Download Economics of Global Warming 1 With growth in fossil fuel intensive

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 scientists’
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
world’s 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 didn’t
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;
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑢𝑠𝑎𝑔𝑒 𝑝𝑒𝑟 𝑑𝑎𝑦 𝑓𝑜𝑟 𝑦𝑒𝑎𝑟 =
=
𝑠𝑢𝑚 𝑜𝑓 𝑢𝑠𝑎𝑔𝑒 𝑎𝑙𝑑𝑎𝑡𝑒𝑠
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑡𝑒𝑠
29.6 + 33.05 + 18.1 + 9.05 + 8.45 + 11.15
𝑘𝑊ℎ/𝑑𝑎𝑦
6
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 𝑢𝑠𝑎𝑔𝑒 𝑝𝑒𝑟 𝑑𝑎𝑦 = 18.23𝑘𝑊ℎ/𝑑𝑎𝑦
𝑦𝑒𝑎𝑟𝑙𝑦 𝑡𝑜𝑡𝑎𝑙 𝑢𝑠𝑎𝑔𝑒 = (𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑢𝑠𝑎𝑔𝑒 𝑝𝑒𝑟 𝑑𝑎𝑦) ∗ (𝑛𝑜. 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟)
=
18.23𝑘𝑊ℎ
∗ 365.25 𝑑𝑎𝑦𝑠
𝑑𝑎𝑦
= 6658.51𝑘𝑊ℎ
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;
𝐸𝑖 = (𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑝𝑒𝑟 𝑘𝑊ℎ) ∗ (𝑦𝑒𝑎𝑟𝑙𝑦 𝑡𝑜𝑡𝑎𝑙 𝑢𝑠𝑎𝑔𝑒)
= 0.850𝑘𝑔/𝑘𝑊ℎ ∗ 6658.51𝑘𝑊ℎ/𝑦𝑒𝑎𝑟
𝐸𝑖 = 5659.73𝑘𝑔/𝑦𝑒𝑎𝑟
Total GHG electricity externality for under 2009 marginal Damage estimates are
MD=$50/tonne;
1tonne=1000kg
𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑖𝑡𝑦 = 𝑀𝐷 ∗ (𝑡𝑜𝑡𝑎𝑙 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟)
=
5659.73
∗ $50
1000
= $282.99/𝑦𝑒𝑎𝑟
MD=$100/tonne;
𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑖𝑡𝑦 =
5659.73
∗ $100
1000
= $565.97/𝑦𝑒𝑎𝑟
MD=$200/tonne;
𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑖𝑡𝑦 =
5659.73
∗ $200
1000
= $1131.95/𝑦𝑒𝑎𝑟
MD=$400/tonne;
𝑒𝑥𝑡𝑒𝑟𝑛𝑎𝑙𝑖𝑡𝑦 =
5659.73
∗ $400
1000
= $2263.89/𝑦𝑒𝑎𝑟
Since the marginal damage is constant,the value of carbon tax will follow it, that is
𝑐𝑎𝑟𝑏𝑜𝑛 𝑡𝑎𝑥 = 𝑚𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑑𝑎𝑚𝑎𝑔𝑒
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
𝑐𝑎𝑟𝑏𝑜𝑛 𝑡𝑎𝑥 = (𝑡𝑜𝑡𝑎𝑙 𝑒𝑙𝑒𝑐𝑡𝑟𝑐𝑖𝑡𝑦 𝑢𝑠𝑎𝑔𝑒) ∗ (𝐺𝐻𝐺 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦) ∗ (𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑐𝑎𝑟𝑏𝑜𝑛)
= 6658.51𝑘𝑊ℎ ∗
0.002𝑘𝑔
$200
∗
𝑘𝑊ℎ
1000𝑘𝑔
𝑐𝑎𝑟𝑏𝑜𝑛 𝑡𝑎𝑥 = $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
𝑇𝐴𝐶 = (7.5 − 5.625)𝑀𝑡/𝑦𝑒𝑎𝑟 ∗ $50/𝑡𝑜𝑛𝑛𝑒
2
𝑇𝐴𝐶 = $46.88𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟
Total private cost of compliance;
TCCprivate=Total Tax+TAC
E
Mt/year
=
$50 5.625𝑀𝑡 $46.88𝑚𝑖𝑙𝑙𝑖𝑜𝑛
∗
+
𝑡𝑜𝑛𝑛𝑒
𝑦𝑒𝑎𝑟
𝑦𝑒𝑎𝑟
$328.13𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟
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 ∗ $45/𝑡𝑜𝑛𝑛𝑒)𝑀𝑡
𝑇𝐴𝐶 = 2
𝑦𝑒𝑎𝑟
𝑇𝐴𝐶 = $168.75𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟
𝑇𝐶𝐶 = 𝑇𝑜𝑡𝑎𝑙 𝑇𝑎𝑥 + 𝑇𝐴𝐶
𝑇𝐶𝐶 =
$0
+ $168.75𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟
𝑦𝑒𝑎𝑟
𝑇𝐶𝐶 = $$168.75𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟
NSP will save atotal of
$328.13𝑚𝑖𝑙𝑙𝑖𝑜𝑛
𝑦𝑒𝑎𝑟
−
$168.75𝑚𝑖𝑙𝑙𝑖𝑜𝑛
𝑦𝑒𝑎𝑟
= $159.38𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑦𝑒𝑎𝑟 in TCCprivate