourage transport,
industry, and residential fuel efficiency. There would be no need to
set appliance or building code standards or offer subsidies to
companies and consumers to switch to low-carbon sources of energy.
Furthermore, subsidies or tax credits for companies to develop new
low-carbon technologies would not be necessary-higher carbon energy
prices by themselves will encourage energy supply innovation.
Furthermore we must be on guard against creating institutions that
could damage our capacity to respond to unanticipated catastrophes.
But let's leave that full discussion to a later time.
Finally, if claims by the IPCC Working Group III Summary for
Policymakers are right about the low cost of mitigating climate
change-and analysts will have to wait to see the full report before
thoroughly assessing their accuracy-then big sacrifices from consumers
and massive changes in lifestyles will not be necessary. Even better
news is that the economies of all countries, especially those of poor
countries, can grow rapidly throughout this century. And that's
especially good news because the best insurance against
catastrophe-climatic and otherwise--is increased wealth and
technological progress.
--
There may come a time when the CO2 police will wander the earth telling
the poor and the dispossed how many dung chips they can put on their
cook fires. -- Captain Compassion.
Wherever I go it will be well with me, for it was well with me here, not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS
"Civilization is the interval between Ice Ages." -- Will Durant.
"Progress is the increasing control of the environment by life.
--Will Durant
Joseph R. Darancette
daranc@NOSPAMcharter.net
