Reports on climate change, almost all suggesting action rather than inaction, are now being published so frequently that they threaten to overwhelm GallonDaily. We know our readers are interested in the full range of environmental and sustainability issues facing business in Canada so we will deliberately limit our coverage of climate change matters to a maximum of two articles each week. We will try to select those topics which may have the greatest impact on business and on public policy affecting business.
One of the more significant reports this week comes from the U.S. President’s Council of Economic Advisers. Focussing on the economics of climate change and with an extensive bibliography, the report makes clear that costs will be substantially lower if action is taken sooner rather than later. Among the findings:
- if a delay [in action on climate change] causes the mean global temperature increase to stabilize at 3° Celsius above preindustrial levels, instead of 2°, that delay will induce annual additional damages of approximately 0.9 percent of global output. To put this percentage in perspective, 0.9 percent of estimated 2014 U.S. GDP is approximately $150 billion. The next degree increase, from 3° to 4°, would incur greater additional annual costs of approximately 1.2 percent of global output. These costs are not one-time: they are incurred year after year because of the permanent damage caused by additional climate change resulting from the delay.
- the second type of cost of delay is the increased cost of reducing emissions more sharply if, instead, the delayed policy is to achieve the same climate target as the non-delayed policy.
- any short run gains from delay tend to be outweighed by the additional costs arising from the need to adopt a more abrupt and stringent policy later. An analysis of the collective results from research suggests that the cost of hitting a specific climate target increases, on average, by approximately 40 percent for each decade of delay. These costs are higher for more aggressive climate goals: the longer the delay, the more difficult it becomes to hit a climate target. Furthermore, the research also finds that delay substantially decreases the chances that even concerted efforts in the future will hit the most aggressive climate targets.
- it is cost-effective to start with a relatively less stringent policy, then increase stringency over time, and the models typically build in this cost-effective tradeoff. However, most models still find that immediate initiation of a less stringent policy followed by increasing stringency incurs lower costs than delaying policy entirely and then increasing stringency more rapidly.
- delaying action is much costlier for more stringent targets… the median additional cost (global present value) for a 20-year delay is estimated to be $0.7 trillion for 650 ppm CO2e but a substantially greater $4.7 trillion for 550 ppm CO2e. Many of the models in these studies suggest that delay causes a target of 450 ppm CO2e to be much more costly to achieve, or possibly even infeasible.
- delay from 2010 to 2020 to stabilize CO2 concentration levels at 450 ppm by 2100 raises mitigation cost by 50 to 700 percent.
A summary of the report and a link to the full 32 page document can be found at http://www.whitehouse.gov/blog/2014/07/29/new-report-cost-delaying-action-stem-climate-change