Climate Change Policies - Environmental Economics - Lecture Slides, Slides of Environmental Economics

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Climate Change Policies:

Roles of Developing Countries

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Variations of the Earth’s Surface Temperature: 1000 to

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The Balance each year...

• 6.3 Gt from fossil emissions
• ca. 1.6 Gt emitted from land-clearing
• 1.7 Gt net uptake into ocean systems and c. 3.0 Gt into terrestrial systems
• Leaving a net 3.2 Gt in the atmosphere
• We cannot ignore sinks in UNFCCC 4

Carbon budget

1980s 1990s

Atmospheric increase +3.3 ± 0.1 +3.2 ± 0.

Fossil emissions +5.4 ± 0.3 +6.3 ± 0.

Ocean - Atmosphere flux -1.9 ± 0.6 -1.7 ± 0.

Land – Atmosphere flux -0.2 ± 0.7 -1.4 ± 0.

Land-use Change 1.7 ±? ?1.6 ± 0.8?

Residual terrestrial sink -1.9 ±? ?-3.0 ??

The terrestrial carbon sink appears to be increasing 6

Background Information Consensus on Impacts Suggests A modest impact on agricultural production but with very wide variations (Positive to highly negative). Changes in fisheries with possible benefits in some areas, losses in others. Loss of land in low-lying areas. With some action a 1 meter rise would cause loss of 6% of Netherlands, 17.5% of Bangladesh. 8

Background Information Consensus on Impacts Further Suggests Health impacts are significant: increase in malaria and infectious waterborne diseases. Increase in magnitude and frequency of natural disasters. Impacts on tourism, negative in winter sports, positive in some sea resorts. Possible conflicts as different groups attempt to claim land and water resources 9

Valuation of Impacts in Money Terms

• Can we value the damages in money terms?
• Question is highly controversial. Yet some attempts have been made.
• Main effects are health, sea-level rise and agriculture.
• Problem of time period is critical. Most damages over next 100 years will occur from 2030-2100. Hence discount rate is very important.
• Degree of uncertainty is very high. 11

Valuation of Impacts: Fund Model

Net Present Value of Total Damage 1990-2100 as a Function of Discount Rate a 0% 1% 3% 5% 10% Percentage By Sector Sea level rise b 57.8 61.1 68.6 75.1 82. Agriculture 2.7 2.4 1.5 0.7 -0. Extreme weather c 33.5 30.1 22.7 16.3 9. Species 0.9 0.8 0.6 0.4 0. Malaria 5.2 5.6 6.7 7.6 8. Percentage By Region OECD-America 0.3 0.3 0.3 0.3 0. OECD-Europe 0.5 0.5 0.5 0.4 0. OECD-Pacific 0.1 0.1 0.1 0.1 0. C and E Europe and Former USSR -0.1 -0.2 -0.2 -0.2 -0. Middle East 6.9 6.9 6.6 6.2 5. Latin America 12.3 12.7 13.6 14.5 15. South and SE Asia 42.0 42.5 44.2 46.4 50. Central planned Asia 6.4 5.6 3.7 2.1 0. Africa 31.7 31.7 31.3 30.2 27. Total (in billions of 1990 US dollars) Total 519 500 248 800 74 400 31 800 10 100 Source: Eyre et al (1998) 12

Valuation of Impacts

• Models presented are not too dissimilar but

there are some who argue that damages could

be much greater.

• At 3% discount rate damages range from $43 to

$74 trillion over 100 years. Annual world GNP

was about $30 trillion in 1998. So annual

damages are about 1-2% of world GNP, which

is significant but should not be

insurmountable.

• Damages amount to $20-60tC at 3% discount

rate. This would amount to 1.7 to

5.1cents/kWh or 1.4-4.2 cents/litre of diesel.

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Some Recent Meta-analyses

• Joel Smith and Sam Hitz: “Estimating the Global Impacts

from Climate Change,” OECD Background Paper

ENV/EPOC/GSP(2002)12/FINAL, Paris (2003)

• Joel Smith, “A Synthesis of Potential Climate Change

Impacts on the US,” Pew Center, Washington, DC (2004)

• Richard Tol, “The Marginal Damage Costs of Carbon

Dioxide Emissions: An Assessment of the Uncertainties,”

Energy Policy, 33:2064-74 (2005)

• Richard Tol, “Estimates of the Damage Costs of Climate

Change,” Environmental and Resource Economics,

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Issues in Valuation

• Discount rate
• Valuation of loss of life
• Why estimates have been declining?
• Certain values have been ignored. 18

19 Stabilisation Scenario: Scope of Benefits

Adaptation

• Action to adapt is necessary whatever measures

for reducing greenhouse gases are agreed on.

• Uncertainty and risk aversion play a critical role in

determining adaptation strategy.

• Measures have been classified w.r.t. purpose

(whether planned or autonomous) and with

respect to timing (reactive or anticipatory).

Autonomous, reactive adaptation does not need

government intervention. Planned anticipatory

intervention does

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Adaptation Options

• Measures include

infrastructure investments (e.g. sea defences)

incentives to discourage land use in vulnerable

areas

Investment in R&D for malaria control and

other diseases

Development of better early warning

mechanisms to reduce damages caused by

extreme weather conditions.

Investment in development of crops suited to

new climate

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