The world faces rising costs of climate change as oil prices drop
19 December 2018 | Mitigation
In the last few weeks, two important climate reports were released – the Fourth National Climate Assessment (NCA4) and the UN Emissions Gap Report 2018. Both studies highlight the risks of rising greenhouse gas emission (GHG) concentrations in the Earth’s atmosphere, and the potential consequences should these trends continue. The threats posed by a warming world are not just dangerous for the climate-dependent sectors of our economy (crops, livestock, and global fisheries), but bad for global security as well. The Trump Administration’s Pentagon calls climate change a ‘threat multiplier’ because it aggravates pre-existing societal stress factors. Instances of state collapse, refugee flows, and conflicts over basic resources, including food and water attributable to climate change, have already been studied.
But battling climate change will not be easy – or cheap. Since the era of a steam engine, the global economy has been inextricably linked to fossil fuels – from the oil that powers the world’s vehicles to the coal and natural gas that illuminates our cities – which means that a transition to cleaner alternatives will need to be managed with care. Too sudden a shift -- and we may risk introducing economic, social and geopolitical shocks that could dwarf the worst outcomes of climate change.
On a positive note, there is broad scientific – and now public – consensus that anthropogenic (human-caused) climate change is taking place. When previously sequestered hydrocarbons are burned for energy, they release heat-trapping compounds such as carbon dioxide (CO2) and methane (CH4). The increased concentration of these gases in our atmosphere prevents solar energy from dissipating, leading to increases in average global temperatures (the Greenhouse Effect). More heat in the earth’s climate system means more frequent and more severe weather events, dramatic shifts in precipitation, shrinking polar ice caps, and rising ocean levels. And temperatures are going up by every conceivable metric.
What the Reports Say
The NCA4 is important because it puts in perspective two different greenhouse gas concentration scenarios – Representative Concentration pathways RCP 8.5 and RCP 4.5.
The NCA4 predicts that under the RCP8.5 or ‘business as usual scenario’, fossil fuel emissions continue to rise throughout the century, reaching 4.2 –8.5 degrees Fahrenheit (2.4°–4.7 degrees Celsius) above 1986–2015 average levels.
Under the lower RCP4.5 GHG concentration scenario, which assumes a rapid global transition to renewable fuel sources, emissions peak mid-century and then taper off. By 2090, global average temperatures would increase by 1.7 –4.4 degrees F (0.9 –2.4 degrees C) relative to 1986–2015.
But the dangerous RCP 8.5 is looking much more likely than RCP 4.5. Low oil prices – as we have experienced since their crash in November – hurt the renewables transition by making fossil fuels more competitive. Without a large-scale substitute for oil in the world’s transportation fleets, the lower-case scenario may be out of reach.
Even an RCP 4.5 scenario (2.4 degrees C or 4.5 degrees F temperature rise by 2090) could cost the U.S. economy 4% of GDP. In a worst-case scenario, global warming costs the United States 15% of its GDP by the end of the century – if not more. According to the UN Gap Report, warming needs to be kept below 2 degrees C to avoid trillions of dollars of future expenses. While the timeline is not specified, the report estimates that the $54 trillion in damage from 2.7 degrees C of warming would grow to $69 trillion if the world continues to warm by 3.6 degrees C and beyond.
The Environmental Defense Fund claims that $40 per ton of CO2 is the best estimate for the cost of carbon, but it admittedly fails to calculate all of the widely recognized and accepted scientific and economic impacts of climate change. The UN emissions gap report suggests that a carbon tax of USD $70 per ton of CO2 reflects a more accurate market price. But as these discrepancies show, our best calculations are still far from precise, and instituting these policies is much easier said than done.
If the governments and the private sector adopt early and timely mitigation, we can help reduce extreme climate impacts in the short term, while preventing dangerous thresholds from being crossed in the long-run. Assuming the UN and U.S. scientific studies are correct, countries need to scale up and increase the effectiveness of their domestic policies to achieve the temperature goals of the Paris Agreement, signed during COP21. They also need to strengthen their commitment to their Nationally Determined Climate Contributions (NDCs) and enhance their mitigation ambitions as well.
Our society has reached a critical milestone in accepting that climate change is real and dangerous. The next step is finding ways to address this planetary threat in politically and economically sustainable ways before it’s too late. There won’t be an easy or cheap answer.