Socrates would have understood; the more I blog, the more I realise how much there is out there which was previously unknown to me. During a quite spell in Blogostan, I was surfing the virtual waves when a link came up to a side presentation at Geneva last month by the World Business Council for Sustainable Development. This linked to the release of their new climate and energy policy document, ‘Policy directions to 2050‘. I looked. I was struck; I delved. Then I thought of something.
This is no penny-ante organisation; one of the ‘big players’ in corporate/business response to climate change, at CEO level, and with 190+ members. Heck, just take a look at the pdf document; here is an object lesson in how to produce a tightly written, well presented and clear policy document. It is based on two previous publications, one of which sets out the ‘facts and trends‘ relating to energy and climate change, another which sets out the ‘pathways‘ to sustainable development.
An interesting side point is the ‘factual’ element of their presentation is based on both IPCC and IEA reports; it therefore takes a broader scope in defining the facts and the challenges than is common. The facts are certainly open to discussion, in particular, some of the assumptions being made about potential impacts of warming above 2C. But the whole makes an intriguing read for those of us who want to understand how to approach planning for the future in a ‘realistic’ way. If you like, it shows the ‘CEO mindset’ with respect to energy and climate change in the future.
So, what do they have to say? The policy document really is extremely concise and therefore hard to reduce fairly, but the conclusions reached are familiar: In order to sustain development and ensure economic stability, action is needed now to reduce emissions, shift energy production to less carbon-intensive sources, and adapt to expected changes. Although the numbers are slightly different, and some of the material could arguably be considered ‘conservative’ in its estimates, the WBCSD reaches the same broad conclusion as most climate scientists, the IPCC and all but the few remaining ‘hardline’ ‘sceptics’; Action and action now.
Then the thought came to me. One of the current favourite objections to action on emissions or energy production policy is founded on the supposed contradiction of increasing development (= energy demand growth) vs. emissions reduction. Procrastinators consistently argue that emissions regulations will lead to recession and therefore are not acceptable. The argument is based on the assumption that nothing takes priority over sustaining a stable global economy.
These documents, and I am sure much else produced by the WBCSD, put this argument in its place. Not only does the policy document show that sustainable development in the context of stable economy is possible, it also puts the case that, in the context of expected changes to climate, mitigation and adaptation is the best way to ensure economic stability in the future. So let’s lay some more ghosts to rest in the larger debate; the claim that mitigation necessarily implies recession is false. The claim that emissions regulations are anti-development is also false. The claim that action to reduce emissions now will result in less wealth to sustain development is false. The claim that corporations and businesses are unaware or unwilling to act or to respond to regulation is false.
Where does this leave the current state of play with regard to policies on climate, energy and emissions? Simple. The only players dragging their heels in this game now are our representatives, the various governments of the world (though some more than others). It seems that almost every sector of society is aware of at least some of the issues and some of the problems and is willing to both act and (in part) pay for effective action to be taken. So the questions remain, why did the G8 produce nothing of real import, and what will it take to get our leaders to do what must be done, sooner rather than later?
Be loved.
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June 14, 2007 at 3:04 am
Steve Reynolds
Fergus,
I’m curious why you think the WBCSD has so much credibility, as opposed to the peer-reviewed experts (economists in this case).
They seem to be a collection of companies (including Ford and GM) that could just be trying to get governments to fund their R&D.
Isn’t this the mirror image of an Exxon report denying peer-reviewed climate science?
Of course, that does not prove they are wrong, but the situation is ironic.
June 14, 2007 at 9:06 am
fergusbrown
Hi, Steve,
Perhaps it is too early in the morning, but ‘credibility’ is the question? To be clear, I am not ‘championing’ the WBCSD or its report. I use it as evidence that a stable economy and mitigitation are not necessarily mutually exclusive.
If you are talking about the reference I made to it’s relative status, this was to place it in context for readers, rather than to claim a special authority for its report. In fact, I do not think the pathway they propose is in any way ‘ideal’, but it does serve to illustrate what some important members of the corporate community think of as acceptable action, which in this case includes a definitive emissions policy and targets by 2010; this goes further than the US government has managed so far.
I am unclear what you mean about the ‘mirror-image’ comment; if this means that it is a non-peer-reviewed report promoting a particular line in climate policy, and as such has no sound foundation, then you have a case, but the detail would have to be looked at to ascertain how sound the assumptions are. In this case, I would say that its significance lies not in the methodology (or even the motive for producing it), but in the conclusions it reaches, which seem clear enough, if rather too ‘generous’ to business for comfort.
There is a certain irony in seeing those who have previously participated in some hot debates about the validity of the need for emissions regulation turning around and promoting it as a necessary part of a sensible step forward. Why they are doing so is unknown to me; what I can see is that here is corporate recognition of many of the proposed actions promoted by scientists and others as a response to the risks associated with AGW.
My contention, then, is that there is limited credibility in arguing the economic case for avoiding a firm emissions policy, and that these reports provide an illustrative example (not a definitive one).
Were there any economists in particular that you were thinking of, or any particular paper or report, which contradicts the principal ideas in the WBCSD report?
Regards,
June 16, 2007 at 2:30 pm
Steve Reynolds
Here a source (looks at 28 published studies):
Energy Policy 33 (2005) 2064â??2074
The marginal damage costs of carbon dioxide emissions:an
assessment of the uncertainties
Richard S.J. Tol
Abstract:
One hundred and three estimates of the marginal damage costs of carbon dioxide emissions were gathered from 28 published studies and combined to form a probability density function. The uncertainty is strongly right-skewed.
If all studies are combined, the mode is $2/tC, the median $14/tC, the mean $93/tC, and the 95 percentile $350/tC. Studies with a lower discount rate have higher estimates and much greater uncertainties. Similarly, studies that use equity weighing, have higher estimates and larger uncertainties. Interestingly, studies that are peer-reviewed have lower estimates and smaller uncertainties. Using standard assumptions about discounting and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50/tC, and probably much smaller.
June 17, 2007 at 5:55 pm
Heiko Gerhauser
I think it all depends on the detail of the particular emissions reduction policy. How bad for development can it be, if some literally fat westerner cuts down on his beef consumption and cycles to work rather than taking his car?
On the other hand, if you make cement so expensive that developing countries can no longer afford to build schools or hospitals, it’s not hard to see how that might impact development …
June 18, 2007 at 1:14 am
fergusbrown
If I read your citation right, Steve, then a figure of no more than $50/tC would amount to around 3.5 trillion dollars (or less) per year of marginal damage costs, though some believe it may be higher than this, at current rates of emission. That seems like a lot.
Heiko, the problem is that, too often, what looks like a good plan for sustainable development gets hijacked and abused at the first opportunity in the name of turning a buck, because ‘foreign exchange now’ is a ‘better’ guarantee of future security than doing what would environmentally sensible.
The relationship between developed, emerging and developing nations and the creation of equitable policies which will result in the right sort of action is fraught with complexity, but mostly because such things are treated as investment opportunities, or wealth-generation schemes, rather than necessary steps to avoid likely future problems. I don’t even pretend to have an answer for this.
Regards,
June 22, 2007 at 4:46 am
Steve Reynolds
>a figure of no more than $50/tC would amount to around 3.5 trillion dollars (or less) per year …
I think that is $350 billion, but the median peer-reviewed number was $14/tC, or ~$100 billion/year, which is much less than most mitigation cost estimates.
June 30, 2007 at 6:58 am
Paul Baer
Damage cost estimates are comprised of not less than five components:
1) an estimate of how much climate change will be caused by GHG emissions
2) an estimate of the climate impacts that will occur (e.g., storms, sea-level rise, species extinction)
3) an estimate of the economic value of the impacts that will occur (including the value of lost lives and species)
4) a method for aggregating impacts over time (typically an exponential discount rate, but other methods of discounting have been used) and
5) a method for aggregating impacts occuring to different people alive at the same time (typically referred to as “equity weighting”.
(1) is extraordinarily uncertain. Most studies use for example mid-range estimates of climate sensitivity
(2) is extraordinarily uncertain. No one knows if the Greenland ice sheet will melt at 2ºC or 4ºC or not at all
(3) is uncertain and ethically indeterminate
(4) is ethically indeterminate and extremely controversial
(5) is ethically indertiminate, is very controversial and mainstream economists typically ignore it.
In short, the marginal damage cost of carbon is not anything like an objective fact; it is, quite literally, something we decide rather than something we measure or predict. Mainstream economists who peer review each other’s work share assumptions about 3, 4 and 5 that tend to lead to very low numbers. The fact that the median numbers Tol cites are low (and lower if they’re peer reviewed) are a comment about the economics community and their values and assumptions, not about the world.
July 2, 2007 at 12:01 pm
fergusbrown
Thanks for responding to this Paul: I was unsure how to respond to Steve accurately and you seem to have done the job rather well. My own feeling is that this serves to highlight some of the differences between an ‘economist’s’ assessment and a scientist’s version of the same.
Although you are right to say that many of the estimates are based on high levels of uncertainty, there have been some interesting discussions recently on the Google Globalchange discussion forum about gaining some level of agreement on reasonable figures. I’ll be working on this over the next few days.
Regards to you both,
July 17, 2007 at 3:24 am
inel
Hi fergus!
Did you hear about the European (un)Happy Planet Index in the news today? I posted it for my Norwegian friend (as we often compare notes on what our families find visiting and living in Norway, the US and the UK). Now it occurs to me you also might find this New Economics Foundation (nef) report or at least the Friends of the Earth (FoE) UK 21st in European league of carbon efficiency and well-being press release about it interesting.
July 17, 2007 at 3:27 am
inel
P.S. You can move my comment to another post about climate change and economics if you like. Whatever works for you.