Published on July 2nd, 2014 | by James Ayre3
Costs Of Climate Change Being Massively Underestimated, Researchers State
July 2nd, 2014 by James Ayre
The myriad costs of future climate change are being greatly underestimated, according to a new paper recently published in The Economic Journal.
Written by Nicholas Stern and Simon Dietz of the Grantham Research Institute on Climate Change and the Environment, the report warns that previous estimates on the potential costs of climate change are likely to be very far off the approaching reality — largely as the result of outdated economic models, and ineffective carbon-trading programs that undercharge polluters for their emissions.
Image Credit: Hot via Flickr CC
Grist provides some more info on this:
The new paper critiques a model developed in the early ’90s — the Dynamic Integrated model of Climate and the Economy, or DICE model – and a related paper, “To slow or not to slow,” by Yale economist William Nordhaus. Both represented historic efforts to evaluate the economic costs of climate change, demonstrating that delaying climate action would increase its costs. But DICE was a basic model by modern standards, and Nordhaus himself emphasized its limitations. Yet it continues to be cited by leading researchers and groups, including the Intergovernmental Panel on Climate Change, with the absurd effect of substantially reducing the seriousness with which global warming’s economic impacts are being viewed.
“This modeling framework has had a lasting influence on the field and indeed several elements of it still constitute the ‘industry standard’ today,” Stern and Deitz note. “While it was very much the purpose of ‘To slow or not to slow’ to cast climate-change mitigation as a dynamic, investment problem, in which abatement costs could be paid up front, so that climate change could be avoided several decades into the future, the model dynamics were unsatisfactory.”
To address these issues, the researchers ran the DICE numbers themselves, this time taking into account a potentially greater effect from climate change on economic growth and output — via the incorporation of a great quantity of new research exploring the subject.
The original DICE model results in a recommended carbon price of between “$40 and $50 per tonne of carbon dioxide emissions next year. But by incorporating Stern and Deitz’s more contemporary assumptions, that price could rise to more than $200 per tonne.”
That’s a significant difference. Considering the importance of the subject, even more so.
“It is extremely important to understand the severe limitations of standard economic models, such as those cited in the IPCC report,” Stern concluded. “I hope our paper will prompt other economists to strive for much better models.”
Building off of this new report is another one, a bi-partisan report emphasizing that climate change is “risky business.” The report — commissioned by former New York Mayor Michael Bloomberg, billionaire renewables advocate Tom Steyer, and former Secretary of the Treasury (under George W. Bush) Henry Paulson — provides specialized predictions for all of the various regions and economic sectors of America. The potential costs are dramatic. Worth a read in my opinion.