Wednesday, September 30, 2009

Climate Change Adaptation Costs

The volume of politically-charged noise has increased recently regarding projections of how much big bad climate legislation might cost poor little innocent American consumer, whose country is responsible for about one third of total historic carbon dioxide emissions.

Here's just one example of the necessary push-back against what is a near-constant assault of cost projection distortions. In this episode, we see Cai Steger nail Jim Manzi for apparently representing a cost-effectiveness analysis as a cost-benefit analysis of Waxman-Markey, the important difference being that the former method compares how much you can get for your money among alternative possible policy options, while the latter weighs actual and projected costs and benefits of a policy or policies. Excluding benefits from policy evaluation makes any policy look too costly (but even then, in Manzi's confusing assessment the numbers are not that high), of course, if not totally absurd (as in, "let's make a new policy in which we spend a lot of money with absolutely no return, achievements, or positive effects").

A complex cost, or rather set of costs, often excluded from these kinds of discussions is the aggregate cost of adaptation and the wildly uneven distribution of these costs. A new World Bank study, assuming a 3.6°F (2°C) rise in global temperature over 40 years, the recommended baseline goal of mitigation efforts (now considered nearly impossible to achieve), finds that climate change adaptation starting in 2010 will cost $75-100 billion per year. The number is similar to that estimated in 2007 by the UNFCCC/IPCC, while the IIED (International Institute for Environment and Development) published a report earlier this month estimating 2 to 3 times that amount. Costs over time can decrease alongside early adaptation measures, but costs over time will increase the longer adaptation measures remain idle.

But remember also that the Bank's estimate is based on a projected 3.6°F temperature increase (the famous 2°C). A new UNEP report predicts that the world is now actually facing twice that: a 6.3°F increase in temperature, which is currently not only increasing but accelerating. This entails some pretty bad stuff,

"With every day that passes, the underlying trends that science has provided is . . . of such a dramatic nature that shying away from a major agreement in Copenhagen will probably be unforgivable if you look back in history at this moment," [Achim Steiner, executive director of UNEP] said. He noted that since 2000 alone, the average rate of melting at 30 glaciers in nine mountain ranges has doubled compared with the rate during the previous two decades.

"These are not things that are in dispute in terms of data," he said. "They are actually physically measurable."

Other findings include the fact that sea level might rise by as much as six feet by 2100 instead of 1.5 feet, as the IPCC had projected, and the Arctic may experience a sea-ice summer by 2030, rather than by the end of the century.

These predictions indicate grave consequences for all countries and, for developing countries, costs that they cannot bear by themselves. Many developed nations acknowledge responsibility for developing world adaptation costs, for moral reasons since the developed countries are the main source of the problem as well as for reasons of political and economic self-interest. These are complex costs.

Meanwhile, here in the US we seem to be over the debate whether climate change even exists, and possibly even over the debate whether global warming is largely due to anthropogenic emissions, at least among those with reasonable disagreements. We now debate whether a $100 per year increase in household costs - which on some estimates would save money for individual households over time - are really worth all the time and effort to do something about climate change. Our elected officials across parties and all the way up to President Obama seem to believe that any truly significant measures are not worth the political costs.

Sorry, developing countries.


Anonymous said...

I think if you read the post that Cai Steger references, you will see that I did not confuse cost-benefit analysis with cost effectiveness analysis.

Jim Manzi

helmut said...

OK, maybe so - that's perhaps a rhetorical issue rather than a substantive one. Sloppy on my part for not investigating further, sorry.

Nonetheless, it's not clear, at least from the EPA assessment - the actual Waxman-Markey CBA, not the preliminary analysis - how you arrive at your figure of "$1,100 per household by 2050." Have you selected one of the various scenarios as having a greater probability for some reason and then calculated from there?

The EPA's CBA report explicitly states that the cost per household numbers do not include the benefits of mitigating climate change. The EPA further concludes, "...the cap and trade policy has a relatively modest impact on consumers assuming the bulk of revenues from the program are returned to household."

On this - the real content of the matter - it looks to me like Steger is right.