Scientists find “net present value of climate change impacts” of $1240 TRILLION on current emissions path, making mitigation to under 450 ppm a must

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"Scientists find “net present value of climate change impacts” of $1240 TRILLION on current emissions path, making mitigation to under 450 ppm a must"

[The authors of this study framed their results incorrectly, I think, causing many in the media to miscover or ignore the story.]

Scientists led by a former co-chair of the Intergovernmental Panel on Climate Change [warn] that the UN negotiations aimed at tackling climate change are based on substantial underestimates of what it will cost to adapt to its impacts.

The real costs of adaptation are likely to be 2-3 times greater than estimates made by the UN Framework Convention on Climate Change (UNFCCC), say Professor Martin Parry and colleagues in a new report published by the International Institute for Environment and Development [IIED].

And as the IIED reported, the study Assessing the costs of adaptation to climate change: a review of the UNFCCC and other recent estimates concludes costs will be even more when the full range of climate impacts on human activities is considered.

The study finds that the mean “Net present value of climate change impacts” in the A2 scenario is $1240 TRILLION with no adaptation, but “only” $890 trillion with adaptation.

The mean [annual] impacts in 2060 are about $1.5 trillion….  As usual, there is a long right tail, with a small probability of impacts as large as $20 trillion.

Don’t worry folks, it’s only a “small probability” — but that “fat tail” by itself is enough to render all traditional economic analyses useless (see Harvard economist: Climate cost-benefit analyses are “unusually misleading,” warns colleagues “we may be deluding ourselves and others”).  Let’s put aside the fact we are on pace to exceed the A2 scenario (which is “only” about 850 ppm atmospheric concentrations of CO2 in 2100):  See U.S. media largely ignores latest warning from climate scientists: “Recent observations confirm “¦ the worst-case IPCC scenario trajectories (or even worse) are being realised” “” 1000 ppm.  For this country, the A2 scenario means 9 to 11°F warming over most of inland U.S. by 2090 with Kansas above 90°F some 120 days a year.

But here’s the key point the media and the authors failed to convey.  In the “aggressive abatement” case (450 ppm), the mean “Net present value [NPV] of climate change impacts” is only $410 trillion — or $275 trillion with adaptation.  So stabilizing at 450 ppm reduces NPV impacts by $615 to $830 trillion.  But the abatement NPV cost is only $110 trillion — a 6-to-1 savings or better.

Bizarrely, the authors never point this out directly.  They are adaptation experts, so rather than focusing on the immense economic benefits of preventing catastrophic global warming in the first place, they offer up this secondary conclusion as their primary finding:

Parry and colleagues warn that this underestimate of the cost of adaptation threatens to weaken the outcome of UNFCCC negotiations, which are due to culminate in Copenhagen in December with a global deal aimed at tackling climate change.

“The amount of money on the table at Copenhagen is one of the key factors that will determine whether we achieve a climate change agreement,” says Professor Parry, visiting research fellow at the Grantham Institute for Climate Change at Imperial College London. “But previous estimates of adaptation costs have substantially misjudged the scale of funds needed.”

Uhhh, not quite.  What threatens to weaken the outcome of the Copenhagen negotiations is that the overwhelming majority of politicians, opinion makers, and journalists in this country (and around the world, I think) don’t get that 1) the cost of inaction is catastrophically high [and potentially beyond calculation] and 2) the cost of action is far, far lower [see also “Intro to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar“].

Oh well.  If you’re interested in why the IPCC underestimated adaptation costs, the study focuses on several areas:

  • Water: The UNFCCC estimate of US$11 billion excluded costs of adapting to floods and assumes no costs for transferring water within nations from areas of surplus to areas of deficit. The underestimate could be substantial, according to the new report.
  • Health: The UNFCCC estimate of US$5 billion excluded developed nations, and assessed only malaria, diarrhoea and malnutrition. This could cover only 30-50% of the global total disease burden, according to the new report.
  • Infrastructure: The UNFCCC estimate of US$8-130 billion assumed that low levels of investment in infrastructure will continue to characterise development in Africa and other relatively poor parts of the world. But the new report points out that such investment must increase in order to reduce poverty and thus avoid continuing high levels of vulnerability to climate change. It says the costs of adapting this upgraded infrastructure to climate change could be eight times more costly than the higher estimates predicted by the UNFCCC.
  • Coastal zones: The UNFCCC estimate of US$11 billion excluded increased storm intensity and used low IPCC predictions of sea level rise. Considering research on sea level rise published since the 2007 IPCC report, and including storms, the new report suggests costs could be about three times greater than predicted.
  • Ecosystems: The UNFCCC excluded from its estimates the costs of protecting ecosystems and the services they can provide for human society. The new report concludes that that this is an important source of under-estimation, which could cost over US$350 billion, including both protected and non-protected areas.

No surprise, really, given that the IPCC lowballs amplifying feedbacks and climate impacts, too.

Anyway, if you’re interested in the important stuff — the enormous benefit of stabilizing at 450 ppm — just jump to Chapter 8, page 103, here.

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11 Responses to Scientists find “net present value of climate change impacts” of $1240 TRILLION on current emissions path, making mitigation to under 450 ppm a must

  1. MAGB says:

    My reading of the health research literature shows that the work of Professor Paul Reiter and others is quite conclusive. Infectious disease prevalence is more influenced by other factors rather than climate change. And so that is what is taught to our post-graduate public health students.

    http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeconaf/12/12we21.htm

    http://www.mja.com.au/public/issues/190_05_020309/rus10887_fm.html

    “….current vector distribution is ……not restricted by temperature…..thus, it is unlikely that rising temperatures alone will bring increased vector or virus distribution”.

  2. danl says:

    Any idea what this means in the “cost per ton” for carbon pricing? I think a talking point like this could be quite important.

  3. jorleh says:

    These guys don`t notice that the cost of inaction is genocide of homo sapiensis. How much in any money? Economics is perhaps not the best weapon in our climate catastrophe.

  4. Lou Grinzo says:

    jorleh: I wouldn’t use quite so broad a brush (“Economics is perhaps not the best weapon in our climate catastrophe.”). Economics, which is the study of the allocation of scarce resources, is critically important now. Just consider all the market-based mechanisms that we’ll have to rely on, from cap and trade to taxes on some forms of pollution to tax incentives to influence consumption patterns and infrastructure changes. Those are all real-world exercises in economics.

    But that’s not to say that economics, like any large body of knowledge, can’t be misused, and in right now we’re still seeing a lot of evidence that not every one of my fellow dismal scientists have received the latest status memo (or perhaps none since about 1960). In particular, I’ve been critical of the idea of applying the standard discounting techniques when assessing the costs and benefits of climate action, inaction, and the ramifications of whatever we choose to do. When we’ve created a situation that, in effect, puts a loaded gun to our own head, arguing over the cost/benefit ratios of various paths seems astoundingly short sighted to me.

  5. Andrew says:

    And check out this new study, the first to assess the BENEFITS of Waxman-Markey against the costs: http://blogs.wsj.com/environmentalcapital/2009/09/08/waxman-markey-benefits-far-outweigh-costs-new-study-finds/

    What’s interesting (and sad) is how in the comments section, the conservative commenters don’t even engage the arguments, but just dismiss the study out of hand. “Complete nonsense. I cannot believe this garbage is being reported in the WSJ.” “What is this, Mother Jones?”

  6. paulm says:

    Of course all these figures will be underestimates.

  7. Joe, et al.,

    As I read this, they are focussed on just the “costs” of adaptation/abatement, and not on the “loss of existing benefits”. I want to focus specifically on the “line item” they excluded:
    Ecosystems: The UNFCCC excluded from its estimates the costs of protecting ecosystems and the services they can provide for human society. The new report concludes that that this is an important source of under-estimation, which could cost over US$350 billion, including both protected and non-protected areas.

    Meanwhile, UNEP’s TEEB studies (The Economics of Ecosystems and Biodiversity) suggest that “investing in the Earth’s ecological infrastructure has the potential to offer an excellent rate of return. For example an investment of $45 billion in protected areas alone could secure nature-based services worth some $5 trillion a year.” In other words, we are losing BENEFITS at the rate of TRILLIONS per year… which we could avoid for mere billions…

    In the BBC coverage of the TEEB work, they highlight:
    “Studies suggest that (coral) reefs are worth more than $100bn (£60bn) annually… The study puts the cost of forest loss each year at $2-5 trillion.”

    There is more on the UNEP/TEEB objectives here, where they state:
    “Human existence would not be possible without such things as water and air purification, nutrient cycling and the maintenance of biodiversity – nature provides these “ecosystem services” at no cost to the consumer. These predominantly public goods typically have no markets and no prices, so their gradual disappearance is not reflected in our current economic system.”

    So, um, we know that it is going to be fantastically expensive to build seawalls and irrigation projects, etc., etc. AND we know that we are annually destroying $TRILLIONS worth of ecosystem services. AND we know that avoiding both would not be nearly as expensive…

    I guess we should “study” this to see if doing anything makes economic sense… sigh…

  8. The usual discounting for net present value clearly is not appropriate for global warming. With discounting, any impact more than a century in the future has a net present value that is close to zero.

    Even if the world is less livable for many millenia to come, even if hundreds of generations or thousands of generations have to suffer living on a degraded planet, net present value essentially ignores the effect on everyone except the next few generations.

  9. David B. Benson says:

    What paulm wrote in comment #6.

  10. CTF says:

    While I understand that the cost of doing nothing is far too high, it’s not clear to me that W-M is the best course of action. A revenue-neutral carbon tax seems to me to be a better means by which to mitigate catastrophic global climate change. In fact, a new study by monetary economist Dr. Joseph R. Mason, “The Economic Policy Risks of Cap-and-Trade Markets for Carbon Emissions,” explores the market risks of W-M. Bottom line, I’m not convinced that the question is IF we should do something about climate change (of course we must!), it’s which solution is best.

  11. Leland Palmer says:

    If we ignite a self-sustaining methane catastrophe, the cost of business as usual could be infinite, in a hundred years or so- the loss of everything, possibly including all life on earth.

    We don’t know where a self-sustaining methane catastrophe would stop.

    The Permian-Triassic apparent methane catastrophe killed something like 95 percent of marine species and 80 percent of land species on earth. Some have speculated, looking at the fossil record, that this event – the largest extinction event, ever – came very close to tipping the whole climate system over, and destroying the self-regulating influence of life on the climate altogether. And the current best theory to explain the Permain-Triassic mass extinction is a runaway methane catastrophe.

    http://www.killerinourmidst.com

    Thermodynamic equilibrium for the surface of the earth, in the absence of life, resembles the surface of Venus.

    We don’t know what the outcome of dumping the 300 billion or more tons of carbon from the industrial revolution into the climate system geologically instantaneously will be.

    But, in our personal lives, we have seen examples of self-regulating systems that go out of control due to a sudden jolt, and self-sustaining positive feedback events.

    Driving down the highway, a self-regulating car/driver system can be sent out of control by a tire blowing out, or the driver falling asleep, resulting in a catastrophic crash.

    When igniting a bonfire, if the conditions are right, the bonfire can quickly burn higher and higher, in a self-sustaining positive feedback event, and can burn furiously until all fuel is consumed.

    Economic arguments against combating climate change carry a touch of madness, IMO, since without a stable climate, we have nothing – perhaps no life on earth, at all.

    Lovelock thinks that we are headed for a second stable state of the earth’s climate, a hotter state about 16 degrees hotter, on average, than today’s climate.

    But, he could be wrong. We could go straight through that second stable state, and tip the entire system over, IMO, due to the rapid, massive jolt of carbon we have added to the climate system. We really could be headed for a climate resembling that of Venus, if we continue business as usual.