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
2
3
Since 1900, Earth has warmed by ~ 0.8o C
10 warmest years in history: 2002-2010, 1998*
Temperature Change (oC)
- warmest year: 2010
- rate of waming is 10-100 times faster
than in at least the last 800,000 years
4
Developed countries are causing the problem, but
developing countries experience most health costs
Countries
Countriesproportional
proportionaltotoclimate-related
CO2 emissionshealth
in 2002:
effects:
5
What are the biggest climate change effects on
human health?
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Climate change is already affecting human health
World Health Organization estimates that climate change already kills 150,000
people annually; World Humanitarian Forum (2009) estimates over 300,000
deaths a year
- death rates are greatest in Africa
7
U.S. emits the most carbon per person
On average, CO2 stays in the atmosphere for ~100 years
8
Droughts have increased worldwide
9
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
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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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Much of the world is likely to experience much more
frequent and stronger droughts
2060-2069
1950-1959
2000-2009
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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The economics of climate change
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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The economics of climate change
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)
b)
What discount rate?
What harms to include, how to assign values to noneconomic harms and to harms that fall on vulnerable
populations?
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The economics of climate change
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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The economics of climate change
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, noneconomic impacts, would add about 33% to the cost of
harms, not included in central analysis
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The economics of climate change
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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The economics of climate change
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
Norway
France
China
India
Uganda
17.5
10.5
6.1
5.3
1.4
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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Politics of climate change
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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Politics of climate change
Lack of U.S. support undermines possibility of
international treaty, sets condition for ongoing
emission increases.
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Politics of climate change
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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Politics of climate change
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 humaninduced global warming
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Politics of climate change
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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Politics of climate change
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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Politics of climate change
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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Politics of climate change
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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Politics of climate change
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 countermovement
Corporate and ideological interest groups: literal
and interpretive denial of global warming and
climate change
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Ron Kramer’s presentation last week on sociology of climate change
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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Ron Kramer’s presentation last week on sociology of climate change
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
41
Ron Kramer’s presentation last week on sociology of climate change
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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