Planet Earth

Copenhagen Consensus — Carlo Carraro, Francesco Bosello and Enrica De Cian look at what can be achieved with adaptation policies.

They find that the most important impacts of global warming will be on agriculture and tourism, where nations will lose, on average, about half a percent of GDP from each by mid-century. However, they point out that much of this damage will be avoided by people choosing for themselves to adapt to a change in their environment. Farmers will choose plants that thrive in the heat. New houses will be designed to deal with warmer temperatures.

Taking adaptation into account, rich countries will adapt to the negative impacts of global warming and exploit the positive changes, creating a total positive effect of global warming worth about half a percentage point of GDP.

Poor countries will be hit harder, however. Adaptation will reduce the climate change-related losses from five percent of GDP to slightly less than 3 percent – but this is still a significant impact. The real challenge of global warming, therefore, lies in tackling its impact on developing nations. Here, more needs to be done, above and beyond the adaptation that will happen naturally.

Adaptation may serve multiple purposes, including helping developing countries boost education, health, and economic development.

The researchers find that every dollar spent on adaptation would achieve at least about $1.65 worth of positive changes for the planet.

Climate-engineering is another potential response to climate change. J. Eric Bickel and Lee Lane argue that at a relatively low cost, climate-engineering could pay large dividends. This essentially means cooling the planet, by reflecting more of the sun’s rays back to space. One promising approach is Stratospheric Aerosol Injection – where a precursor of sulfur dioxide would be continuously injected into the stratosphere, forming a layer of aerosols to reflect sunlight. The amount of sulfur required to offset global warming is on the order of 2% of the sulfur that humans already inject into the atmosphere, largely through burning fossil fuels. Another suggested approach is Marine Cloud Whitening, where seawater would be mixed into the atmosphere at sea to make the clouds whiter and more reflective.

Bickel and Lane do not suggest actually implementing such programs at this point, but they look at the costs and benefits of preparing the knowledge of how they might be deployed in the future. They estimate the cost of a climate-engineering research and development program as being on the order of a billion dollars: a small fraction of what the United States alone is spending on climate-change research each year. They roughly estimate that each dollar spent could create $1,000 of benefits in economic terms.

Such high benefits reflect the fact that SRM holds the potential of reducing the economic damages caused by both warming and costly CO2 reduction measures (such as carbon taxes). These early reduction costs tend to be higher than those of climate change; so by lessening the stringency of controls, climate-engineering may provide near-term benefits—compared to strategies relying solely on emissions reductions.

Moreover, if climate change should suddenly get much worse (reach the so-called tipping points), geo-engineering appears to be the only technology that could quickly cool the Earth. This feature would allow it to play an important risk management role despite this so far intractable source of uncertainty.

Richard Tol makes the case that there is wide agreement in the economic literature that greenhouse gas emission reduction is best done through a carbon tax. Climate policy, he notes, is not about spending money. It is about raising money (and, of course, about finding the best way to spend the revenues raised through a carbon tax.)

He makes the case that research and development and CO2 abatement are complements, not substitutes. He points out that drastic reduction of carbon dioxide emissions would be very expensive with current technologies, so R&D is a critical part of CO2 abatement policy. However, most of that R&D is innovation and diffusion, rather than invention. For innovation and diffusion, the regulator should create a credible promise of a future market: In this case, the promise of an emission reduction target or, better, a carbon tax in the future.

The best way to give a credible signal is to start now – which has an additional advantage because the regulator does not know how close to market renewable energy technologies really are.

Tol argues that the costs of deep emission cuts are relatively small if emission reduction targets are lenient at first but accelerate over time; all emitting sectors are regulated and marginal abatement costs are the same; all gases are regulated and priced uniformly; all countries reduce emissions, and marginal costs are equal; and climate policy is coordinated with other policies. The costs of emission reduction rapidly escalate if such rules are are violated – which unfortunately, they often have been in the past.

Recent progress has been made in alternative energy technologies, notably in bioenergy and solar power. On the other hand, nuclear power has fallen out of favour. It is also increasingly clear that governments have great difficulty in delivering emission reduction programmes that are least-cost.

While very stringent emission reduction targets such as the long-term goals of the European Union do not pass the benefit-cost test with any assumptions. However, very modest emission reduction appears to be justifiable with any number of assumptions. More stringent emission reduction needs more favorable assumptions.

Tol finds that a low tax of about $1.80 on each tonne of carbon would generate benefits worth between $1.5 and $52. However, a much higher tax set at $250 would cost more than it would gain, with only benefits of 2-67 cents.

Watch Richard Tol’s phone presentation of his research at YouTube

“Isabel Galiana and Christopher Green propose a technology-led climate policy, centred on increased research and development, testing and demonstration (RDT&D) of scalable, reliable, and cost effective low carbon emitting energy technologies funded by a low but gradually rising carbon tax. They argue that the size of the energy technology challenge to “stabilizing climate” is huge, and there is a current lack of technological readiness and scalability in low-carbon energy sources. They show that adopting a “brute force” approach to reducing GHG emissions with carbon pricing in the absence of technological readiness could generate economic costs an order of magnitude or more, greater than widely published estimates of CO2 mitigation cost estimates.

The authors argue that while the importance of new technologies to slowing and eventually reducing global GHG emissions is more widely accepted, there have been no fundamental developments on the low carbon energy front in recent years. Moreover funding has gone mainly to subsidizing manufacture and deployment rather than to RDT&D. With continued increases in global emissions despite an enduring global economic crisis, the case for a technology-led climate policy is stronger than ever.

Galiana and Green conclude that increased funding for low-carbon research and development would have benefits ranging from 3 to 11 times higher than cost, depending on rate of success and time horizon.”