Climate Change

[drplokta]

We keep seeing scary-looking estimates of the cost of climate change -- most recently an estimate here that it could be costing the UK £42 billion per year by 2080. What all these estimates have in common is that, while they look scary, they are in fact extremely small numbers, and indicate that we should do nothing about climate change.

Let's take that £42 billion per year by 2080 as an example. The UK's GDP is currently a little over £1 trillion per year. But if we assume 2% real growth in the economy per year over the next 74 years, then in 2080 it will be over 4.3 billion, and that £42 billion per year will be less than 1% of the economy, or equivalent to delaying economic growth by less than six months. Put another way, the effect of climate change will be to reduce average growth over the period from 2.00% to 1.99%, so it doesn't seem worth spending more than .02% of current GDP, or £200 million per year, to do anything about it.

Comments

[purplecthulhu.livejournal.com]

I would be interested to see the details of that 42 billion calculation, and what error bars they place on it (the usual absence of error bars, or at least some quantification of uncertainty, in such gnomic declarations from government or QUANGO usually leaves me frustrated).

My guess is that there are large uncertainties on that value, with a significant probability of much much higher costs even if you believe the initial estimate. The presence of such large but uncertain costs has been the basis of substantial precautionary spending in the past. The London Barrage was constructed to prevent an unlikely event - the flooding of London through the conincidence of a spring tide and an easterly gale - causing a lot of expensive damage. I'd argue that substatial spending to reduce global warming is justified in just the same way, even if you believe these figures.

[palatinate.livejournal.com]

You have also assumed that the £42bn is expressed in current terms, enabling you to deflate its impact. I'd expect that impact assessments would normally be given in today's terms, so that the £42bn is in 2006 pounds.

I also think that the figure of itself is of limited value (as Dave says, typically gnomic). Single figures are always too reductionist. For instance, an income tax increase which takes £42bn a year out of the economy is not going to have the same impact on people as a major hurricane occurring every year (think 1987) which does £42bn of damage. I think this kind of clarity applies even if you don't invoke the more radical downsides referred to by the_gardener.

I also think climate change impact estimates are particularly likely to come up short when a purely financial approach is adopted - at least for any scenario short of major flooding / massive drought. For instance, assume a scenario where we get more temperature variation and suspect weather - an extension of the behaviour of the last decade - but without these extreme outcomes. For instance, the UK is heavily industrialised and industrial output won't be heavily affected unless the weather is actually bad enough to prevent transport or close factories. The agricultural sector is relatively modest. I would guess that the scenario the analysts have run involves a cost for additional flood defences and insurance claims from more storms, combined with some marginal loss of output.

[the-gardener.livejournal.com]

The agricultural sector is relatively modest.

In terms of its contribution to GDP -- but bear in mind that food plants only grow within a relatively narrow temperature band, and that without food nothing else will get done.