Economic Impact of Global Warming

By:  Brad Crandell MBA, MSPM

Table of Contents

Abstract

Chapter 1: Overview of Greenhouse gasses.

Chapter 2: Cost of Climate Change (Doing nothing)

Chapter 3: Cost of Climate Change (Doing something)

Summary

Abstract

The costs of global warming and the increases in greenhouse gasses has been largely studied from the standpoint of climate change and damages, ranging from agricultural losses, loss of forests, scarcity of water, and other effects.  Damages to the environment, however, also come with economic damages and can be viewed in terms of a cost – benefit analysis or estimate.  This article examines the economic costs and benefits of action and inaction to cut down on greenhouse warming.

Chapter 1

Overview-Greenhouse gasses

With few exceptions, including President Trump, most people and the majority of scientists agree that our globe is getting warmer and emissions of greenhouse gasses are increasing because of human activity (see Figure 1); electricity and transport being the fastest growing sources.

The problem is global in nature and many of the risks are very serious with potential impacts that could be irreversible.  The science and study of global warming has its roots in the work of French mathematician Fourier, and physicist Tyndall, which was established in the nineteenth century. Work continues via the IPCC (Intergovernmental Panel on Climate Change).  

Each country needs to asses their own policy towards climate change, a difficult task for many reasons, largely economic reasons and dependence on coal and oil, and challenges of growth. Figure 2 shows projected emissions growth by country.

Clearly, the United States leads the projected emissions growth by country by a sizable margin.  Why then is President Trump so combative on his views of climate change?

Climate change a Chinese Hoax

President Trump has called climate change a “Chinese Hoax”, then has recanted or stated that he didn’t make that statement. It’s interesting to note that Trump acknowledges climate change and warned about its dire effects regarding his golf course when applying for a permit to build a sea wall. 1^[1]  Trump, speaking to Hugh Hewitt, a conservative radio talk show host, stated he was not a believer in global warming. “ I consider it to be not a big problem at all.” 2

Chapter 2

Cost of Climate Change (Doing nothing)

The Trump administration surmises that the cost of addressing global warming is too high, with possible job loses, more regulations on auto manufacturers, and other industries.  There is a cost to innovation, fuel efficient cars, and energy saving technologies. The 80% reduction in U. S emissions that will be needed to lead international action to stop climate change will not come cheaply. What about the cost of business as usual?  

In a study done by the NDRC, based on four effects:  

1. Increasing intensity of Atlantic and Gulf Coast hurricanes;
2. Inundation of coastal residential real estate with sea-level rise;
3. Changing patterns of energy supply and consumption;
4. Changing patterns of water supply and consumption including the effect of these changes on agriculture.

The cost of these four effects may add up to $1.9 trillion in 2100, about 1.8 percent of the U.S. Gross domestic product. 2^[2]

Climatologists point out that the annual temperature in most of the United State mainland will increase 12 to 13 degrees by 2100.  They claim the increases represent a fundamental change to the climate. 

Source: NDRC March 2008

If precipitation and humidity are important determinants, those of us who live in Seattle in 2017 know all about precipitation. For the third time in a row, Seattle has seen a much wetter-than-average rainfall.  Year to date, the average rainfall through April 2017 is 14.98”.  3^[3]

Source: Seattle Weather Blog

William Nordhaus, speaking on the Economics of Climate Change, April 16, 2014, stated climate change will bring large and costly impacts that touch every area of the economy. Nordhaus, Sterling Professor of Economics at Yale University authors two models of the economics of climate change, making a case for using markets to appease the problem by putting a price on pollution. 3 ^[4]

Nordhaus sites the continual rise of Carbon dioxide emissions which have increased by 2.6 percent  per year since 1900.  He says that concentrations of Carbon dioxide hang around the atmosphere for a century. 

Nordhaus says the Impacts of climate change are likely to be felt in these areas:

• Agriculture, big declines in food production leading to starvation and population shifts.
• Extinction rates, projections ranging from 10 to 55 percent of species per century wiped out.
• Tipping points and abrupt catastrophic risk. 

Nordhuas says it’s difficult to estimate the economic impacts because “We don’t actually have a good handle on when the impacts will become dangerous.  We’re taking something that might happen 50 years from now and addressing aspects of economy and human life that will change in unknown way.”  4^[5]

Summary

Clearly, if we continue to make very little progress towards eliminating green house gases and reducing the carbon footprint, the future of Agriculture, Extension rates, and catastrophic events, will be unavoidable.  So why then are we dragging our feet? Lets look at the economics of making fundamental changes in order to significantly reduce green house gases,  carbon footprint, and global warming.

Chapter 3

Cost of Climate Change (Doing something)

Reports seem to indicate that stabilizing climate change can be done at a relatively low cost. When you factor in issues such as delays in developing and implementing technology – the cost of solving the problem are much higher.  It is estimated that to switch fro fossil fuels to low-carbon sources would cost $44 trillion according to a report released by the International Energy Agency. 5^[6]

A intergovernmental Panel on Climate Change estimated efforts to stabilize green house gas emissions would require a monetary investment of $13 Trillion and may result in higher energy prices as well as a reduction in economic growth.  Is this the reason President Trump is opposed to dealing with climate change? 

If you are a home owner you probably are already aware of the ramifications of delaying needed repairs and maintenance. The condition of your home will deteriorate, costing you more money than you would have spent if you fixed the problem early.   Delaying efforts to stabilize greenhouse-gas emissions will have a profound consequences down the road. The IPCC report shows that continuing to delay or hold off on reducing emissions will increase costs by 40 percent if emissions are 50 percent higher in 2030.  

Monetary costs of holding off on reducing emissions is significant but it’s not the only concern.   The risk injury, illness and death from resulting heat waves, fires, storms, and floods are possible. Reported in the Union of Concerned Scientists, extreme heat coupled with high humidity, can be a killer.  Natural disasters are projected to occur when changes in temperature and precipitation under global warming and will threaten human health and safety. 6^[7]  Allergens, poor air quality and the spreading of disease are possible affects of global warming. 

Summary

Trump is not alone when it comes climate change. Many people have a difficult time wrapping there heads around the science.  For some reason, 57 percent of Republicans in Congress deny that climate change is real. 7^[8]  Even though the  scientific evidence is substantial, how is it possible to overlook this evidence? Are there other reasons besides cost incentives to ignore the facts?

It’s probably basic psychology. Nobody wants to be wrong, and we look for information that confirms what we believe. For example, a business man or women who has a vested interest in fossil fuels, will likely acknowledge global warming. 

Another reason is many people just don’t trust scientists, and don’t believe global warming is caused by human activity. Carolyn Gregoire in her article “Why She Conservatives Can’t accept That Climate Change is Real” says that climate change denial is likely due to the influence of high-profile climate skeptics. “A single exposure to a denial message significantly reduces subjects’ belief in and concern about climate change,” said Dr. Aaron McCright, an environmental sociologist at Michigan State University.

There appears to be a growing separation between what scientists and the general public think about such things as vaccines, animal research, and GMO’s  Certain ideological views seems to  make it more likely that a person will deny climate change.  “The conservative echo chamber — Fox News, talk radio, conservative columnists and bloggers â€” combine to create a ‘bubble’ in which many committed Republicans live, and when it comes to scientific issues we find that they literally create an ‘alternative reality’ in which human-caused climate change is a hoax,” Dunlap said. “The problem is that this conservative worldview is deeply at odds with empirical reality.” 8^[9]

The current administration is not likely to take climate change seriously for reasons of cost, and ideological views.  When the water starts to rise and the temperature in DC reaches 115, it maybe too late to act.

2: http://www.politico.com/story/2016/05/donald-trump-climate-change-golf-course-223436

[1] http://www.politico.com/story/2016/05/donald-trump-climate-change-golf-course-223436

[2] https://www.nrdc.org/sites/default/files/cost.pdf

[3]http://www.seattleweatherblog.com/rain-stats/rainfall-2017/

[4]https://bfi.uchicago.edu/events/CC-climate

[5] https://bfi.uchicago.edu/events/CC-climate

[6] http://www.iea.org/

[7] http://www.climatehotmap.org/global-warming-effects/health.html

[8] https://thinkprogress.org/the-anti-science-climate-denier-caucus-114th-congress-edition-c76c3f8bfedd

[9] http://www.huffingtonpost.com/entry/climate-change-denial-psychology_us_56438664e4b045bf3ded5ca5