Ignoring Climate Change Carries a High Price Tag

Sep 15, 2009

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As Congress debates climate legislation, critics are pounding their fists about costs, arguing that the United States can't afford to take action during a recession and calling the House-passed American Clean Energy and Security Act (ACES) the biggest tax in U.S. history.

Government analyses from the Environmental Protection Agency and Congressional Budget Office have already concluded that the wild claims about costs are exaggerated, with ACES's price over a decade likely to be around $24 billion.

What is eye-popping instead, experts say, are the cost of doing nothing to forestall climate change.

"Every time economists look at this, it becomes clear that the costs of doing nothing are quite high, and that is something that is missing in the domestic debate," says Brenda Ekwurzel, climate scientist with the Union of Concerned Scientists.

"Most people are thinking only about the cost of mitigating climate change without knowing anything about the costs of doing nothing about climate change."

The Economics of Climate Adaptation Working Group, which was created by the Global Environment Facility and includes reinsurer Swiss Re and consulting firm McKinsey & Company, released a report on Monday showing that failing to take action to stop climate change could cost vulnerable nations, such as flood-prone Guyana, up to 19% of their gross domestic product by 2030. Island nations and coastal communities like the low-lying Maldives, already threatened by rising seas, are weighing an even more expensive mass relocation of their people.

Such losses will grow worldwide without swift international action, the World Bank says in its World Development Report 2010, released today. The report finds that flooding, droughts and other climate change disasters will cost African and South Asian countries up to 5 percent of their GDP if temperatures rise more than 2 degrees Celsius from pre-industrial levels.

"Climate change is costly, whatever the policy chosen," the World Bank says, but it warns that "spending less on mitigation will mean spending more on adaptation and accepting greater damages: The cost of action must be compared with the cost of inaction."

Countries that continue to delay action will see their costs increase, the World Bank writes. First, the impacts of climate change will worsen as atmospheric CO2 levels continue to rise. Second, the more affordable mitigation options that could be taken today will become more expensive and even disappear as developing countries build coal-fired power plants and become locked into high-carbon infrastructure.

Secretary of State Hillary Clinton alluded to the danger of that inertia toward a high-carbon economy when she visited China earlier this year. Speaking at a power plant in Beijing about the environment and foreign relations, she said:

"What we hope is you don't make the same mistake we made, because I don't think either Chinese and the world can afford that."

The World Bank report notes that the major economic models forecasting the costs of mitigating climate change estimate that the benefits of stabilizing greenhouse gas emissions exceed the costs at a 2.5 degree Celsius increase, and that all the major economic models "conclude that business as usual (meaning no mitigation efforts whatsoever) would be disastrous." British economist Nicholas Stern's Stern Review on the Economics of Climate Change, for one, estimated the cost of unmitigated climate change would be a permanent annual loss of 5-20 percent of GDP.

"What we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next," Stern wrote.

Climate Costs Hits Home

In the United States, the costs of climate change will add up for many sectors of the economy. An overview of more then 60 studies released last week by the Union of Concerned Scientists detailed the impact of climate change on coastal communities, public health, water resources, agriculture, transportation, energy infrastructure and recreational resources under both a high-emissions and a low-emissions scenario.

The analysis projected that if emissions remain high, Florida could see a 45-inch rise in sea levels, causing residential real estate losses of $60 billion. Additionally, the costs of hurricane damage in Florida could reach $111 billion annually by 2100.

California would see annual losses in agriculture, forestry and fisheries by $4.3 billion a year if emissions remain high, and the state's milk production would also fall 22% by 2100. In the eastern and central United States, the average value of rain-fed farmland would fall 69% by the end of the century.

Ekwurzel points out that climate change can have many unexpected effects, such as on airplane runways. "When you have warmer air temperatures, it is harder for [airplanes] to take off. So in the subtropics or southern parts of the United States, you will likely have to increase the runway length, because you will need to have a longer runway for the planes to get off the ground." Climate change can cause other infrastructure problems, such as deformities in railroad tracks and stress on bridge joints due to expansion.

Tourism and recreation would take major hits, as well. The UCS report says climate change could close ski slopes in the Northeast, eliminating up to $810 million in annual skiing revenues, and the West, evaporating California's ski season and its $500 million in annual revenues. Even the Northeast's maple syrup industry would be affected, losing between $5 and $12 million annually.

However, these studies all agree that it is possible to prevent such economically devastating impacts.

The Economics of Climate Adaptation Working Group's report concluded that currently existing cost-effective adaptation measures could prevent between 40% and 68% of expected economic loss.

The challenge, the World Bank says, is getting significant actions started now, before high-carbon development in developing countries gains too much inertia and before feedback loops in the world's ecosystems, such as melting permafrost releasing globe-warming methane and the loss of sea ice allowing oceans to absorb more solar heat, become unstoppable.

"The current financial crisis cannot be an excuse to put climate on the back burner," the World Bank says. "For all the harm they cause, financial crises come and go. Not so with the growing threat imposed by a changing climate."

The UN Intergovernmental Panel on Climate Change suggested in 2007 that the average global temperature increase could be stabilized at 2 to 3 degrees Celsius — between 450 and 550 ppm atmospheric CO2 — at a cost of about 3 percent of the world's cumulative growth of domestic product by 2030, or about 0.12 percent annually.

A growing number of scientists now say even 450 ppm is too high to prevent significant climate change; atmospheric CO2 levels are nearing 390 ppm already and the impacts are appearing in droughts that have caused food crises from India to Kenya to Mexico, and melting glaciers that threaten the water supplies of millions of people in Asia and South America, among other agricultural damage.

Helping the Developing World

The costs for helping developing nations mitigate climate change successfully — and adapt where necessary — will be a top issue as world leaders meet later this month in Pittsburgh for the G20 summit and at the United Nations to discuss climate change in the run-up to the December meeting in Copenhagen, where a follow-up to the 1997 Kyoto Protocol will be negotiated. Because of the relative vulnerability and lack of infrastructure in developing countries, climate change is poised to especially harm poorer nations.

The World Bank estimates a need for $75 billion annually for adaptation and $500 billion annually for developing low-carbon technology, such as renewable energy.

The United Nations Framework Convention on Climate Change estimated costs between $49 billion and $171 billion per year by 2030. However, a recent report by
the International Institute for Environment and Development and Grantham Institute for Climate Change at Imperial College London concluded that so many potential impacts were left out of the calculation that actual costs would likely be two to three times higher than the UN estimate, throwing into question the numbers to be used at Copenhagen.

African Union leaders said in recent weeks that they intend to ask for $67 billion a year, and Ethiopia has said that African countries will not ratify a bill that does to provide enough money from developed nations to help developing countries fight climate change.

"We will use our numbers to delegitimize any agreement that is not consistent with our minimal position," said Ethiopian Prime Minister Meles Zalawi.

 

See also:

Study: Global Climate Adaptation Costs Will Be Far Higher than UN Estimates

Bonn Talks Produce Ideas for Financing Climate Adaptation but No Agreements

Public Financing or Offsets? How Best to Fund Clean Tech for Developing Nations

Beyond Bonn: America Must Get Its Own House in Order, Say Green Groups

 

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