William D. Nordhaus, PNAS (2010), Economic aspects of global warming in a post-Copenhagen environment

Proceedings of the National Academy of Sciences, published online before print June 14, 2010; doi: 10.1073/pnas.1005985107

Economic aspects of global warming in a post-Copenhagen environment

William D. Nordhaus
Department of Economics, Yale University, New Haven, CT 06520, U.S.A.

Abstract

The science of global warming has reached a consensus on the high likelihood of substantial warming over the coming century. Nations have taken only limited steps to reduce greenhouse gas emissions since the first agreement in Kyoto in 1997, and little progress was made at the Copenhagen meeting in December 2009. The present study examines alternative outcomes for emissions, climate change, and damages under different policy scenarios. It uses an updated version of the regional integrated model of climate and the economy (RICE model). Recent projections suggest that substantial future warming will occur if no abatement policies are implemented. The model also calculates the path of carbon prices necessary to keep the increase in global mean temperature to 2 °C or less in an efficient manner. The carbon price for 2010 associated with that goal is estimated to be $59 per ton (at 2005 prices), compared with an effective global average price today of around $5 per ton. However, it is unlikely that the Copenhagen temperature goal will be attained even if countries meet their ambitious stated objectives under the Copenhagen Accord.

Link to abstract:  http://www.pnas.org/content/early/2010/06/10/1005985107.abstract

Link to open-access full article (pdf):  http://www.pnas.org/content/early/2010/06/10/1005985107.full.pdf+html

Introduction

The world is far along in what Roger Revelle and Hans Suess called “our great geophysical experiment” (1). The failure of nations in Copenhagen in December 2009 to reach a concrete agreement to extend and broaden the Kyoto Protocol raises the prospect that attempts to limit atmospheric concentrations of carbon dioxide (CO2) and other greenhouse gases (GHGs), with the resulting global temperature increases, may prove politically difficult. This study reports improved estimates of the likely trajectories of global output, GHG emissions, climate change, and damages in the coming decades.

Climatologists and other scientists have warned for more than half a century that the accumulation of CO2 and other GHGs in the atmosphere is leading to global warming and other significant climatic, ecological, and societal changes. However, the economic, political, and institutional issues involved in limiting GHG emissions have only begun to be considered over the past 2 decades.

The difficulty is that reducing emissions is an extreme “global public good,” meaning that no single nation can capture for itself a substantial part of the benefits from its own emission reductions (2). The intellectual challenge is daunting, raising formidable issues of data, modeling, uncertainty, international coordination, and institutional design. In addition, the economic stakes in climate-change policy are huge.

What are the stakes if nations fail to reach meaningful climate change agreements? In other words, what are the climatic and economic consequences of uncontrolled emissions of GHGs over the coming decades? These questions become particularly salient, given the apparent difficulties of reaching a binding and effective international agreement. Surprisingly, the impressive work of scientific bodies such as the Intergovernmental Panel on Climate Change (IPCC) does not address the likely trajectory of uncontrolled emissions, either in the past two rounds of assessments or prospectively in the coming fifth round. The present study attempts to explain the issues and provide some tentative answers.

More at the link above.