the economics & politics of climate change - homepages at wmu

The Economics & Politics of Climate Change

By Paul Clements

Professor of Political Science

Outline

Review the science Climate change is here and getting worse Economics of climate change Stern & Nordhaus, taxes, discount rates & non-economic effects Rawlsian analysis of climate change The original position, a just response Politics of climate change U.S. intransigence obstructs international agreement Responding to climate change Carbon footprints, education and political action

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10 warmest years in history: 2002-2010, 1998* Tem

pera

ture

Chang

e (

oC

) Tem

pera

ture

Chang

e (

oC

)

Since 1900, Earth has warmed by ~ 0.8o C

- warmest year: 2010 - rate of waming is 10-100 times faster than in at least the last 800,000 years

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Developed countries are causing the problem, but developing countries experience most health costs

Countries proportional to CO2 emissions in 2002: Countries proportional to climate-related health effects:

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What are the biggest climate change effects on human health?

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- death rates are greatest in Africa

World Health Organization estimates that climate change already kills 150,000 people annually; World Humanitarian Forum (2009) estimates over 300,000 deaths a year

Climate change is already affecting human health

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U.S. emits the most carbon per person

On average, CO2 stays in the atmosphere for ~100 years 8

Droughts have increased worldwide

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Last year 2nd year of catastrophic flooding in Pakistan 2010: 1/5 of country’s landmass flooded 2011: 200,000 homeless

Due partly to increased evaporation from Indian Ocean due to warmer temperatures (Photo: Asif Hassan / AFP / Getty Images) Time CLN 10

Worst drought in 60 years in Somalia 2 million children malnourished Refugee camps overflowing Tens of thousands of deaths

Photograph: Robin Hammond/Panos, The Guardian

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Worst floods in Thailand in 50 years Cost about 9% of Thailand’s GDP

AP Photo

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Globally, if we allow Earth to warm by 3o C, 20-50% of species may be committed to extinction

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In the future, most summers are likely to be hotter than any experienced thus far

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1950-1959 2000-2009 2060-2069

Much of the world is likely to experience much more frequent and stronger droughts

Palmer Drought Severity Index (PDSI)

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The economics of climate change

Economics aims to maximize economic efficiency, maximize utility as economists understand it

Climate change – an externality

Theory of externalities well developed o costs/benefits fall on third parties

o tragedy of the commons

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Climate change as an externality

If governments fail to tax producers so they internalize costs,

competitive markets will “not allow” individual producers to act responsibly

Climate change externalities international and intergenerational Processes that generate greenhouse gasses are associated with

economic growth, have strong momentum Externalities long lasting, feedback effects likely to increase

externalities are poorly understood

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Economists’ preferred mechanism to achieve desired level of atmospheric carbon dioxide – carbon taxes

Let the market decide mix of investments,

reductions in consumption, changes in technology, etc.

[Recently: based largely on East Asian experience,

renewed support for industrial policy to drive technological improvements (state + market)]

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Economic Methodology

Tax good with externality to the point at which:

Marginal Cost = Marginal Benefit (harms avoided)

How to count harms avoided? a) What discount rate? b) What harms to include, how to assign values to non-

economic harms and to harms that fall on vulnerable populations?

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Nordhaus:

4% discount rate based on long term returns to capital

Stern:

0.1% discount rate based on chance of end of humanity

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Economic theory: Benefits based on economic value of harms avoided Economic value based on willingness (hence, ability) to

pay, biased in favor of wealthy Stern & Nordhaus: to take account of distribution, non-

economic impacts, would add about 33% to the cost of harms, not included in central analysis

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Results

Nordhaus Atmospheric CO2 to peak around 680 ppm around 2180,

average global temperatures rise 2.6°C over 1900 level by 2100, 3.45° by 2200

Stern Atmospheric CO2 to peak around 450 - 550 ppm between

2050 and 2100, average temperatures rise about 2° to 2.8°C over 1900 level by late 2000s, then gradually fall

[based on ~2005 data … but CO2 increasing faster and

evidence of harms worse than anticipated at that time]

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Policy Proposals Nordhaus • Worldwide tax of $126 per ton of CO2 in 2010 rising to $748 in 2100

(in 2005 dollars) Stern [model attributed to him by Nordhaus] • Worldwide tax of $1130 per ton of CO2 in 2010 rising to $3514 in

2100 • Cost of emission reductions and adaptation about 1% of world GDP

compared to harms averted summing to 5% of world GDP if no action taken, “now and forever”.

• Recommends wealthy countries should fulfill earlier commitments to increase foreign aid

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Rawlsian Approach

Original position

• Want economic growth, so want efficiency

• Insist on protecting the vulnerable o Particularly avoid unnecessary deaths,

loss of livelihoods, ways of life

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Rawlsian Approach

Results

Would prefer CO2 peak below 450 ppm and temperature rise below 2°C, but targets lower than these are not institutionally feasible, so accept these targets

Since wealthy peoples impose harms on poor peoples through

climate change, wealthy peoples have an obligation to help the poor to avoid serious harms, adapt to changes, adopt low-carbon technologies as they industrialize

~ $100b a year for adaptation now, increasing as harms

increase, plus technological support

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Rawlsian Approach

Results

To retain a 50% chance of keeping global warming below 2°C, worldwide emissions need to peak by 2018 then decline at 4% a year or peak by 2020 and then decline at 5% a year through 2050; cutting emissions by more than 5% a year probably is not feasible.

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Rawlsian Approach

2008 C02 emissions (tons/capita):

USA 17.5 Norway 10.5 France 6.1 China 5.3 India 1.4 Uganda 0.1

Source: US Dept. of Energy

Fair goal for 2050 for 2°C rise: all countries 2.5 tons/capita

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Rawlsian Approach

Results

This requires 85% per capita reduction in CO2 emissions between 2005 and 2050 by USA …

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Politics of climate change

Institutional context: anarchic global system of nation-states

Challenges: – Establishing a just regime of emission controls [targets

for each country]; implementing emission controls

– Technology transfers

– Monitoring emissions

– Implementing measures to avert and redress harms from climate change

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So far, wide consensus on 2°C and 450 ppm target, but no specific agreement on targets or how to divide rights and obligations, and increasing emissions will soon render 2°C target institutionally unattainable.

Need international agreement before governments are likely

to establish taxation and regulatory regimes and industrial policies to induce changes needed by firms and citizens

E.g. firms do not know how much to invest in energy efficient

technologies until they know what carbon taxes to expect

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Lack of U.S. support undermines possibility of international treaty, sets condition for ongoing emission increases.

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U.S. Institutional History 1978 Democratic-majority Congress enacts

National Climate Program Act requiring investigation of climate change

Jimmy Carter asks National Research Council to investigate

NRC’s reply: “if carbon dioxide continues to increase … [we find] no

reason to doubt that climate change will result and no reason to believe that these changes will be negligible. … A wait-and-see policy may mean waiting until it is too late.”

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U.S. Institutional History

1987 Democratic Congress directs Environmental Protection Agency to develop national policy on climate change, directs Secretary of State to coordinate diplomatic efforts to combat global warming.

1988 Intergovernmental Panel on Climate Change (IPCC)

established by World Meteorological Organization & United Nations Environment Programme

1990 IPCC publishes first report confirming human-

induced global warming

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U.S. Institutional History 1992 UN Framework Convention on Climate Change – nonbinding

agreement among 154 nations to reduce atmospheric concentrations of carbon dioxide and other greenhouse gasses – signed by George H. W. Bush, ratified unanimously by U.S. Senate

1997 Framework Convention signatories meet in Kyoto, Japan,

adopt protocol that assigns mandatory targets for industrialized nations to reduce greenhouse gas emissions.

It assigns the U.S. an emissions target for 2012 seven percent below U.S. level in 1990.

Bill Clinton signs it but Senate unanimously passes resolution stating the U.S. should not enter into a treaty that did not include binding commitments from developing countries or that would cause harm to the U.S. economy.

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U.S. Institutional History 1999 Presidential candidate George W. Bush promises to regulate

CO2 emissions 2000 President Bush repudiates Kyoto Protocol, chooses not to

regulate CO2

2002 Bush announces climate change policy centered on plan to

reduce greenhouse gas intensity of the U.S. economy by 18% by 2012 [implies increase in total emissions] by voluntary action

2005 California Governor Schwarzenegger orders state’s total

greenhouse gas emissions to be reduced to 2000 levels by 2010, 1990 levels by 2020, and 80% below 1990 levels by 2050. Corresponds to 12.5 tonnes of CO2 equivalent per capita in 2010, 10 tonnes in 2020, and 1.5 tonnes in 2050.

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U.S. Institutional History 2009 Democratic majority in U.S. House of Representatives passes

climate change bill proposing cap and trade system, yielding estimated price of $13 in 2012 to emit a tonne of CO2. Aims to reduce U.S. emissions to 18 tonnes per capita by 2020 and 4 tonnes per capita by 2050. Bill supported by President Obama, but dies when Senate refuses to take it up.

Climate change conference in Copenhagen agrees to 2°C target

but fails to set binding commitments (lacking U.S. support). Hillary Clinton promises that U.S. will help to raise $100 billion

annually by 2020 to help poor countries cope with climate change if China and India accept binding commitments open to international inspection and verification.

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U.S. Institutional History 2011 Climate change conference in Durban agrees to set legally

binding emission limits by 2015 to take effect in 2020 Representative Fred Upton, chair of House Energy and Commerce

Committee, sponsors bill (H. 910) barring Environmental Protection Agency from regulating greenhouse gasses, argues this regulation would threaten the American economy

League of Conservation Voters gives Fred Upton score of zero for

pro-environment votes Los Angeles Times names Fred Upton Congress’s #1 enemy of the

earth 2012 Feb 20 – Rick Santorum “I refer to global warming as not climate

science, but political science.”

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U.S. Institutional History

Between April 2008 and October 2009, proportion of Americans who say there is solid evidence of global warming due to human activities declined from 47% to 36%, proportion who thought it a very serious problem declined from 44% to 35%.

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Ron Kramer’s presentation last week on sociology of climate change

Conservative climate change denial counter-movement

Corporate and ideological interest groups: literal and interpretive denial of global warming and climate change

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implicatory denial “covers the multitude of vocabularies – justifications, rationalizations, evasions – that we use to deal with our awareness of so many images of unmitigated suffering.” Here, “knowledge itself is not an issue. The genuine challenge is doing the ‘right’ thing with this knowledge.”

Explored by Kari Marie Norgaard, Living in Denial: Climate Change,

Emotions, and Everyday Life (2011). Central role of emotions Climate change is a troubling topic, an uncomfortable issue Emotions and cognition are linked We control emotions by controlling thoughts

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Climate change raises troubling emotions:

Fears for the future; threatens a sense of continuity

Feelings of helplessness and powerlessness

Feelings of guilt; fear of being a bad person

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The American Case: Superwicked problem-complex, no clear solution, time up Extensive political alienation – existing structure inadequate Cult of American individualism – can’t be fixed by individuals American Exceptionalism – “the American way of life” Anti-intellectualism in American political culture Corporate funded campaign of denial

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What can we do about climate change?

Reduce our carbon footprints

Educate others

Political action re politicians who support/oppose significant reforms

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