Cost-benefit analysis is a systematic approach to estimating the strength of various alternative options, determining the best approach, and therefore justifying certain activities in various fields. It is often required by law to justify new government regulations. Climate change is no exception. Often with climate change, the costs calculated are those of the present, while the benefits are primarily seen as belonging to the future. As I have mentioned before (February 18, 2013) economists tend to discount the future. In the context of climate change, this discounting involves assumptions about future availability of better technologies as well as resources for mitigation and adaptation. To use a personal example that I often use in class – in my lifetime the global population has risen from about 2 billion to 7 billion, and the GDP/Person has risen from about $2,000 to about $8,000. The total global wealth has increased by factor close to 15. At the same rate of increase, toward the end of the century an average global citizen will be as rich as an average American is today. The natural inclination is to do nothing now and leave the work to our future rich descendants (our children and grandchildren).
What about the cost? Here is what the IPCC wrote in its recent Working Group 2 Summary for Policy Makers report:
Global economic impacts from climate change are difficult to estimate. Economic impact estimates completed over the past 20 years vary in their coverage of subsets of economic sectors and depend on a large number of assumptions, many of which are disputable, and many estimates do not account for catastrophic changes, tipping points, and many other factors. With these recognized limitations, the incomplete estimates of global annual economic losses for additional temperature increases of ~2°C are between 0.2 and 2.0% of income (±1 standard deviation around the mean) (medium evidence, medium agreement). Losses are more likely than not to be greater, rather than smaller, than this range (limited evidence, high agreement). Additionally, there are large differences between and within countries. Losses accelerate with greater warming (limited evidence, high agreement), but few quantitative estimates have been completed for additional warming around 3°C or above. Estimates of the incremental economic impact of emitting carbon dioxide lie between a few dollars and several hundreds of dollars per tonne of carbon (robust evidence, medium agreement). Estimates vary strongly with the assumed damage function and discount rate.
The topic is a subject of active research. A summary of a European Union project on the topics is given below:
ClimateCost (the Full Costs of Climate Change) is a major research project on the economics of climate change, funded from the European Community’s Seventh Framework Programme.
The objective of the project is to advance knowledge in three areas:
- Long-term targets and mitigation policies.
- Costs of inaction (the economic effects of climate change).
- Costs and benefits of adaptation.
The projects is addressing these objectives through seven tasks:
- Identify and develop consistent scenarios for climate change and socio-economic development, including mitigation scenarios.
- Quantify in physical terms, and value as economic costs, the effects of future climate change (the ‘costs of inaction’) under different scenarios for the EU and other major negotiator countries (China, India). This analysis will be at a disaggregated level, undertaken, where possible using spatial analysis (Geographic Information Systems, GIS). The analysis will include market and non-market sectors (coasts, health, ecosystems, energy, water and infrastructure). The analysis will also quantify and value the costs and ‘benefit’ of adaptation.
- Assess the potential physical effects and economic costs of major catastrophic events and major socially contingent effects.
- Update the mitigation costs of greenhouse gas (GHG) emissions reductions, consistent with medium- and long-term reduction targets/ stabilisation goals for the mitigation scenarios, including (induced) technological change, non-CO2 GHG and sinks, and recent abatement technologies.
- Quantify the ancillary air-quality co-benefits (in physical and economic terms) of mitigation, using a spatially detailed disaggregated approach to quantify benefits in Europe, China and India.
- Develop and apply a number of General Circulation Models (GCMs) and Integrated Assessment Models (IAMs) to integrate the analyses.
- Bring the information together to provide policy relevant output, including undertaking analysis of policy scenarios.
What does all of this have to do with geoengineering?
Under the term “geoengineering,” one can include suggestions for attempts to globally counter the damage that we are making to the chemistry of the atmosphere by trying to restore the conditions through human interventions. In 2012, the IPCC compiled a special report on the topic. Here are two paragraphs that define the issues (IPCC, 2012: Meeting Report of the Intergovernmental Panel on Climate Change Expert Meeting on Geoengineering. IPCC Working Group III Technical Support Unit, Potsdam Institute for Climate Impact Research, Potsdam, Germany, pp. 99.):
The concept of geoengineering can be traced back to the 1960s with a US report calling for research on “possibilities to deliberately bringing about countervailing climatic changes” to that of CO2 (Marchetti, 1977). The term geoengineering itself was originally used in the 1970s by Marchetti (1977) to describe the context of the idea of injecting CO2 into the ocean to reduce the atmospheric burden of this greenhouse gas. Since that time, the term has evolved considerably, coming to encompass a broad, and ill-defined, variety of concepts for intentionally modifying the Earth’s climate at the large scale (Keith, 2000). As a result, discussions of geoengineering in both academic and public contexts have sometimes convoluted characteristics from different techniques in ways that have unhelpfully confused discussions. Nonetheless, since Paul Crutzen’s 2006 editorial essay (Crutzen, 2006), scientific, policy and media attention to geoengineering concepts has grown rapidly. Several assessments have been conducted at the national level (The Royal Society, 2009; GAO, 2011; Rickels et al., 2011).
Terms and Issues:
Geoengineering refers to a broad set of methods and technologies that aim to deliberately alter the climate system in order to alleviate the impacts of climate change. Most, but not all, methods seek to either (a) reduce the amount of absorbed solar energy in the climate system (Solar Radiation Management) or (b) increase net carbon sinks from the atmosphere at a scale sufficiently large to alter climate (Carbon Dioxide Removal). Scale and intent are of central importance. Two key characteristics of geoengineering methods of particular concern are that they use or affect the climate system (e.g., atmosphere, land or ocean) globally or regionally and/or could have substantive unintended effects that cross national boundaries. Geoengineering is different from weather modification and ecological engineering, but the boundary can be fuzzy.
Solar Radiation Management (SRM) refers to the intentional modification of the Earth’s shortwave radiative budget with the aim to reduce climate change according to a given metric (e.g., surface temperature, precipitation, regional impacts, etc). Artificial injection of stratospheric aerosols and cloud brightening are two examples of SRM techniques. Methods to modify some fast-responding elements of the longwave radiative budget (such as cirrus clouds), although not strictly speaking SRM, can be related to SRM. SRM techniques do not fall within the usual definitions of mitigation and adaptation.
Carbon Dioxide Removal (CDR) methods refer to a set of techniques that aim to remove CO2 directly from the atmosphere by either (1) increasing natural sinks for carbon or (2) using chemical engineering to remove the CO2, with the intent of reducing the atmospheric CO2 concentration. CDR methods involve the ocean, land, and technical systems, including such methods as iron fertilization, large-scale afforestation, and direct capture of CO2 from the atmosphere using engineered chemical means. Some CDR methods fall under the category of geoengineering, while this may not be the case for others, with the distinction being based upon the magnitude, scale, and impact of the particular CDR activities. The boundary between CDR and mitigation is not clear and there could be some overlap between the two given current definitions.
Among the earlier efforts in this direction were the attempts to seed barren stretches of the ocean with iron fertilizers. The thinking was that iron was the missing ingredient preventing vegetation from growing there; once we seeded these stretches with the missing ingredient, vegetation would grow and start to sequester carbon dioxide, thus shifting the balance. There were a few experiments that proved that the concept was valid. I told my wife about these efforts and she almost started with divorce proceedings. “How dare you play with God’s creation? (she is not religious) What about unintended consequences (like poisoning the oceans for example)?” She was not convinced even after I mentioning that we are already doing just that continuously by dumping all of the products of our waste into the atmosphere. Under the “Terms and Issues” of the IPCC, ocean fertilization falls under the CDR category. It gets worse; seeding clouds to alter the radiation balance falls under the SRM initiatives and is intended to restore the changes that we force on the system through the atmospheric chemical changes. As I have mentioned before (March 25, 2014) the radiation balance changes not only the energy cycle but also the water cycle. Under these conditions, whenever anybody – globally – got weather that they don’t like, they would immediately blame it on the guys that are doing the cloud seeding… great.
However, in my opinion, there is one very useful way that one can use geoengineering with no fear of unintended consequences. Conceptually, geoengineering is based upon existing technologies. One can price said existing technologies. Therefore, we can take the known atmospheric concentration of greenhouse gasses of a certain year – say 2010, calculate what it would take to chemically restore the atmosphere in future years to that level, and define this number as the cost of climate change at that time. Once the standard and the methodology are decided, the numbers shouldn’t be controversial. This way we will be pricing the cause instead of the uncertain effects. That way, we can directly calculate the cost-benefit analysis for any mitigation efforts that we might choose to adopt.