Download 2. Summer Arctic Sea Ice Decline

Climate Change—Lecture 2
The Economics and Impacts of Climate Change
Major Sources
• The economics of climate change, AREC454, Spring 2010, Andreas
Lange, University of Maryland
• Congressional Budget Office (2003), “The Economics of Climate
Change: A Primer” (http://www.cbo.gov/ftpdocs/41xx/doc4171/04-25ClimateChange.pdf)
• http://www.c2es.org/facts-figures/impacts (Center for Climate and
Energy Solutions)
• USDA (2009), “The Effects of Climate Change on U.S. Ecosystems”
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Externality
• The Stern Review on the Economics of Climate
Change
– a 700-page report released for the British government
on October 30, 2006 by economist Nicholas Stern, chair
of the Grantham Research Institute on Climate Change
and the Environment at the London School of
Economics
– the main conclusion is that the benefits of strong, early
action on climate change far outweigh the costs of not
acting
– although not the first economic report on climate
change, it is significant as the largest and most widely
known and discussed report of its kind
• “Climate change is the biggest market failure the
world has ever seen”—GHG emissions are due to
an externality
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The tragedy of the commons
• From a country’s perspective, the stock of GHGs in
the atmosphere is a public bad, and emission
reductions are a public good
• Hence, each country has an incentive to
understate its willingness to pay (willingness to
reduce emissions): if EU reduces emissions, US
still benefits!
• Makes it hard to agree on international emission
reductions (Kyoto Protocol): free-riding behavior
leads to agreement with weak targets; collectively
desirable international cooperation is difficult
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If abatement pays off why would we not abate?
• Global cost-benefit analysis—Stern-Report
(2006):
– cost of inaction: 5-20 % of global GDP/year
– cost of action: 1% of global GDP/year
• But, self-interest impedes cooperation
(prisoner’s dilemma)!
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Non-cooperation is individually rational!
• Countries act in their own interest (noncooperative):
– omission of benefit spillovers to other countries
– too little abatement as compared to cooperative solution
(*)
• Collectively rational behavior can not be enforced:
– Absence of supranational authority
– Lack of credible sanctions
– Enhancing cooperation is challenging (side payments……)
To achieve efficiency in greenhouse gas mitigations, policy
recommendations unanimously point to equalization of marginal mitigation
costs across regions with side payments (unilateral transfers) if necessary.
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MC: marginal cost of abatement
MB: marginal benefit of abatement
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Optimal provision of public good
• Aggregate marginal willingness-to-pay should equal
marginal costs of providing the public good
• Or, sum of marginal benefits must be equal to
marginal cost (with private good: individual marginal
benefit must be equal to marginal cost)
• This is Samuelson-condition (authored by Paul
Samuelson, in the theory of public goods in
economics, is a condition for the efficient provision
of public goods)
Paul Samuelson (1915 –2009): was an
American economist, and the first
American to win the Nobel Memorial
Prize in Economic Sciences.
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Potential climate change impacts
• Humanity’s greenhouse gas emissions are expected to lead to
climatic changes in the 21st century and beyond. These changes
will potentially have wide-ranging effects on the natural
environment as well as on human societies and economies.
Scientists have made estimates of the potential direct impacts on
various socio-economic sectors, but in reality the full
consequences would be more complicated because impacts on
one sector can also affect other sectors indirectly. To assess
potential impacts, it is necessary to estimate the extent and
magnitude of climate change, especially at the national and local
levels. Although much progress has been made in understanding
the climate system and climate change, projections of climate
change and its impacts still contain many uncertainties,
particularly at the regional and local levels.
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The following 8 slides depict observed impacts
from the enhanced greenhouse effect
One of the impacts of
climate change is an
increase in sea level.
This figure shows the
results of satellite
measurements of the
change in average
global sea level over
time. Sea level rise is
caused by the
expansion of water as
it warms up and by
melting land ice from
glaciers and ice caps.
1. Mean Sea Level Rise
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This figure compares
the average extent of
the summer arctic sea
ice since 1979 with
the extent of the sea
ice in summer 2010.
Since 1979, the
minimum size of the
ice cap during the
summer has
decreased in response
to increased air and
ocean temperatures.
2. Summer Arctic Sea Ice Decline
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This figure
demonstrates
the trend in
arctic sea ice
extent, as
measured in
September—
the annual
summer
minimum for
sea ice
extent—for
each
reporting
year.
3. Late Summer Arctic Sea Ice Decline
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The top figure shows
dryness trend as
measured by the Palmer
Drought Severity Index
(PDSI) from 1900 to 2002
for different regions of
the world. For most
areas, drier (red and
yellow) conditions are
now significantly more
common than wetter
(blue and green)
conditions. The bottom
figure shows the trend
over time of increasing
drought, indicating that
for much of the world,
droughts are more
common.
4. Drought
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Increasing
temperatures cause a
corresponding increase
in extreme high
temperatures and heat
waves. Over the past
decade, record high
temperatures now
occur about twice as
often as record lows. In
the 1950s this ratio was
about one-to-one.
5. Extreme Temperature
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This figure shows
extremes in
summer minimum
temperatures for
the U.S. since 1910.
In general,
nighttime
temperatures are
warming faster due
to global warming
than daytime
temperatures. In
recent years, warm
extremes have
vastly outnumbered
cold extremes.
6. Summer Minimum Temperature
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Increased moisture in the
atmosphere as a result of
warming temperatures
increases the risk of
extreme precipitation
events. In the United
States, the frequency of
heavy downpours has
increased by almost 20
percent on average. This
figure shows changes in
the number of days with
heavy precipitation since
1958 on a regional basis.
7. Extreme Precipitation
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The top figure shows
the size of U.S.
wildfires over a 25year period from 1983
to 2008. Wildfire
season is now longer
on average and
increases in wildfire
frequency have been
greatest in midelevation, Northern
Rockies forests where
land use histories have
little effect on fire
risks. (Westerling,
2006)
8. Wildfires
The Northern Rockies region includes western portions of Montana and Colorado,
northern and central Idaho, and eastern Washington and Oregon.
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The Effects of Climate Change on U.S.
Ecosystems
• During the 20th century, global average surface
temperature increased by about 0.6°C and global sea
level increased about 15 to 20 cm. Global precipitation
over land increased about 2% during this same period
• During the 20th century, the United States warmed and
became wetter overall, with changes varying by region.
Parts of the South have cooled, while northern regions
have warmed—Alaskan temperatures, for example, have
increased 2 to 4°C , which is more than four times the
global average. Much of the eastern and southern United
States now receives more precipitation than 100 years
ago, while other areas, especially in the Southwest,
receive less.
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Agriculture: U.S. crops and livestock were
valued at about $200 billion in 2002
• Higher temperatures will negatively affect livestock.
Warmer winters will reduce mortality, but this will be
more than offset by greater mortality in hotter
summers. Hotter temperatures will also result in
reduced productivity of livestock and dairy animals. 19
• Except in the case of rice and beans, the benefits of
CO2 rise over the next 20 years largely offset the
negative effects of temperature for wheat and other
fine grains, soybeans, etc. However, because corn,
sorghum, cane sugar, etc. have little response to
rising CO2 concentrations, yields will decrease as
temperatures rise.
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• Disease pressure on crops and domestic
animals will likely increase with earlier springs
and warmer winters, through proliferation and
higher survival rates of pathogens and
parasites. Regional variation in warming and
changes in rainfall will also affect spatial and
temporal distribution of disease.
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Land resources
• The size and number of forest fires, insect
outbreaks, and tree mortality in the interior
West, the Southwest, and Alaska have very
likely increased because of changing climate,
and will continue to do so.
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Water resources
• There is a trend toward reduced mountain
snowpack and earlier spring snowmelt runoff
peaks across much of the western United States.
This trend is very likely attributable at least in
part to long-term warming. Where earlier
snowmelt peaks and reduced summer and fall
low flows have already been detected, continuing
shifts in this direction are very likely and may
have substantial impacts on the performance of
reservoir systems.
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Biodiversity
• Subtropical and tropical corals in shallow
waters have already suffered major bleaching
events that are clearly driven by increases in
sea surface temperature. Increases in ocean
acidity, which are a direct consequence of
increases in atmospheric carbon dioxide, are
calculated to have the potential for serious
negative consequences for corals.
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The problem of risk and uncertainty
• Risk vs. uncertainty
– risk: we somehow understand the probabilities (e.g., hurricanes in the
Gulf)
– Uncertainty: we don’t really even understand how likely or unlikely things
are (e.g., shut down of Gulf Stream). Most climate consequences.
• Scientific and economic uncertainty complicates decisions on climate policy
– Abatement costs (today and in future periods)
– Sensitivity of the climate system
– Assessment of costs/damages/benefits of a changing climate
– Future technology options
– Population changes; preferences of future generations
– Economic growth
• Problem of irreversibilities
– Today’s emissions stay in the atmosphere (depending on their lifetime)
– Investments to reduce emissions will be impossible to recoup if warming
is less damaging
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The problem of risk and uncertainty (con’t)
The Unknown
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.
Secretary of Defense
from 2001 to 2006
under President
George W. Bush.
D. H. Rumsfeld—Feb. 12, 2002, Department of Defense news briefing
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