Climate change to cost trillions, say economists

Richard Ingham Yahoo News 26 Nov 09;

PARIS (AFP) – Estimates vary widely on the costs of damage from climate change, easing these impacts and taming the carbon gas stoking the problem, but economists agree the bill is likely to be in the trillions of dollars.

Figures depend on different forecasts for greenhouse-gas emissions and the timeline for reaching them. In addition, key variables remain sketchy.

How will rainfall, snowfall, storm frequency and ocean levels look a few decades from now? How will they affect a specific country or region? And how fast will nations introduce low-carbon technologies, carbon taxes and other policies that alter energy use?

Despite these uncertainties, economists share a broad consensus: climate change will ultimately cost thousands of billions of dollars, a tab that keeps rising as more carbon enters the atmosphere.

"The cost of climate impacts goes up with the delay on emissions mitigation," said Sam Fankhauser of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE).

"On the cost of adaptation, there's a timing issue. For instance, there's no point building sea walls now if the sea levels are only going to rise gradually over the next 50 years. But we do know that costs of adaptation will go up non-linearly, in other words exponentially, with the degree of warming that we have."

Following is a snapshot of the main items on the tab.

-- IMPACTS: Warming of between two to three degrees Celsius (3.6-5.4 degrees Fahrenheit) over pre-industrial times would inflict a permanent loss in global world output of up to three percent, according to the 2006 Stern Review, authored by British economist Nicholas Stern.

But this would rise to an average of five to 10 percent loss of GDP with warming of five to six C (9.0 F), with poor countries suffering costs "in excess" of 10 percent of GDP.

On current trends, Earth is headed for an average increase of 4 C (7.2 F) this century, to which 0.74 C (1.33 F) of warming from the 20th century must be added, according to the so-called A1F1 emissions scenario of the UN's Intergovernmental Panel on Climate Change (IPCC).

-- MITIGATION: Action to reduce emissions of greenhouse gases focuses on more efficient use of coal, oil and gas and a switch to clean renewable sources.

The European Union (EU) and others have set the target of limiting overall warming to 2C (3.6 F), which entails stabilising carbon concentrations in the atmosphere at 450 parts per million (ppm).

Attaining this would require 10.5 trillion dollars in energy-related investment by 2030, which would be additional to money committed under existing policies, the International Energy Agency (IEA) says.

The largest increase -- 4.7 trillion -- is in transport, mainly to purchase more efficient, but more expensive, vehicles.

Investment to make buildings more energy-efficient would cost an additional 2.5 trillion dollars by 2030 while a switch to clean or low-carbon power generation would notch up another 1.7 trillion.

-- ADAPTATION: Estimates of the cost of protecting against water stress, flood, extreme storms, rising sea levels and other ills vary widely, from four billion a year to 109 billion annually over the next 20 years.

A widely-regarded estimate put forward in 2007 by the UN Framework Convention for Climate Change (UNFCCC) suggested the bill by 2030 could be between 49 and 171 billion dollars annually, of which 27-66 billion would be needed in developing countries.

The figure is based on the need to climate-proof infrastructure; help agriculture; protect water supplies; defend coastal zones; and treat malnutrition, diarrhoea and malaria, which are among the diseases likely to be amplified by climate change.

But this is only half, or even just a third, of the likely cost, as it does not factor in protecting ecosystems, energy, tourism, manufacturing and mining, according to a paper published in August by Martin Parry of Imperial College London.

By way of comparison, the EU estimates developing nations will need 100 billion euros (150 billion dollars) per year by 2020, for both adaptation and mitigation.

Trillions spent in mitigation and adaptation will have an economic benefit and create new jobs, although exactly how far they will ease the cost of impacts is -- once more -- hard to calculate, say economists.