The Kyoto treaty would have little impact on greenhouse emissions even if ratified by all; economic analysis suggests that if there is an urgent need to do something it is to find means of cutting emissions other than treaty “targets”, including the use of more appropriate technologies. The netbenefits of emission controls over the next fifty years or so, based on admittedly uncertain data, are surprisingly small. These are the main conclusions of an economic evaluation of climate change data by a Committee of the UK parliament My attention was drawn to the House of Lords Economic Committee’s report on the “Economics of Climate Change”:http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeconaf/12/12i.pdf (500k PDF file) by my favorite business economist “John Kay”:http://news.ft.com/cms/s/11d0debc-fd36-11d9-b224-00000e2511c8.html. It’s 80-or-so well-written pages reward an hour’s reading. But, for the impatient, here is a sound manifesto in one sentence followed by a couple of “awful truth” extracts: h4. How much risk should we avoid? bq. In terms of policy on climate mitigation and adaptation, the issue becomes one of how to behave in the face of uncertainty. Given this uncertainty, the effective irreversibility of climate change, and the potential for large-scale damage, a precautionary approach is called for. But precaution cannot be the right option at any cost. (p. 18) h4. The costs of mitigation bq. … getting to the 550 ppm level [generally considered an ambitious, but feasible goal for 2100] may cost the equivalent of $2 trillion to $17 trillion in present value terms … As an annual flow, the sums are $78 billion to $1141 billion per annum … [or] 0.2 to 3.2% of annual current [world] income … [but] if the world economy grows at 2% per annum, then the “worst case” level of costs (assuming all costs are borne in the next 20 years) would fall to some 2.3% of world income in 2035. If the costs are spread out over 50 years, the fraction would fall to 1.3% of world income (p. 44) h4. The benefits of mitigation bq. So, if we take, say, the Nordhaus estimates, these tell us that for a +2.5°C
warming one might expect to see global damage amounting to 1.5–1.9% of
world GNP … in terms of percentages of world GNP, damage is relatively low, even for +2.5°C. The damages are not evenly spread. In general, developing countries lose more than developed economies. Some models suggest no real net damage to rich countries.(p. 52) Brutal summary: the math looks like this up to the third quarter of this century
* Unevenly distributed damage amounting to 2% of world GNP
* Costs of mitigating this damage: 1.3% to 2.3% of world GNP
* Net benefits from mitigation: -0.7 to +0.3 of world GNP Important, but not scary, numbers.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher