Guest essay by Eric Worrall
Efforts to contain global warming will not produce any net economic benefits until the next century, according to a new PLOS One study.
The abstract of the study;
Approximate calculations of the net economic impact of mitigation targets under increased damage estimates
Patrick T. Brown,
Published: October 7, 2020
Efforts to curb global warming are often justified by calculations of the economic damage that can occur without mitigation. The earliest such damage estimates were speculative mathematical representations, but some recent studies provide empirical estimates of the damage to economic growth that will accumulate over time and result in greater damage than previously estimated. These increased damage estimates were used to indicate that limiting global warming to 1.5 ° C this century would damage gross world product of $ 10 trillion in 2010 compared to limiting global warming to 2.0 ° C to be avoided. However, in order to estimate the net effect on gross world product, the mitigation costs associated with the decarbonization of global energy systems must be subtracted from the benefits of avoided damage. Here we are following earlier work to parameterize the above-mentioned increased damage estimates into a schematic global climate economy model (DICE) so that they can be weighed against the general estimates of mitigation costs in a uniform framework. We investigate the net effect of the reduction on the gross world product through finite time horizons under a spectrum of exogenously defined levels of the stringency of the reduction. We think, that Even with increased damage estimates, the additional mitigation costs for limiting global warming to 1.5 ° C (compared to 2.0 ° C) are higher than the additional damage avoided in this century among most of the parameter combinations considered. Using our core parametric values, limiting global warming to 1.5 ° C results in a net loss in gross world product of about forty trillion US dollars compared to 2 ° C, and reaching 1.5 ° C or 2.0 ° C C requires a net sacrifice of gross world product compared to a no mitigation case, although 2100 with a discount rate of 3% / year. However, the benefits of stricter damage control accumulate over time, and our calculations show it Stabilizing warming at 1.5 ° C or 2.0 ° C by 2100 would eventually bring a net benefit of thousands of trillion US dollars of gross world product by 2300. The results underline the temporal asymmetry between the costs of mitigation and the benefits of avoided damage from climate change and thus the long period of time for which investments in mitigation pay off.
Read more: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0239520
The authors used a discount rate of 3%, which is IMO reasonable; 3% is cheap compared to benchmarks such as long-term US Treasury bond yields and bypasses widespread criticism of cost-benefit forecasts for climate protection measures.
The most important finding is that the sums do not add up even when extreme climate damage forecasts are used – the costs of climate protection measures exceed any reasonable projected benefit in this century.
What about the next century? In all honesty, they can take care of their own problems. The notorious great horse manure crisis of 1894 shows how pointless it is to worry about the problems of the distant future.
Our ancestors in the late 19th century produced economic models that showed that by the mid 20th century the world's great cities would be buried under mountains of horse manure. Their models were mathematically consistent; What they overlooked was the rise of the automobile.