The Economics of Climate Change How to Tackle Global Warming and the World s Remaining Problems Smartly

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1 The Economics of Climate Change How to Tackle Global Warming and the World s Remaining Problems Smartly Bjørn Lomborg

2 Making a better world Rational, not fashionable Doing good vs. feeling good Remove our myths Panic is unlikely to be a good guide to making smart choices Spend our money best Overworrying about some things mean underworrying about other things

3 The origin of environmentalism: Pesticides and cancer Well regulated pesticides in the US Cause 20 deaths each year Going ecological Would avoid the 20 deaths but Would likely cost $100bn+/year Would need to plow up more nature Fruits and vegetables price up >10-20% Reduction in consumption by 5-10% Cancer death increase of about 26,000/year

4 What to do? Global warming

5 1 Global warming is real and man-made

6 Climate change is real On the agenda, thanks to Al Gore The best information from the UN Climate Panel, IPCC Likely temperature rise by O C ( O C) Cost of global warming $15 trillion 0.5% of 21 st century $3,000 trillion Need smart strategy

7 2 Consequences vastly exaggerated and one-sided, leading to bad judgment

8 Al Gore and the standard story Gore and many others tell us Planetary emergency we have just ten years to avert a major catastrophe that could send our entire planet into a tail-spin of epic destruction involving extreme weather, floods, droughts, epidemics and killer heat waves beyond anything we have ever experienced. Four central issues Heat deaths Sea level rise Hurricanes Malaria

9 1 Higher mortality with heat? Absolutely more heat deaths Number of deaths Dying from increased heat in the UK by ,000 more But cold deaths in the UK by ,000 fewer This also holds true globally Net more than 1.4 million fewer deaths by 2050 Bosello, Roson, & Tol, 2006; Keatinge & Donaldson, 2004; Keatinge et al., 2000

10 1 Better policies against heat Policy innovation Almost no heat deaths in the US Because of air conditioning Cities much warmer than countryside Lack of water, more black surfaces Take London: Add more water and greenery 8 o C reduction in heat waves Make more light surfaces paint the tarmac 10 o C reduction in heat waves

11 2 Sea level rise Sea levels will rise But not a catastophe 30cm (18-59cm) over the next 100 years Not Al Gore s 20 feet (6 meters) 30cm the last 150 years Did anyone notice?

12 2 Saving the Maldives If we just look at 30cm increase Flood 77% of the Maldives at 121% GDP Yet at 0.04% of GDP the Maldives can safeguard everything but % of dry land Nicholls, 2004; Nicholls & Tol, 2006

13 3 Hurricanes: ever costlier in the US Damage costs from hurricanes in the US Pielke et al. 2007, 2010

14 3 Hurricanes: ever costlier in the US Miami Beach

15 3 Hurricanes: ever costlier in the US Damage costs from hurricanes in the US Pielke et al. 2007, 2010

16 More people with more goods in exposed areas Costs if all hurricanes had hit the US in 2010 Pielke et al. 2007, 2010

17 Increase in hurricane losses till 2050 Hurricanes: Fix climate or social vulnerability 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% climate change social vulnerability If we stop climate change Prevent 10% damage increase If we end social vulnerability Prevent 480% damage increase Which knob should we focus on? Pielke 2005

18 4 More malaria from heat? Malaria is weakly correlated to heat But strongly correlated to wealth So what should we focus on? Temperature? Treatment?

19 Which knob to tackle malaria? Deaths avoided per year Kyoto $180bn Malaria $3bn Kyoto Malaria-specific policy

20 3 Copenhagen faliure predictable: Smarter options needed

21 Standard solutions: High costs, no benefits Kyoto $180 billion per year o C reduction by 2100 (now: o C) EU decision Cost about $250 billion annually 0.05 o C lower by 2100 Each dollar spent will avoid 3 cent of climate damage 2 o C target $40,000 billion per year Each dollar avoids less than 2 cents climate damage If not done optimally, could increase cost times

22 We re still getting most energy from fossil fuels Renewables 12.4% global 0.2% solar/wind Fraction of renewables has declined since 1990 IEA 2010

23 Most of the rest from wood and biomass in third world About twothirds of all renewables From wood/ biomass from 3 rd world Other: Geothermal, wind, solar, tide. IEA 2010

24 CO2 growth, %/yr Cutting CO2 is costly Economic Growth vs CO2 growth Economic growth, %/yr

25 Current policies are ineffective Take German solar policies The largest per cap PV capacity Fulfills 0.1% of total primary energy Cost is about $75bn in first decade Effect is to postpone global warming 7 hrs Employs 74,400 Wind energy produces 1% of energy, with about the same number of jobs

26 $ per ton CO2 Current policies are ineffective Cost per ton CO Best damage estimate 80 ETS Kyoto Wind Solar

27 Percent GDP All peer reviewed cost-benefit show little effort now Peer-reviewed Damages Costs Stern Review Damages Costs Only Stern review shows otherwise Easily end up making policies that do more harm than climate change Tol and Yohe 2006

28 Cost, benfit, % of current GDP Why? Because cost is now, benefit much later Stabilizing at 1990 levels 3 2 Cost 1 Benefit Nordhaus 2006

29 Lack of smart solutions Take polar bears Yes, less Arctic ice means fewer polar bears Global population increasing 1960: about 5,000 Now: about 22,000 But what can we do? If we implement the Kyoto Protocol Save 1 polar bear each year But each year we shoot polar bears each year

30 So what should cement producers do? Yes, global warming is a problem The biggest peer-reviewed meta-study $7 damage per ton of CO 2 So do cut if price less than $7 per ton Fight against much higher taxes Fight for the many other smart solutions More greenery, more water features, more light surfaces, avoid insurance subsidies, distribute mosquito nets, And then fight for a smarter macro solution

31 What should we all do? Right now, solar panels are much more expensive than fossil fuels So is solution Force everyone to buy many, many more of these inefficient panels? Or Innovate the price down, so these panels eventually become cheaper than fossil fuels?

32 Smarter way forward The new global accord Invest 0.2% of GDP in RD&D of non-carbon emitting energy technologies $100 billion/year 2 times cheaper than Kyoto 50 times more R&D than today Let each country focus on its own visions renewables, fission, fusion, conservation, energy storage, carbon storage, 2 nd generation biofuels Solves global warming in medium term Avoids $11 climate damage for each dollar

33 4 Many other problems where we can do much more good

34 Gore: our generational mission How do we want to be remembered? Spending $180 billion/year doing virtually no good a hundred years from now? (Kyoto etc.) Compare this to For $75 billion/year the UN estimate we can solve all major basic problems Clean drinking water Sanitation Basic healthcare Education

35 Copenhagen Consensus 2008 Top economists: Most bang for the buck Very good investments 1 Micronutrients 2 Free trade 3 Immunization 4 Agricultural R&D 14 Energy R&D 30 Cut CO 2 Copenhagen Consensus

36 Conclusion Generational mission Focus on best solutions Maldives rich, not slightly lower sea level All the top Copenhagen Consensus solutions Weigh benefits and costs Saving one polar bear at $180 billion? For global warming, do the smart policies Stop shooting polar bears Invest in energy R&D Rational, not fashionable

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