Carbon mitigation will cost - but so will doing nothing

Dec 1, 2007, 12:24 GMT

Washington - Economists may disagree about the cost of reducing greenhouse emissions, but one thing they concur on is this: mitigation will be cheaper than doing nothing.

Whether it's planting more trees or investing in new technology, or hoisting tall wind mills - all are better than drifting along, business as usual, into the uncertain future of a rapidly heating planet, economists say.

World governments are heading to Bali, Indonesia, in December to discuss what happens after the two-year-old Kyoto Protocol on climate change - which for the first time imposed mandatory cuts on industrial nations' emissions - expires in 2012.

The meeting caps off a year of dramatic reports by the United Nations' climate-change watchdog, the Intergovernmental Panel on Climate Change (IPCC), which warned that only eight years remain to start reducing global carbon emissions that trap heat in Earth's atmosphere.

Otherwise, world surface temperatures - which have already climbed 0.74 degrees Celsius in the last 100 years - will likely go higher than a 2-degree difference that could trigger massive flooding and human displacement.

The price tag for improved technology and reduced consumption to help avoid such a disaster, the IPCC says, could start as low as 0.06 per cent of annual world GDP and reach 0.12 per cent, depending on the ambition of the target.

A compromise, which would allow carbon dioxide concentrations to rise slightly before they start declining about 2020, would cost about 0.1 per cent GDP a year. By 2030, however, that amount will have lowered GDP by 2.5 per cent and by 2050, by 4 per cent, the IPCC scientists and economists estimated.

The United States, which emits about 25 per cent of the world's greenhouse gasses and has provoked Europe by refusing to ratify the Kyoto treaty, rejects the costs as too high. Jim Connaughton, chairman of the White House Council on Environmental Quality, told reporters earlier this year that such costs would 'cause a global recession.'

But for others, including Richard Richels, a Harvard-trained physicist at the California-based Electric Power Research Institute (EPRI) who contributed to the IPCC report, the costs are reasonable.

'I've always been one to say there's no free lunch,' he said in an interview. 'At the same time, it could be the best lunch we ever buy.'

For one, the costs of doing nothing could rival the costs of mitigation and then some.

Former World Bank chief economist Nicholas Stern says that without lowering emissions, the world economy could shrink by 5 per cent a year 'now and forever,' if one counts the anticipated human costs of massive human displacement, coastal flooding, water shortages, and depletion of up to 40 per cent of species.

By factoring in the worst possibilities, he put the cost as high as 14 per cent of GDP - a figure that raised eyebrows around the world but captured the attention of then-British prime minister Tony Blair, for whom Stern had written the report.

Blair called Stern's findings 'overwhelming' and 'disastrous.'

But other economists, like Dale Jorgenson of Harvard University who has advocated a tax on greenhouse gasses since the late 1990s, put the cost of global warming much lower.

Jorgenson suggests that unchecked greenhouse gas emissions could shave as much as 3 per cent off world GDP by 2100 under the most pessimistic conditions, but could also give a temporary boost to growth through enhanced agricultural expansion.

As an example of the costs of doing business as usual, Stern pointed to Hurricane Katrina, which devastated New Orleans in 2005 to the tune of 125 billion dollars and lowered US GDP by nearly 1 per cent.

Weighed against those figures, the 1.4 billion dollars a year that EPRI says needs to be invested in US research to improve electricity generation seem like a drop in the bucket.

With the annual investment, EPRI says the coal-dependent US electricity sector could reduce carbon emissions by 45 per cent by 2030. The plan calls not only for new technology that could make carbon sequestration at coal-burning plants commercially viable, but also improve on nuclear power and create better transmission and storage techniques for wind and solar energy.

In the long-run, EPRI says, possibly by mid century, there would be enough green electric power to fuel 30 per cent of the country's light cars, and the country would save 750 billion dollars by 2050 in power infrastructure investments.

If this sounds like pie in the sky, British engineers point out that in the 19th Century, it took up to 11.3 kilogrammes of coal to produce one kilowatt hour of electricity in England.

That figure dropped to 680 grams in 1947 and 318 grams in the current century.