Frank Ackerman considers “The Economic Case for Slashing Carbon Emissions”
In a recent article for Yale’s Environment 360, the frequent RWER contributor Frank Ackerman tells how leading climate scientists have come to realize that the current international policy goal of keeping the atmospheric concentration of CO2 below 450 parts per million puts us on course for an ice-free Earth and thereby a catastrophic rise in sea levels. To avoid this, atmospheric concentrations of CO2 must be reduced to 350 ppm by the end of this century. Ackerman’s article looks at what the economic costs will be. He writes:
“to reach 350 ppm, we will have to go far beyond the emission reductions considered in recent U.S. proposals. How much will it cost to reach this more ambitious target? Until recently, most economic research focused on higher targets such as 450 ppm or more. There are, however, four major climate economics modeling groups — all at European universities — that have analyzed the costs of reaching 350 ppm.
One group starts from the (realistic) assumption of high unemployment, and finds that long-run employment and economic growth would be increased by a program of public investment in green technology and emissions reduction that leads to 350 ppm. The other three groups adopt the common assumption that short-run unemployment can be ignored in long-run models. They generally find that the needed emissions reductions will cost an average of 1 to 3 percent of world economic output, for some years to come.
Other studies have reached more optimistic conclusions about costs. McKinsey & Company, an international consulting firm, has carried out detailed studies of the costs of hundreds of emission-reducing technologies. They find that some emissions can be eliminated for no cost or even an economic savings; more than half of worldwide business-as-usual emissions in 2030 could be eliminated at very small total cost. The net costs of reducing carbon emissions (i.e. investment costs, minus the value of energy saved) go down when the price of oil goes up, and vice versa. McKinsey’s entire package of reductions, eliminating more than half of world emissions, would have zero total cost if the price of oil were $90 per barrel.
Studies from major environmental groups, including Greenpeace and the Union of Concerned Scientists (UCS), have reached even more optimistic conclusions than McKinsey. Both Greenpeace and UCS project substantial economic savings from emission reduction, with fuel savings much larger than the costs of investment. Both assume high oil prices — up to $140 per barrel for Greenpeace — along with rapid change in emissions-reduction technologies.”
The whole of Ackerman’s article is available here.