Why the costs of mitigating climate change cannot be combined into one correct number

Credit: The Conversation

In November 2019, before the pandemic began, did you guess how important a video conference like Zoom would be to people’s lives just a few months later?

This is the kind of challenge economists face when trying to give a single number to the long-term costs of mitigation. Climate change Or the cost that allows the temperature of the earth to continue to rise. As public policy changes and new technologies arrive and evolve, human behavior changes.

I’m a microeconomicist Causes and consequences of climate change..When i think Climate change challenges After 2040, I anticipate many “known unknowns” about our future.Therefore, I am surprised to read it accurately climate Cost estimates as recently announced by economic consultant McKinsey & Company.

McKinsey sets global costs to move energy and other sectors to net zero emissions by 2050 US $ 9.2 trillion annually.. Insurance company Swiss Re If you do nothing, it will be cut By 2050, global GDP will increase by 14%, or about $ 23 trillion.

Such numbers are widely used to encourage action by governments, businesses and individuals. Economists agree that if climate change is left unchecked, it will harm the economy. However, these estimates are made using a formal model that features many assumptions, one of which can significantly abandon accounting and make the estimates very high or low.

People may want “accuracy”, but accurate predictions Increase the risk of over-expressing certainty A constantly changing world. The contents of the climate economic model and the reasons why certainty cannot be selected in future cost forecasts are as follows.

Forecast challenges

Climate economic model Try to answer some predictive questions such as:

“What impact will the enactment of a carbon tax today have on the performance of the global economy?” The answer to this question will help us understand the “cost of taking action.”

“If the world enacts this carbon tax, how much will greenhouse gas emissions decrease in the following years?”

“What can be economically gained by reducing greenhouse gas emissions?”

Why some economists are unable to quantify the costs of mitigating climate change in spite of their best efforts.

Levelized cost of energy includes construction costs, ongoing fuel costs, and operating costs over their useful life. Credits: Chart: The Conversation / CC-BY-2.0

“What is the impact on economics and quality of life if we do nothing and increase greenhouse gas emissions under a” normal business “? “

To answer these complex questions, climate economists make a series of assumptions “burned” into mathematical models.

Known unknown

First, economists need to predict the average global income per capita for each future year.

Macroeconomics face challenges Predict the timing and duration of a recession..Predict the future 30 or 40 years of economic growth We need to predict how the world’s workforce and the quantity and quality of our technology will evolve over time. Forecasting the world’s population growth Urbanization, Access to women’s education All improvements in contraception are associated with reduced childbirth.

Second, they must make informed guesses about what technologies will exist in the future with respect to our power sources and the energy we use for transportation. If they can estimate future world population levels, income levels, and technologies, they can measure how much greenhouse gases the world emits each year.

Third, they use climate science models to estimate the additional climate change risk caused by the production of greenhouse gas emissions. This is usually World average surface temperature..

Fourth, they must take a position on how the production of our future economy will be affected by the increased risk of climate change. Ideally, these models emit more greenhouse gas emissions, Potential disaster scenarios..

By combining all these equations with their respective assumptions, the research team produces a single number that looks like this: If we do not take serious steps to reduce emissions, the world will face $ 23 trillion in damage from climate change.

“Art” to predict future emissions

Economists estimate future global greenhouse gas emissions by multiplying the projected GDP (total of goods and services) by the average GDP emissions per dollar.

Why some economists are unable to quantify the costs of mitigating climate change in spite of their best efforts.

The estimated range of damage increases with increasing temperature.Credit: 4th National Climate Assessment

If the world succeeds in ending Use of fossil fuels, This latter number can be close to zero. Innovations and deployments of low-carbon technologies such as electric vehicles and solar farms can significantly change the costs and benefits economists are trying to quantify.

Many factors, including investment in research and development, determine the path to this technological advancement.International politics does not always affect the climate Economic model.. For example, if China chooses to be more isolated, will the country be blessed with coal and increase coal consumption? vice versa, China chooses to use its powerful nation How to push the green technology sector and create a booming future export market that will green the world economy?

Predict the impact of future climate change

Economic mathematical models summarize the effects of climate change into a single algebraic equation called the “climate damage function.”of My book “Adaptation to Climate Change” Here are some examples of why this function is so constantly changing that it is so difficult to predict.

For example, many companies are developing climate risk assessment systems to educate real estate buyers on a variety of things. future Climate risks faced by certain real estate, such as wildfires and floods.

Suppose this emerging climate risk assessment industry has made progress in identifying low-risk areas and the zoning code has changed to allow more people to live in these safer areas. .. As people literally “move to higher ground,” the damage that Americans suffer from climate change will diminish.

Confident climate modelers cannot capture this dynamic in inflexible algebra.

Forecast under uncertainty

The climate economic model can play the role of “Paul Revere”. In other words, educate policy makers and the general public about possible risks in the future.When economists build these models, they Honest about their limits.. Models that produce “answers” can confuse decision makers.

Everyone may prefer a concrete answer about climate change and the cost of responding to it, but we must live with uncertainty.

How politics, society and technology shape the path of climate change

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Why the costs of mitigating climate change cannot be combined into one correct number

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