Download Stern Review on the Economics of Climate Change

The economics of climate change: the messages to
Africa
Presentation for the CDM DNA Forum
Addis Ababa, 6th October 2007
Hannah Muthoni Ryder
What is the economics of climate change
and how does it depend on the science?
Analytical foundations
Climate change is an externality with a difference:
• Global
• Long-term
• Uncertain
• Potentially large and irreversible
2
Projected impacts of climate change
0°C
Food
Water
Global temperature change (relative to pre-industrial)
1°C
2°C
3°C
4°C
5°C
Falling crop yields in many areas, particularly
developing regions
Falling yields in many
Possible rising yields in
developed regions
some high latitude regions
Small mountain glaciers
disappear – water
supplies threatened in
several areas
Significant decreases in water
availability in many areas, including
Mediterranean and Southern Africa
Sea level rise
threatens major cities
Ecosystems
Extensive Damage
to Coral Reefs
Rising number of species face extinction
Extreme
Rising intensity of storms, forest fires, droughts, flooding and heat waves
Weather
Events
Risk of Abrupt and
Increasing risk of dangerous feedbacks and
Major Irreversible
abrupt, large-scale shifts in the climate system
Changes
Stabilisation and Commitment to Warming
5%
400 ppm CO2e
95%
450 ppm CO2e
550 ppm CO2e
650ppm CO2e
750ppm CO2e
Eventual temperature change (relative to pre-industrial)
0°C
1°C
2°C
3°C
4°C
5°C
4
Mean losses in income per capita from scenarios
of climate change
2000
0
2050
2100
2150
% loss in GDP per capita
-5
2200
-5.3
-7.3
-10
-13.8
-15
-20
Baseline Climate, market impacts + risk of catastrophe
-25
High Climate, market impacts + risk of catastrophe
-30
High Climate, market impacts + risk of catastrophe +
non-market impacts
-35
-40
• Essential to take account of risk and uncertainty
• Models do not provide precise forecasts
• Assumptions on discounting, equity, and risk aversion affect results
Taking urgent action makes good economics delaying is dangerous and costly
100
450ppm CO2e
90
Global Emissions (GtCO2e)
80
500ppm CO2e (falling to
450ppm CO2e in 2150)
70
550ppm CO2e
60
50
Business as Usual
40
50GtCO2e
30
65GtCO2e
20
70GtCO2e
10
0
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
The cost of cutting emissions consistent with a 550ppm CO2e stabilisation
trajectory averages 1% of GDP per year in 2050 – this can be achieved
by deployment of available technologies and those expected to be
commercialised in coming decades
Delaying emissions reductions significantly constrains the opportunities
to achieve lower stabilisation - strong mitigation is fully consistent with
aspirations for growth and development in poor and rich countries
6
Why should Africa be concerned about
climate change?
Impacts will hit Africa early and hard
Africa’s voice is crucial to establishing effective
international action – including on:
– Long-term global goals
– Equitable distribution of effort across the globe
– Incentives – through carbon price mechanisms
– to reduce emissions globally
– Technology Cooperation and transfer
– Planning and policy change – moving beyond
sticks and carrots
7
Transforming carbon finance
• Increasing the size of global carbon markets – with
ambitious global goals – can drive large flows across
countries and promote action in developing countries
• CDM has the potential to provide private sector finance
and leverage, technology transfer, and sustainable
development
• Are limits to what CDM can achieve now – scaling up
and reform involves more programme and policy
orientation.
• Nairobi framework and other initiatives crucial to this
process.
Making the most of international
institutions
• Multi-dimensional role – more than a source of
financing
• Can find early opportunities for pilot projects, for
enabling policy frameworks, etc.
• Can help with risk management instruments for
low carbon energy sources
• Within the Clean Energy and Investment
Framework, African Development Bank focuses
on specific, relevant issues:
– Access to energy
– Adaptation to climate change
– Access to carbon finance
Adaptation priorities
• Adaptation unavoidable –
will put strong pressure on
developing country
budgets and ODA
• Adaptive measures in the
energy sector have a role
to play
• International action has a
key role in supporting
global public goods for
adaptation
– Disaster response
– Crop varieties and technology
– Forecasting climate and weather
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Conclusions
• Unless emissions are curbed, climate change will
bring high costs for human development,
economies and the environment
• The costs of taking action are modest relative to
the costs of inaction
• Decisive and strong action globally is urgent:
delay means greater risks and higher costs
• The options for financing low carbon economies in
Africa are within reach – making the most of cobenefits and opportunities for growth and
sustainable development
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