Introduction to Climate Change

6. Understanding the Costs and Benefits of Preventing Climate Change

Much of the current debate regarding the appropriate response to climate change is related to an evaluation of the benefits and costs of different strategies. Of course, given the enormous range and complexity of the potential impacts from climate change (described above), it is no surprise to find that estimates of costs and benefits vary considerably and are shrouded with significant levels of uncertainty.

Defensible predictions have placed the cost of controlling greenhouse gas emissions at between $20 per ton and $400 per ton. The United States, at least under President Clinton, settled on an estimate closer to the $20. Its estimate assumed the United States would gain much of its reductions under emissions trading and other flexibility mechanisms.

A. Economic Costs of Controlling Emissions

Economic analysis of the costs and benefits of reducing carbon dioxide emissions can help policymakers decide whether emissions should be curtailed and, if so, how much and on what kind of schedule. However, assigning realistic dollar values to these various costs and benefits has proved extremely difficult. As much as 10 to 30 percent of current energy demand could be eliminated with off the shelf and soon to be available technologies, such as better electric motors, more fuel efficient cars, and better insulation of dwellings.

The timing of emission reductions can have a large effect on abatement costs. Under certain circumstances, deferring emission reductions somewhat may save money because the cost per ton of reducing emissions is expected to decline with time. The trade off, of course, is that delaying emissions in the beginning necessitates steeper cuts later on or, alternatively, accepting a higher rate of global warming. Vigorous promotion of research and development that focuses on renewable energy sources and energy efficient technologies can cut the eventual costs of abatement significantly, and is therefore considered a prudent investment even in the near term, particularly if emission cuts are delayed and new technologies are being relied upon to drastically reduce emissions in the future.

B. Economic Benefits of Reducing Emissions

If setting a price tag on the costs of cutting greenhouse gas emissions is difficult, determining the dollar value of the benefits is even more problematic. The primary benefit of abatement is avoiding the damages associated with global warming, which include coastal inundation from rising sea levels, disruption of rainfall and therefore water use patterns, agricultural effects due to heat stress, and ecosystem damage such as loss of biodiversity and habitat disruption. Other important potential benefits also come from cutting energy related emissions, however such as cleaner air, reduced damage to crops and forests, and less environmental disruption from fossil fuel extraction. Other benefits-both local and regional-of emissions abatement, including air quality improvements can be quite high.

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