Economic stagnation should not be an excuse for climate inaction
- 01 Jul 2013, 11:05
- Mat Hope
Should policymakers be choosing between climate change
action and economic recovery?
Governments have increasingly been using the economic
fallout as an excuse for climate inaction. International
grinding along with no tangible progress and domestic
measures are being
deferred or abandoned.
But a new
research note I have co-authored with Chris Hope of
Cambridge University, published in Nature Climate Change today,
suggests economic stagnation is no excuse for climate inaction.
Obvious disclaimer: I am a co-author of this paper!
Our research shows emitting an extra tonne of carbon
dioxide today is actually more costly when there is low economic
growth than when economies grow steadily.
Obama recognised the difficulty of getting governments to act
on climate change in the midst of a global recession back in 2009
when he told a United Nations meeting that leaders would be
"... sweeping but
necessary change in the midst of a global recession, where every
nation's most immediate priority is reviving their economy and
putting their people back to work".
More recently, the UK Chancellor
George Osborne demonstrated the tension between climate policy
and economic recovery when he told the Conservative party annual
"... [w]e're not going
to save the planet by putting our country out of
Fast forward another two years and the International Energy
Agency's (IEA) executive director, Maria van der Hoeven, last week
"... amid concerns over
global economic pressures, climate change has quite frankly slipped
to the back burner of policy priorities".
She was speaking at the launch of the IEA's latest
report which prepares for governments failing to act any time
soon to meet the internationally agreed target of limiting warming
to two degrees above preindustrial levels.
Our research suggests this neglect is unwise, however.
Emissions cause more damage in a low growth
We find the damage caused by emitting an additional tonne of
carbon dioxide today is $107, assuming economic growth of around
two per cent per year. The cost if economies continue to stagnate?
$138 per tonne.
Scientists predict destructive consequences of climate change
like more frequent wildfires, extended periods of drought and a
higher risk of strong storms could incur heavy costs in the
Integrated assessment models estimate changes in
temperature and economic conditions based on emissions predictions.
The changes are then compared to the predicted damages to calculate
the cost emitting one additional tonne of carbon dioxide today -
known as the social cost of carbon dioxide.
We used the PAGE09 model to calculate the social
cost of carbon dioxide for a range of economic growth scenarios.
Our results show the mean value is significantly higher if there is
low economic growth.
The main reason for the higher cost in a low
growth world is that people have less money when the worst impacts
of climate change hit.
The middle column of the table below shows the
global average GDP per person if rich economies don't grow is only
$27,000 in 2100, that's about $10,000 less than it currently is in
the UK. In contrast, average Gross Domestic Product (GDP) per
person will be around $164,000 if economies grow as in the
Intergovernmental Panel on Climate Change's fourth assessment
report's central scenario, as shown in the first column.
This suggest governments should feel more compelled
- not less - to implement climate policies if economies are going
to continue to stagnate.
One simple change would be to raise the carbon
price - either through a tax or adjusting current emissions trading
Our results suggest the EU should be charging
about $130 more to emit a tonne of carbon dioxide than the current
ETS price if economies are expected to continue to grow slowly. The
price is still about $110 per tonne too low even when the
additional charge of the UK carbon price floor is
Our calculations show just how unfit for purpose
the EU ETS currently is. Even If there is better economic growth -
as Europe's governments hope there will be - the current price is
still about $100 too low.
Governments are currently significantly
undervaluing the cost of emitting a tonne of carbon dioxide. This
climate inaction is not justified, particularly when economies are
Getting much richer isn't the
If the main problem is that people are much poorer in the future
it might seem like governments should actually put all their
efforts into stimulating economic growth. Our results show this
isn't the case, however.
The social cost of carbon dioxide starts to rise again with
rapid economic growth. The curve on the graph below shows the
social cost of carbon dioxide is actually lowest with medium levels
of economic growth in rich countries - between about two and four
per cent per year.
If industrialised economies grow at a rate of
five per cent per year - an extremely optimistic scenario - average
GDP per person is over $2 million by 2100. Which sounds
But the social cost of carbon dioxide is also higher because the
chance of the worst effects of climate change occuring - known as
discontinuity - increases as rapid economic growth is accompanied
by far greater emissions and and the associated temperature change.
Not so nice.
Governments should resist the urge to use the economy as an
excuse for failing to implement what they see as economically
stifling climate policies. Our research suggests they should be in
fact be charging more to emit carbon dioxide, not less.
So next time Osborne, Obama or anyone else says a
poorly economy means we shouldn't be taking steps to address
climate change, raise a sceptical eyebrow and wave our work at the