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Chapter 8 - Costing Climate Change (cont.)


Studies to assess and quantify these concerns include the official ones conducted by large teams of experts. The most prominent of these are the UK report by Nicholas Stern and the Australian report by Ross Garnaut.  The latter was followed up by other reports, including the ‘Strong Growth Low Pollution’ modelling by the Treasury.  


As authors, this listed 84 Treasury officials in addition to officers from other agencies.


While arguing that ‘the analysis should not focus only on narrow measures of income like GDP’, Stern suggested the cost of human induced climate change under business-as-usual would be ‘the equivalent of around a twenty per cent reduction in consumption per head, now and into the future’. Combatting this, he said, would cost only one per cent of GDP. Stern received a peerage for the report which Her Majesty’s Government has archived.

Like Stern, Garnaut provided a number of cost estimates, including one of up to twelve per cent. He maintained ‘all of the detailed assessments of the economics of climate change indicate that the main costs of climate change, and therefore the main benefits of mitigation, accrue in the twenty-second, twenty-third centuries, and beyond.’  


Garnaut included many individual features in his warming-induced damage estimates, though the detailed costs were not well supported. Thus, he argues that the additional expense for repairing roads and bridges could cost over one percentage point of GDP but offers no substantiation for these assertions. Oddly, he also argues that other cost increases will ensue from reduced tourism partly due to a highly implausible collapse of the Great Barrier Reef but also because of higher electricity costs and a loss of international tourism (in the reference case international travel to Australia is projected to increase substantially).

Projecting a series of ‘climate refugee’ scenarios, Garnaut also sees a need for increased defence spending with an additional cost amounting to 0.2 per cent per annum. However, the IPCC has now downgraded such fears. In 2005 the IPCC had global warming creating ‘50 million “climate refugees” by 2010’ (later deferred to 2020). It now says that such fears, ‘are not supported by past experiences of responses to droughts and extreme weather events and predictions for future migration flows are tentative at best.’  7  


Richard Tol has pointed out that the Stern and Garnaut reports were not peer reviewed. Tol has now been demonised for withdrawing his name as an author of a key IPCC chapter that he claims the Summary for Policymakers had distorted. That Summary argues, ‘the incomplete estimates of global annual economic losses for additional temperature increases of 2 degrees Celsius are between 0.2 and 2.0 per cent of income … Losses accelerate with greater warming but few quantitative estimates have been completed for additional warming around 3 degrees Celsius or above.’8

The IPCC’s estimates of costs from inaction to prevent climate change are, nonetheless, considerably lower than those offered by the British and Australian semi-official government reports. 


The IPCC Assessment lists only four studies since 2008 that estimate economic losses due to climate change. One, by Maddison and Rehdanz , is based on ‘self-reported happiness’ and therefore fails key scientific verifiability tests.9 Of the others, Nordhaus suggests a loss of GDP of 2.5 per cent with a 3 ° C warming10; a second— by Bosello, Eboli and Pierfederici— puts the GDP loss at 0.5 per cent for a 1.9 ° C warming11;  and a third, by Roson and van der Mensbrugghe, estimates a GDP loss of 1.8 per cent for a 2.3 ° C increase and 4.6 per cent loss for a 4.9 ° C warming12. The studies are summarised in Table 1.

There is considerable water-muddying within the IPCC’s Fifth Assessment Report about possible scenarios where much higher warming takes place. But policy has to stay grounded with the more plausible possibilities. The world is replete with remote dangers that might just occur and providing for all of these would take up most of global income.


The bottom line is that the cost of global warming that might result from human activities, as reported by the IPCC, is very small. Moreover, the economists estimating these costs have done so on the basis of some highly unreliable evaluations of damage from climate change.

Thus the costs attributed to losses from reduced agricultural output and productivity, rising sea levels, re-allocation of tourist facilities, river floods and so on are compiled on a static basis. The costs assume people will not modify their behaviours in response to the forecasted gradual changes in temperature, precipitation patterns and tides. Responses to such changes have taken place in the past and should be far more easily accommodated with the more accurate measurements we enjoy today. 




Climate Change The Facts 2014




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