22 November 2008

The Costs of Slowing Climate Change

This is from the Food Climate Research Network (via DG):

The International Energy Agency has published its latest Outlook report setting out world energy trends and their implications to 2030.

Under its Reference Scenario, which assumes no new government policies, world primary energy demand is projected to grow by 1.6% per year on average between 2006 and 2030 – an increase of 45%. This is slower than projected last year, mainly due to the impact of the economic slowdown, prospects for higher energy prices and some new policy initiatives. Demand for oil rises from 85 million barrels per day now to 106 mb/d in 2030 – 10 mb/d less than projected last year. Demand for coal rises more than any other fuel in absolute terms, accounting for over a third of the increase in energy use. Modern renewables grow most rapidly, overtaking gas to become the second-largest source of electricity soon after 2010. China and India account for over half of incremental energy demand to 2030 while the Middle East emerges as a major new demand centre. The share of the world's energy consumed in cities grows from two-thirds to almost three-quarters in 2030. Almost all of the increase in fossil-energy production occurs in non-OECD countries. These trends call for energy-supply investment of $26.3 trillion to 2030, or over $1 trillion/year. Yet the credit squeeze could delay spending, potentially setting up a supply-crunch that could choke economic recovery. Under the reference scenario, greenhouse-gas emissions would put the world on track for an eventual global temperature increase of up to 6°C.

WEO-2008 also analyses policy options for tackling climate change after 2012, when a new global agreement – to be negotiated at the UN Conference of the Parties in Copenhagen next year – is due to take effect. This analysis assumes a hybrid policy approach, comprising a combination of cap-and-trade systems, sectoral agreements and national measures. On current trends, energy-related CO2 emissions are set to increase by 45% between 2006 and 2030, reaching 41 Gt. Three-quarters of the increase arises in China, India and the Middle East, and 97% in non-OECD countries as a whole.

Stabilising greenhouse gas concentration at 550 ppm of CO2-equivalent, which would limit the temperature increase to about 3°C, would require emissions to rise to no more than 33 Gt in 2030 and to fall in the longer term. The share of low-carbon energy – hydropower, nuclear, biomass, other renewables and fossil-fuel power plants equipped with carbon capture and storage (CCS) – in the world primary energy mix would need to expand from 19% in 2006 to 26% in 2030. This would call for $4.1 trillion more investment in energy-related infrastructure and equipment than in the Reference Scenario – equal to 0.2% of annual world GDP. Most of the increase is on the demand side, with $17 per person per year spent worldwide on more efficient cars, appliances and buildings. On the other hand, improved energy efficiency would deliver fuel-cost savings of over $7 trillion.

The scale of the challenge in limiting greenhouse gas concentration to 450 ppm of CO2-eq, which would involve a temperature rise of about 2°C, is much greater. World energy-related CO2 emissions would need to drop sharply from 2020 onwards, reaching less than 26 Gt in 2030. "We would need concerted action from all major emitters. Our analysis shows that OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero", Mr. Tanaka (Director of the IEA) warned. Achieving such an outcome would require even faster growth in the use of low-carbon energy – to account for 36% of global primary energy mix by 2030. In this case, global energy investment needs are $9.3 trillion (0.6% of annual world GDP) higher; fuel savings total $5.8 trillion.

[My] Bottom Line: Business as usual costs nothing extra but leads to a 6°C increase in temperatures (kinda apocalyptic; watch this). Spend $4.1 trillion (but save $7 trillion) to limit the increase to 3°C. Spend $9.3 trillion (but save $5.8 trillion) to limit it to 2°C. Although it looks like we can keep temperatures in the range of survivable at a net savings, it's the distribution of costs and benefits that's mucking things up. Unless we get a world dictator, we need some serious cooperation.

4 comments:

  1. Thanks so much for this detailed breakdown. The effects of two degrees - the "safe" amount we're hoping to scrape through on - are still pretty chilling based on that video.

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  2. Joe Romm at Climate Progress, Steve Schneider from Stanford, and James Hansen are in general agreement that a 450 PPM future is catastrophic. (although they vary some in the details) http://tinyurl.com/6yhqmj is Sunday's post with links to the lots of sources.

    Here are a few of the high points of a one degree Celsius temperature increase:
    1.Peat bogs and tundra are already melting across hundreds of thousands of square miles of Siberia, Alaska, and Canada. They release methane which has 20 times the short-term impact of CO2. The quantities that could be released are mind bogglingly vast. 1 degree Celsius increase could put us on an unstoppable runaway climate trajectory.
    2. The Amazon could burn to the ground with 1 degree C increase. This would add immense amounts of CO2, in addition to precipitating a global political crisis. No one knows for certain what temperature would trigger this event but there's general agreement that we're on the verge of massive fires in the basin. There is some evidence it's already begun - we simply haven't connected the thousands of dots on the map. http://news.mongabay.com/2007/1021-amazon.html
    3. Frozen methane deposits deep in the oceans and in the arctic ocean (methane clathrates) seem to be increasingly unstable. Atmospheric methane levels are increasing after years of relative stability. There is little research on these methane clathrates so there is much speculation. It's like a walk in the dark with only a couple flashlights.

    Any economic analysis that does not weight the cost of potential political destabilization from massive loss of water, loss of agricultural productivity, damage from massive storms, and a human refugee crisis is suspect.

    How much does the loss of life support for 100 million or 1 billion people cost, especially if many of them are in mega-cities across the globe?

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  3. Bottom Line: Business as usual costs nothing extra but leads to a 6°C increase

    Isn't that a self-contradictory statement?

    This is symptomatic: If even DZ is stuck in the mindset that only direct short-term costs count, then we're all doomed. BAU is extremely expensive, even to Business - but as always, it's the distribution of costs and benefits that muck things up.

    It's one thing for IEA, which is notorious for ignoring resource constraints or indeed anything other than their nice steady growth curves, to make these kinds of blunders. Disinterested parties ought to recognize that our options for the future are all extremely expensive; basically, there will be no such thing as BAU in the long run.

    Your last line is spot-on, and since a world dictator seems extremely unlikely, I think it means we really ought to be considering how to adapt civilization to the reality of catastrophic climate change. It's going to happen; how do we survive it? In the context of this blog, does economics offer any hope, or does it merely predict our doom?

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  4. @TiA -- I agree with you that BAU has catastrophic costs in terms of the impacts of climate change. What I meant by "costs nothing" is in terms of reductions in current activities. I am sure that you also knew that, so let's not demolish straw man arguments :)

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