E3G

Investing in the economics of climate security

By Nick Mabey

Economic analysis of climate mitigation

The IPCC’s comprehensive review of the academic literature found nearly 140 studies which looked at stabilising concentrations between 550-700 ppm (CO2 equivalent).This would result in at least a 3-4°C global temperature rise; up to double the “dangerous level”.

Yet by contrast, only 6 studies looked at keeping concentrations below even 490ppm (CO2 equiv).

This analytical gap is a reflection of the economics literature, not the IPCC process, but it has real consequences for policy and the timetable of emissions reductions.

Stabilisation at 550-700ppm only requires global CO2 emissions to peak by 2020-2060; but stabilisation at 450ppm requires emissions to peak between 2015-2020.

Politically, high stabilisation targets remove any need for serious action in the next 15 years, conveniently over the election horizon. But delaying the peak of emissions also locks us in to another generation of high carbon infrastructure, making the eventual shift to a low carbon economy more difficult and expensive, and hence less likely.

Other risks are also absent from these models. Since oil prices rose in 2002, countries have rapidly moved into coal power and coal-to-liquids technology, increasing the rate of global CO2 emissions growth; a result not reflected in most long term modelling.

The models also seem to overestimate the ability of higher prices to improve efficiency. The experience of climate change policy in Europe is that the impact of even large price signals is quickly eroded, and most consumers and businesses are highly price insensitive.

The IPCC report itself discusses how even a small risk of catastrophic damages should motivate faster and deeper emission cuts. But none of the modelling studies it reviews includes either the risks of catastrophic costs or the co-benefits of climate mitigation action.

The IPCC is therefore forced to conclude that the available model results “do not as yet permit an unambiguous determination of an emissions pathway or stabilization level where benefits exceed costs.” [page 18, paragraph 21].