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Climate Change Economics
“Greenhouse gas (GHG) emissions are externalities and represent the biggest market failure the world has seen.” - Nicholas Stern, former Chief Economist of the World
Bank
The Greatest Story Never ToldThis is a graphic representation of the stories that were published in the American press last year. Yellow outlines are business news, blue is politics news, including international stories. Pink is cultural news and Brown is Bad news. Can anyone spot “Climate Change” or COP15?
This is one of the moments that made me very, very angry. Because although one cannot help but have opinions on topics that concern us, we seem to have a double issue: the need to have an opinion on things we also prefer to remain ignorant about. How can anyone have an opinion on climate change, when it hardly makes the news, in such an important year? This graph is also indicative of a dishonesty in serious journalism - because there are a lot of American people who are passionately interested in climate change. While the topic was verboten during the Bush years, many mayors of major cities signed on to the Kyoto Protocol.
Neoliberalism is the creed that is most closely tied into globalization. We do not often do things for purely economic reasons. Understanding that, the neoliberalist says: if you want something and are willing to pay the price for it, you can create/find market for it, and that becomes the best allocation of resources. But this is only true if people are actually informed about what it is they are buying. And a lot of “make work” is put into obstructing the spread of knowledge of outlooks and economies that threaten entrenched interests. People do have an aversion to unfair, unjust, and immoral business practices, especially when it is obfuscated. Climate change has been successfully, almost needlessly, obfuscated. The fear that has been placed on the economics of climate change has forced a contortionist response in order to bring us to where we are today - ready to act, and possibly knowing how. But the deal has not been sold, and the delay is increasingly costly.
Atmosphere 101
l The air we breathe, excluding water:
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Now I’m going to take us back to 1992. The data in this chart is current - see the red circle, that’s today. What I mean is I’m pulling out the transparencies and giving you a lecture on the four spheres of our natural environment, starting with Chemistry 101.
Biosphere 101
l The Sun is the Source of All Life (and Most Energy) l Not just an Iron- and Bronze-age sentiment l Nor New Age.
l Photosynthesis - energy cycle overhead
l Carbon cycle overhead
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Here ask for the inputs and outputs people know about
During the Carbon cycle, leave OH up while going through the next slides
Geosphere 101
l We kick up a lot of dust. So do comets, meteors, storms, glaciers, rivers, deserts, etc.
l History gets buried under all this dirt. l Gravity exerts pressure. Go deep enough,
with this pressure, heat, and tectonic activity, and interesting chemical things happen: l Long-dead dinosaurs and the biota of all time
turn into coal and crude l And other chemical compounds
5You can allow people to read this slide
Hydrosphere
l There has been a much smaller increase in water, because we have been pumping up fossil water - water stored in locked-in aquifers - to irrigate crops.
l We also redistribute water around the world in trade goods in container ships.
l The oceans absorb by far the most carbon dioxide from the atmosphere. But they have limits - carbonic acid is created.
l When oceans warm, their currents change.6
Here is something I learned, that I didn’t know before. Te state of our replenisable aquifers is distressing. But now this!
I already knew about the transportation of water. One choice I made for the better is now I purchase powdered coconut milk. Thailand and SriLanka need their water more than I do.
Climate Changel Crude combustion releases carbon stored millions of
years ago, and reproduces the energy of a millions-year-old sun
l We are putting all of that back into our active system now. l The increase of carbon in our system has been
conjectured, then recorded, then rigorously investigated, and repeatedly demonstrated
l Real greenhouses are warm with the rich mix of H2O and CO2 gasses. Our atmosphere is a greenhouse. l Consider the natural environment processes as a
computer, and our inputs have been loaded. We do not get to hit Ctrl-F4. 7
Human Impact of Climate Change
l Business-as-usual (BAU) will meet 800 ppm this century. l Scientists and climate policy makers want commitments to
hold to no more than 2ºC over 1900 (year) level temperatures.
l An Ice Age has a measured 180 ppm of CO2 l A Warm Age has 280 ppm – up until beginning of last
century (1900). l The 1990 benchmark is deemed the maximum safe stock
(350 ppm), and at which date matching CO2 outputs can be taken up again with reasonable management effort (mitigation)
l 450 ppm is the “least” dangerous policy limit that may or may not trip the +2ºC feedbacks.
l Many “BAU+” estimates think we can only turn around and start bringing emissions back down when we get somewhere closer to 550 ppm.
Human Impact of Climate Change
l Glaciers will melt and no longer be able to seasonally feed major rivers. This will result in reduction of hydro power, alluvial and nutrient depositing, and drought.
l It can also cause wars where rivers cross borders and the upstream nation withholds water from the downstream nation. Mention Quebec - New York and
the garbage dump
Then think, India and Pakistan!
Human Impact of Climate Change
l Sea levels will certainly rise l Water becomes warmer /less absorptive l The frequency and intensity of storms will
increase. Think Katrina. l Ocean currents may change. They have
before. This alters climate, too. l Ocean life is already dying where carbonic
acid (CO2 saturation) has occurred. l Since 2003, the annual number of
environmental refugees surpasses the number of war and political refugees
Human Impact of Climate Change
l Food production will change. Growing seasons will be longer in the higher north and south. Canada “wins,” so does Siberia.
l Higher heat means crops may no longer be suited to the current areas where they are grown. Crops will fail. Desertification increases. l Extra CO2 does not act as a fertilizer. Low though it
seems, it is not a limiting factor. l This will, and has, lead to food shortages, famines,
and mass migrations.This first point puts some perspective on Canada and Russia’s present and relative oil belligerence. They envision a future in which they can be world powers
Human Impact of Climate Change
l The temperature at the poles will increase dramatically compared to the increases at the equator. l The albedo effect that reflects solar energy back
into space will be greatly reduced when polar ice is gone.
l The permafrost will melt and release even more CO2 and CH4.
l These two are the major feedbacks that we wish to, and must, avoid tripping. l once we trip them, only geoengineering can
mitigate the problem.
Human Impact of Climate Change
l Unchecked, BAU will meet 800 ppm this century: l Palaeontologists now agree that conditions which
met 800 ppm CO2 in prehistory coincided with near-complete extinctions - 5 of them before now - several of which were likely caused by Canfield seas: anoxic toxicity of oceans that poison the air with H2S - sour gas, a large fraction of oil drilling in Alberta - which in turn consumes the ozone layer, exposing what life still remains to ultraviolet radiation.
l We have been here before. Let them read this slide in silence
The 6th Mass Extinction Both “Global Warming” and “Climate
Change” are neutral euphemisms for a large subset of phenomena we are witnessing and hoping to combat. The real name for it is “Biosphere Collapse.” (Aymes)
Some of them are lost due to environmental sensitivity. The rest to “loss of habitat.”
Once they are gone, it’s forever. Take heed!
each of these species here, and many, many more, are on the IUCN red list, under threat of extinction. Here’s wat the IUCN has to say about the response to global warming:
The IUCN's positionl “The International Union for Conservation of
Nature is calling for the inclusion of nature-based solutions to climate change in the post 2012 climate change regime.
l Ecosystem-based adaptation should form part of the Adaptation Framework being discussed, as a cost-effective and immediate adaptation solution that can enable people and ecosystems adapt to the impacts of climate change....”
This is an important position, as the Kyoto solutions were mostly market-based. We will be coming back to this again, so I will finish this quote for you. The IUCN says:
“An equitable and sustainable REDD mechanism (Reducing Emissions from Deforestation and forest Degradation) should also form part of the new regime, with particular consideration to issues such as: the role of conservation, sustainable management of forests and enhancement of forest carbon stocks; links between governance and an effective REDD regime; and co-benefits for biodiversity and adaptation.” to climate change
Why we need forests; why biofuels don’t help much
Bigger (more important) than Businessl Impacts of climate change are wide-ranging and
are already in effect across the natural world. They will lead to impacts on the human-made world. These impacts have economic costs. They also lead to evolutionary, societal, cultural, and spiritual costs.
l Climate Change has been caused by, and - for a limited time only - hinges on production and consumption decisions of people and their businesses.
l It does not call for austerity, but it does call for changes in patterns and values.
I hope that I have been clear about what climate change means both naturally and in effects, then that this story deserves high priority in our press. In particular, in our business press
But: big business opportunities!l The wonderful news is that SO MUCH in the way of
prevention and mitigation has already been researched, discovered, piloted, and done, that it amounts to overhauling systems we need and already use.
l Systems have turnovers. We can implement now, and continue evolution.
l In addition, this is meaningful employment for engineers, architects, technologists, biologists, etc. and meaningful results for everyone, whether futurists and conservationists, space cowboys and real cowboys (not just the Houston kind).
l An invitation to move away from GDP and “growth” as the measure of well-being.
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Give an exmple:
_Algeria’s solar farms with DC transport to EUGeothermal power generationpower storagealgae and halophyte fuel
Consumption, Globalization, Economic growth - faulty
l "Everybody knows that liquidating capital assets to fuel consumption is crazy, but nobody seems to know how to stop." All capital is based on natural capital.
l Globalization generally means we now have access to global resources, and an excuse to expend them now.
l No attention paid to transportation, which adds no value but costs are externalized
l Economic growth is first and foremost a dependency the government and investment banking (incl. pension plans) have on increasing population. l The solution to 1:1(+) population:economic growth models is
the ecological footprint model. l It is 1: 1/N, which is presently 1.8 ha.
Economic evolution Niall Ferguson wrote in The Ascent of Money (2008)
that: l “[there is a] dangerous barrier which has arisen
between financial knowledge and other types of knowledge”
l “financial history looks like a classic case of evolution in action, albeit in a much tighter time-frame than in natural evolution”
l Implication: The practices and policies that drive species and cultures to extinction? They will become extinct too.
Darwin said it’s not the strong who survive, but the adaptable.
I just read some parts of a very interesting book, wich you can download on McGill Overdrive, which also contains valuable information tat we have learned here in Prof. Matz’s course.
The market is required
“The market moves more money in an hour than governments in a year” – Al Gore l Polluter pays principle. Prevent arbitrage. l Technology can fix this!
l but so can population stability. Ergo: Clean, smart, culture- and nature-sensitive development.
l Businesses can act with or without government support to correct their supply chain
Here we can talk bout Bjorn Lomborg and the climate debunkers. He is wrong about the climate, e’s a darling of the status quo/pro-globalization camp. But he is right that poverty and lack of education degrade the evnrionment, and relative development and education stop population growth.
We really need a stop on population growth. It is the #1 driver of climate change. Dirty energy opportunism is #2.
Human history becomes more and more a race between education and
catastrophe...- HG Wells, 1920
…the market is not enoughl “Game Theory has and will continue to dictate the
political action that is required to solve this problem.” – Nick Mabey, E3G l Money spent mitigating is spread around the world.
Results at a delay. Mitigation is focused on reducing GHGs (C02, CH4, NOx, and HFCs), increasing carbon sinks, and “capturing carbon”
l Money spent adapting is local and visible to your own citizens immediately. Adaptation is focussed on building, repairing, and substituting infrastructures and systems that are destroyed or stressed by the effects of climate change.
l Expert-sourced political leadership, because it is a global problem requiring difficult cooperation and an acceptance of political risk.
This is a depressing realization.
Governmnets need to stop listening to markets and their self-interested players. It is never a good time to make a hard decision but the outcomes are never as bad as procrasintation
In addition, BAU+ participants have over-focussed on having a technologcial Carbon Capture and Sequestaion saviour come along in the future. We have invested about 20 years into it, nd it’s not off the table, but there have only been 3 successful projects in the world
Quite honestly we need more scientists in govertnment. Angela Merkel is the only G8 leader as a fully qualified scientist. Germany is doing the most of all nations on this issue.
l End of rhetoric :-)
l The rest of the presentation is to be thought about with respect to FDI and production/consumption decisions.
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So how much do sectors emit?
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http://en.wikipedia.org/wiki/File:Greenhouse_Gas_by_Sector.png
Take a moment here to write down anyting that you find interesting, nd then we will move on.
Sinks and Leakagesl Any process, activity or mechanism which
removes a greenhouse gas from the atmosphere is scientifically referred to as a "sink."
l Any arbitrage opportunity that moves a carbon cost to another location is a leakage. l Western countries shift low-value trade to China, and in
addition, export waste there. This is a leakage. l Our job:
l to prevent emissions as much as possible l to sink emissions we make and have made
The Kyoto mechanismsl Under the Treaty, countries must meet their targets
primarily through national measures. However, the Protocol offers them an additional means of meeting their targets by way of three market-based mechanisms:
l Clean Development mechanism. Reward: 1 Certified Emissions Reduction per 1 tonne CO2 offset (CER / tonne)
l Joint implementation: Emission Reduction Unit (ERU/ tonne) l Later: Reduce Emissions from Deforestation and Degradation
evolved to address land use change and forestry. = Removal Units (RMU / t)
l These FDI projects generate money for the recipient economy, and “right to pollute” credits that a company can either use, or sell
l The mechanisms help stimulate green investment and help countries meet their emission targets in a cost-effective way.
Explain this slide and invite clarification questions
Annex 1 Parties to the Protocolresponsible for 51%e, 75% gdp, 19% pop
The industrialised countries (and countries in transition) with a greenhouse gas reduction commitment: l European Union (both the Federation and its countries: Austria,
Belgium, Bulgaria,, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom,)
l Iceland, Liechtenstein, [Malta], Monaco, Norway, Switzerland, and Turkey,
l Belarus, Ukraine, Russian Federation, and Japan, l United States of America and Canada, l Australia and New Zealand.
l GHG emission profiles for Annex I Parties and major groups are at http://unfccc.int/ghg_data/ghg_data_unfccc/ghg_profiles/items/4625.php
Take another moment to write down anyting of interest to you here
(Interpret this for the class)
Annex B Parties subgroupl Are Annex I countries l Are developed countries which pay for costs of
developing countries through ODA and the CDM; l Participate in Kyoto financial mechanisms l Exclude the following Annex I countries: Belarus, Bulgaria, Croatia, Czech Republic, Estonia,
Hungary, Latvia, Liechtenstein, Lithuania, Monaco, Poland, Romania, Russian Federation, Slovakia, Slovenia, Turkey, Ukraine
Countries labelled (non-Annex I):
l Emerging l The +5 of the G8+5
l Brazil & India 6% e, 4% gdp, 20% pop
l China 21%e, 6%gdp, 20%pop
l Mexico and l South Africa
l several other countries apply l Developing, and l Least Developed
Kyoto Protocol renewal @ COP 15 Stakeholder blocs
l Group of 77: 42 e, 19 gdp, 76 pop
l African Union: 3 e, 2 gdp, 13 pop
l 50 members l Small island states
1 e, 1 gdp, 1 pop
l 39 members l Most at risk
l Rainforest Coalition 4 e, 3 gdp, 19 pop
l OPEC 6 e, 2 gdp, 5 pop
l Russian Federation / Former Soviet republics: 9 e, 2 gdp, 4 pop
l United States: 20 e, 30 gdp, 5 pop
l Dubya’s group said no such thing as
climate change. So, they’re the last on board.
l Don’t forget: Mayors for Kyoto
l European Union: 15 e, 25 gdp, 8 pop
At the time the Conference of Parties - the LongTermWorking Group under the Kyoto p. - met in Copenhagen to strike a new protocol to carry us forward, I saw an interesting interactive on the NYT website.
Other projects:•European Union’s Emissions Trading System
for internal compliance •Asia Pacific Partnership:
l Canada, US, Korea, China, India, Japan, Australia use a sectoral R&D / FDI model
•Carbon Disclosure project
•Conservation International, The Rainforest Alliance, Nature Conservancy, etc. l FAO reports a large drop in deforestation. l China has forbidden logging in sensitive places as 5+ X more
valuable standing than sold as timber
Conclusion
l It is gonna be an interesting ride… l But we succeeded with the ozone layer,
which was an internationally-coordinated effort between businesses, governments, and people.
l Multiply by 10 l Invest in solutions
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Turn out your lights for Earth Hour!
l This Saturday night, March 27, at 8:30 pm l Try to turn everything off for one hour. Make it
a candle-lit dinner! l More details at: l www.thestar.com/topic/earthhour l earthhourcanada.org/earthhour
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Essential intakeBooks
l Climate Wars l Cradle to Cradle l Plan B 3.0 l The World Without Us
Films l The Age of Stupid l An Inconvenient Truth l Refugees from the Blue
Planet
Websites l www.pickensplan.com l www.1010uk.org/ l www.conservation.org l http://www.rainforest-
alliance.org/ l news.bbc.co.uk/2/hi/
science/nature/default.stm l community.wwf.ca/
ActionList.cfm l Calculate your:
l Carbon output l Ecological footprint
A bit of Greek philosophy:l Both Economics & Ecology were derived from
Oikos, meaning household, house, family l Oikos is also an ecology journal l Oikoumene οἰκουμένη = the inhabited earth l Ecumenism = “we are all one.” l Polis = the city, the sphere of public life = politics l You owed your allegiance to the polis, but
philosophers even then were concerned about “the furthest Mysian”
l Democracy worked when you did what was good for the polis. Policy.
l Self-interest : pretty bad.
Practically speaking, economics is not just about keeping your house in order – it is also in the service of public good, and attending to risks and uncertainties
References
l Stern, Nicholas 2008. "The Economics of Climate Change." American Economic Review, 98(2): 1–37. DOI:10.1257/aer.98.2.1
l Who’s at the Climate Talks, and What Do They Seek? http://www.nytimes.com/interactive/2009/12/05/world/climate-graphic-players.html
l Climate change: the cost of inaction and the cost of adaptation. European Environment Agency, 2007. DOI: 10.2800/14754
l Dyer, Gwynne. 2008. Climate Wars.
Thank you!
We are all gonna die, …but we are not doomed!
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