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Economics of Global Warming 1 With growth in fossil fuel intensive energy, an increase in population and high rates of technological innovation; it is predicted that CO2 concentration will reach 675ppm. A stagnation of CO2 concentration at the year 2000 is unlikely given these factors. This has a 50% likelihood of causing 4oC global surface warming but as low as 1.5oC would be possible if the contributing factors are in favorable proportions, which is not very likely. From this, a sea level rise of 0.2m and 0.6m is predicted by 2100 though up to 2m rise is not ruled out. Although the sea level has risen by between 4m and 5m over the last couple of centuries, higher rates may be expected in the 21st century. Accelerated annual flow of emissions is in many instances not factored in climate change models. This acceleration is brought about by fast growing economies investing in high carbon infrastructure, increased demand for energy where many consumers resort to high carbon emission energy sources. Increased demand for transport which heavily relies on fossil fuels also contributes to GHG emissions which are not easy to model. These factors do not follow a given pattern and are therefore hard to model and therefore not included in models. 2 Investment in water storage system might be a good way to adapt to climate change. This is because some areas that are currently lush and well watered are predicted to become dryer while dryer regions might become green. This is however not certain because El Niño effect might affect some of the areas predicted to become dryer while some of the areas predicted to become green may experience droughts. Extensive flooding is also likely to contaminate and disrupt water supply sytems and a clean water storage will come in handy. Alternate wet and dry seasons also call for water harvesting during the wet season to be used in the dry seasons which might be very long due to the erratic nature of the climate and the projected changes. 3 An increase of global surface temperatures of 4oC relative to preindustrial period will affect the following i. ii. Coral reefs are delicate ecosystems that are very sensitive to temperature changes and will be irreversibly damaged by a temperature rise of as low as 1oC. A further temperature rise is likely to destroy up to 50% of the species that comprise coral reef ecosystem. At 4oC, most of the coral reef ecosystems are bound to change their form completely. Between 20% and 50% of the worlds animal species are threatened with extinction if the global surface temperatures increase by 3oC. 20-60% mammal species, 30-40% bird iii. iv. v. species and 15-70% insect species are threatened with extinction, especially those that inhabit colder regions. Infectious diseases are projected to increase among species from these colder regions. A rise of up to 2m of the sea level is predicted threatening to submerge some parts of major world cities for example London, Shanghai and New York. Vast areas will be covered in sea water destroying plant and animal species that formerly occupied these coastal wetlands. Fresh water species in coastal fresh water bodies will be destroyed by the contamination of their habitats and the ecosystems will change completely. Global food production is projected to fall by upto a third in Africa. Althoug some areas that are currently unproductive will become productive, there will be a net decrease in food production due to drying up of productive areas. Tropical rain forests will be affected by drought and increased rate of forest fires. Scientists predict that a 1oC global surface temperature rise will destroy 10% of all species. The figure is projected to reach 50% at4oC. Some species such as polar bears and the Northern Sportiff Lemur would certainly be extinct at these temperatures unless they are kept in nature preserves. Infectious diseases would also affect species that have not experienced them in the past such as whales, which would contribute to their extinnction. The figures are based on carefully selected sample species and would apply with significant accuracy to the whole range of species. Given these facts scientistsβ confidence is above 50% in their predictions. If sea level rises by 10m, a significant percentage of the worlds land mass would be submerged. Boston and New York would be submerged as well as many other cities in the world. 10% of the worldβs population live in low elevation zones, that is less than 10m above sea level therefore about 700million people would have to move. With 75% of Bangladesh total land area being less than 10m above sea level, it is estimated that about 112.5million people will have to move in Bangladesh E In addition to sea level rise, coastal areas will also experience severe storms with destructive effects including Flooding Loss of lives Destruction to property such as buildings Low development of such areas due to fear of destructive effects of storms Increased cost of trading in such areas due to the risks involved F Wetlands should be conserved because they are excellent carbon sinks and They prevent flooding by holding excess water They provide water quality protection by filtering pollutants, sediments and microorganisms They are habitats for different plant and animal species, forming important ecosystems They form habitats for threatened species thus they help in conserving them They are used as research grounds, providing important information to scientists Some wetlands have cultural importance They add to the aesthetic value of the land They are productive ecosystems that trap and store energy from the surroundings g Ecosystems are expected to migrate northwards in response to global warming. This will not necessarily prevent their destruction since some of the areas where they are migrating cannot support them. Human activities and the effects of climate change has destabilized some of these areas rendering them incapable of supporting these migrating ecosystems. They might also encounter previously existing ecosystems which would lead to a conflict and eventually destruction of the migrating ecosystem. Human beings can help the migration by creating sanctuaries in the areas where the ecosystems are migrating or basically a conducive environment for the ecosystem. This can take the form of limited human activities and elimination of species that might threaten the ecosystem both from within it and from outside the ecosystem but occupying the same location. h The extinction of the Golden Toad has been blamed on several factors including increased UV-B radiation and its habitats restricted range. However, the effects of the dry season that followed the 1986-1987 El Nino, which was brought about by global warming encouraged the spread of Chytrid Fungus which is suspected to have led to the extinction. Global warming causes clouds to form high above the forests in which the Harlequin frogs used to inhabit, therefore they didnβt bring enough moisture. The forests also shrunk due to prolonged dry season causing overcrowding in the remaining area which led to spread of disease and fungi species which wiped out most of the frogs. I Due to global warming, the volume of water flowing in the amazon basin is shrinking. The forest is also shrinking and thus its effect as a carbon sink, with the effect that global warming escalates. Reduced flow in rivers means that the hydroelectric power stations depending on them operate at lower output capacities while operating costs remain much the same. This cuts back on their profits and makes energy more expensive since the extra cost per unit power generated has to be covered by the consumer. J There are about 50million environmental refugees which is double the figure in the mid 1990s. the environmental refugees being created in South Asia; mainly Bangladesh, the Sahel region and the Horn of Africa. Wars may arise in these areas since the areas where these refugees migrate to are usually densely populated or areas where resources are scarce. This may lead for conflict between natives and migrants over resources, in some instances degrading to war. K Crop and livestock yields are predicted to increase for moderate warming , with winners and losers. Places near the equator are projected to become dryer thus there will be reduced crop and livestock yields. Africa is projected to be the biggest loser. High latitude areas are projected to become more productive with warmer temperatures, increased moisture and carbon fertilization. For warming greater than 3oC, a net decrease in for food production is projected. African yields my drop by a third while the yield for high altitude areas may fall by a smaller proportion. However, El Nino effect may bring about changes other than those that are projected, with some areas that were predicted to become dry receiving El Nino rains. In the last two decades, forest fires have destroyed approximately 25 million acres of forest compared to the less than 1.5 millio acres burnt in the period 1970-1990. The arctic is warming much faster compared to the rest of the world due to polar amplification effect, thought to be brought about by positive feedback amanating from snow and ice retreats. Observation and models indicate that the poles could be warming twice or more than twice as fast as the rest of the world. 2 Electricity footprint. Date Jan-Feb March-April May-June July-August Sep-Oct kWh/day 296 33.05 18.1 9.05 8.45 Nov-Dec 11.15 A Average electricity usage per day; ππ£πππππ π’π πππ πππ πππ¦ πππ π¦πππ = = π π’π ππ π’π πππ πππππ‘ππ ππ’ππππ ππ πππ‘ππ 29.6 + 33.05 + 18.1 + 9.05 + 8.45 + 11.15 ππβ/πππ¦ 6 ππ£πππππ πππππ‘πππππ‘π¦ π’π πππ πππ πππ¦ = 18.23ππβ/πππ¦ π¦πππππ¦ π‘ππ‘ππ π’π πππ = (ππ£πππππ π’π πππ πππ πππ¦) β (ππ. ππ πππ¦π ππ π π¦πππ) = 18.23ππβ β 365.25 πππ¦π πππ¦ = 6658.51ππβ Assuming that the person get their electricity from Nova Scotia Power with GHG intensity of 0.850kg/kWh, the persons GHG emissions/year, Ei is given by; πΈπ = (ππππ π πππ πππ ππβ) β (π¦πππππ¦ π‘ππ‘ππ π’π πππ) = 0.850ππ/ππβ β 6658.51ππβ/π¦πππ πΈπ = 5659.73ππ/π¦πππ Total GHG electricity externality for under 2009 marginal Damage estimates are MD=$50/tonne; 1tonne=1000kg ππ₯π‘πππππππ‘π¦ = ππ· β (π‘ππ‘ππ ππππ π πππ πππ π¦πππ) = 5659.73 β $50 1000 = $282.99/π¦πππ MD=$100/tonne; ππ₯π‘πππππππ‘π¦ = 5659.73 β $100 1000 = $565.97/π¦πππ MD=$200/tonne; ππ₯π‘πππππππ‘π¦ = 5659.73 β $200 1000 = $1131.95/π¦πππ MD=$400/tonne; ππ₯π‘πππππππ‘π¦ = 5659.73 β $400 1000 = $2263.89/π¦πππ Since the marginal damage is constant,the value of carbon tax will follow it, that is ππππππ π‘ππ₯ = ππππππππ ππππππ Given the marginal damage estimates, the person pays a carbon tax of; $50/tonne =$282.99/year for MD=$50/tonne $100/tonne =$565.97/year for MD=$100/tonne $200/tonne =$1131.95/year for MD=$200/tonne $400/tonne=$2263.89/year for MD=$400/tonne D This tax is likely to have a big impact on behavior of electricity users. Low income earners are not vary wasteful on energy but with increased cost they will tend to avoid unnecessary consumption of electrical energy in their houses. They will tend to be keen on how the energy is spent to avoid any practice that is wasteful, but the reduction in consumption will not reduce by a large margin. They may also opt to do somethings manually instead of using appliances to cut on th bills.High income earners tend to be less concerned about energy consumption. Such a tax would weigh on them such that they would audit how energy is consumed, eventually eliminating energy wastages which might have initially been a significant fraction of the total consumption. The wastages may be in form of light bulbs being left on unnecessarily, and appliances running without being used. E Most low income earners make sure that every cent earned is accounted for. They will therefore like to see the savings in income tax as well as rebates spent on a progressive item rather than pay bills while they can manage how they consume energy and save on the bills. Most of them will therefore go ahead with measures to limit their consumption. On the other hand, high income earners will tend to maintain the former standard and will therefore maintain their power consumption behaviors. G If the person lives in Quebec where the GHG intensity of electricity is 0.002kg/kWh, and the carbon price is $200/tonne, they will pay a carbon tax of ππππππ π‘ππ₯ = (π‘ππ‘ππ πππππ‘ππππ‘π¦ π’π πππ) β (πΊπ»πΊ πππ‘πππ ππ‘π¦) β (πππππ ππ ππππππ) = 6658.51ππβ β 0.002ππ $200 β ππβ 1000ππ ππππππ π‘ππ₯ = $266.34 Hydroelectric power is a widely used low GHG intensity source. It is however a risky strategy to to produce low GHG intensity electricity given the effects of global warming on it. Warmer climates are predicted to cause melting of glaciers, even wiping out the smaller ones. This will greatly reduce the capacity of rivers that provid the hydropower to produce electricity. Most of the hydroelectric power plants will therefore be forced to operate at low and inefficient capacities, with sum shutting down altogether. With erratic weather patterns, the dams might sometimes overflow while at other times the water level falls below capacities the plant is designed to be optimum. It is therefore risky to invest in hydroelectric plants as a low GHG intensity electricity source. 3 MACNSP(ENSP)=875-90ENSP To comply with the Standards; MACNSP(ENSP)=875-90*7.5 =200 $/tonne Standard 200 MD A x TAX TAC 90 Graph 1 Assuming MD=$50/tonne It can be deduced using trigonometric equations that xA=84.86Mt Total abatement cost is therefore given by 1 ππ΄πΆ = (7.5 β 5.625)ππ‘/π¦πππ β $50/π‘ππππ 2 ππ΄πΆ = $46.88πππππππ/π¦πππ Total private cost of compliance; TCCprivate=Total Tax+TAC E Mt/year = $50 5.625ππ‘ $46.88πππππππ β + π‘ππππ π¦πππ π¦πππ $328.13πππππππ/π¦πππ After NPS adopts renewable energy $/tonne 200 MD 50 45 5 7.5 Graph 2 For the new MAC E Mt/year 1 (7.5 β $45/π‘ππππ)ππ‘ ππ΄πΆ = 2 π¦πππ ππ΄πΆ = $168.75πππππππ/π¦πππ ππΆπΆ = πππ‘ππ πππ₯ + ππ΄πΆ ππΆπΆ = $0 + $168.75πππππππ/π¦πππ π¦πππ ππΆπΆ = $$168.75πππππππ/π¦πππ NSP will save atotal of $328.13πππππππ π¦πππ β $168.75πππππππ π¦πππ = $159.38πππππππ/π¦πππ in TCCprivate