Thursday, May 22, 2008

The Cost of Inaction

When it comes time to implement any sort of conservation measure, we often hear the familiar mantra that conservation will hurt the economy. This is certainly the case for wildlife protection. Last week, Secretary Kempthorne raised the objection in his decision to list polar bears as threatened but not address climate change, the chief cause of their decline. This week, Governor Palin of Alaska cited the same issue of economic harm as the state filed a lawsuit to overturn the listing.

The same holds true for climate change, even beyond wildlife protection. Never mind that EPA studies indicate that the Lieberman-Warner Climate Security Act would have minimal impact on the economy. Any measure to conserve energy and reduce emissions is met with howls of protest over the supposed economic devastation it would wreak. When that bill reaches the Senate floor, I expect that we will hear more of the same.

What gets lost in the noise is that climate change will have serious economic consequences if it goes unchecked. Economists at Tufts University concluded that aggressive action to reduce emissions would be less costly than to ignore climate change.

The Tufts study included a "bottom-up" analysis of the economic impacts in four categories and found that by 2100, annual costs would be $422 billion in hurricane damage; $360 billion in real estate losses, with the biggest risk on the Atlantic and Gulf coasts, particularly Florida; $141 billion in increased energy costs; and $950 in water costs, especially in the West. (The estimates are expressed in today's dollars.)

That adds up to an annual loss by 2100 of 1.8 percent of gross domestic product, or GDP, the sum of the nation's output of goods and services.

The study's "business as usual" scenario, in which emissions of greenhouse gases continued at an increasing rate, was taken from the high end of the range of likely outcomes of inaction described by the Nobel Prize-winning Intergovernmental Panel on Climate Change last year. The Tufts study also incorporated some later scientific findings.

The study projected that the average temperature would increase by 13 degrees Fahrenheit in most of the United States and by 18 degrees in Alaska in the next 100 years, bringing more severe heat waves, hurricanes and droughts.

The report also forecast stronger hurricanes as a result of higher sea surface temperatures; sea level rises of 23 inches by 2050 and 45 inches by 2100 that would inundate low-lying coastal areas; and higher air conditioning bills in the Southeast and Southwest that wouldn't be offset nationally by lower heating bills in the North.

The authors of the Tufts study also used a revised version of the model used by Nicholas Stern for his 2006 assessment of the cost of inaction on a global scale. Using that model, the Tufts economists found a U.S. loss of 3.6 percent of GDP by 2100.
The full report can be found here.

Almost all climate forecasts are given as a range of probabilities, with upper and lower bounds. The fact that this report used the IPCC's upper projection rather than the mean projection means that the economic impact could be somewhat less than the report's conclusions. There are also some areas of uncertainty in projecting the consequences of a warmer climate. For example, how much climate change will affect tropical cyclones is still subject to debate.

At the same time, some potential impacts seem to be excluded from the study's estimates. Climate change is likely to harm agricultural output (especially in the developing world) since many crops will not grow well at higher temperatures and severe droughts will become more common. Also excluded were costs associated with the effects of higher temperatures on human health. Meanwhile, loss of biodiversity – driven in part by warmer temperatures – has been estimated to cost 6% of the world's income.

All of these issues need to be front and center in the coming debate over how to forestall climate change. I believe that the human cost and loss of biodiversity should provide a powerful moral basis to take action and reduce our emissions. But we should not let denialists and opponents of reform appropriate economic arguments for themselves.