Global Climate Change

Econ 2277

Prof. Richard L. Sweeney

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Overview of next two weeks

  • Intro
    • science and options
    • challenges
  • Putting a price on CO2
    • IAMs
    • discounting
  • International agreements
    • leakage
    • free riding/ co-operation
  • National / sub-national issues
    • taxes vs subsidies
    • over-lapping instruments

Climate change is happening

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Global combined land and ocean surface temperature anomalies relative to the average from 1986 to 2005. (IPCC 2014)

Climate change is happening

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Annually and globally averaged sea level change relative to the average from 1986 to 2005. (Source: IPCC Synthesis Report 2014)

Trend concurrent with dramatic increase in CO2

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Well known physical relationship

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Source

Humans are causing it


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Things are going to get worse if we don't act

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Things are going to get worse if we don't act

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Current CO2 equiv. concentrations $\approx$450 ppm

Recent IPCC report predicts dire consequences

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NOAA: "a sea level rise of 2 feet would more than triple the frequency of coastal flooding across the Northeast, without any change in storms."

What are we doing about it?

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Emissions path under to 2030 under COP21 Commitments
Source: IEA WEO Special Report 2015

Recent IPCC report concludes drastic action needed

Basic outline of a solution is well known

  • Reduce / revers rate of deforestation

  • Change industrial production processes (example: cement production)

  • Switch as much as we can to electric power

    • heating
    • transportation (!)
  • Decarbonize electricity production

    • shut down coal plants [carbon capture and storage]
    • switch to wind and (mainly) solar
  • Increase energy efficiency of durables (ACs, water heaters, etc)

Good news

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Bad news: Non-hyro renewables less than 5% of global consumption

Challenge #1: Timing and Intermittency

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Challenge #2: Renewables low energy-density

  • Apple recently built a 20MW solar farm in data
  • Takes up 100 acres
  • Typical coal plant 10-20 times more output...

Costs of avoiding 450 ppm is manageable (but not trivial)

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  • IPCC says 450 target can be achieved with a .06 percent reduction in economic growth
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  • Growth compounds though, and this translates into a 5% reduction in total consumption
  • These projections assume optimal timing and implementation/ ie cost effectiveness
  • Do you think market based instruments will be important here?

The main challenges are political, not technical

  • Global climate change ``the ultimate commons problem''
  • Unparalleled challenges along spatial and temporal dimensions.

Challenge #1: CO2 is a uniformly mixing pollutant

  • This means that the impact on climate is independent of where emissions occurs

  • Implication: Cooperation is essential

    • no country (or region) can solve problem alone
    • US + China almost 50% of global emissions
  • Free rider problem

    • If all other countries act, one country's deviations aren't a big deal
    • Large returns to shirking

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Challenge #2: CO2 is a stock pollutant

  • Even if we cut emissions to zero today, warming would persist
  • Problem: costs occur today but the benefits are far in the future
    • Politically and individually challenging

Economic implication:
"Solving climate change is a like marathon, not a sprint"

  • Optimal policy likely involves a gradual tightening of standards
  • Cheaper to make new capital efficient
  • Can invest in new technologies that make solving the problem cheaper in the future
  • But this commitment has to be serious and credible!

Challenge #3: Outcomes and damages are uncertain

  • But costs occur earlier, with certainty

  • Suggests powerful temptation to wait

  • What happens if we do?

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Climate sensitivity parameter = average surface warming resulting from a doubling of CO2, in equilibrium

Source: Heal and Miller 2014

Geoengineering

  • CO2 removal (direct air capture, ocean fertilization, etc.)

    • stir the oceans to suck up more CO2
  • Solar radiation management

    • put reflective material in the sky
  • great New Yorker article

Proof of concept: 1991 Mt. Pinatubo eruption (Phillipines)

  • 20 MM tons of SO2 mixed created a kind of gaseous mirror
  • In 1992 sunlight reaching earth's surface dropped by 10%
    • Estimated decline in temp was .75 degrees Celsius

Adaptation

  • Relocation

  • New resilient infrastructure

  • New crops

  • Emergency resonse

  • Climate control