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Providing Insight
Into Climate Change
Economics
26Articles

Social Cost (Benefit) of Carbon Dioxide from FUND with Corrected Temperatures, Energy and CO2 Fertilization

The FUND integrated assessment model was modified to replacing its faulty climate component with a 2-box ocean climate component, replacing the space heating and cooling component with components that match expenditure data, and adjusting the CO2 fertilization impacts due to recent studies of the effect. The model was run to determine the social cost (benefit) of carbon dioxide weighted by an equilibrium climate sensitivity probability distribution calculated by the energy balance method accounting for urban and natural warming. The global social net benefit of CO2 is estimated at US$11.8 and US$6.2 per tonne CO2, and Can$ 14.2 and Can$7.4 per tonne CO2 at discount rates of 3% and 5%, respectively for emissions in 2020. The positive net benefits of CO2 emissions means that CO2 emissions should be subsidized, not taxed.



The True Cost of Wind and Solar Electricity in Alberta

We are often told that wind and solar are now cheaper than other forms of electricity generation. This ignores the fact that wind and solar generators cannot meet consumers’ electricity needs when the wind is not blowing or the sun is not shining. They must be fully backed up by electricity sources that work even on dark, windless nights, and when the costs of providing that backup are accounted for, it turns out that wind and solar are very expensive. Batteries are sometimes proposed as solutions to wind and solar generation’s variability. However, while batteries can reasonably address the variability over periods from seconds to a few hours, they cannot address the months-long seasonal variability because the associated costs would be in the TRILLIONS of dollars.



The Global Economic Impact of Climate Change on Energy Expenditures

A paper, Lang and Gregory 2019, showed that a 3 °C increase in the global mean surface temperature would reduce USA energy expenditures and increase economic wealth by +0.07% of gross domestic product (GDP), whereas the FUND economic model projects an wealth impact of -0.80% of GDP. This article extends the analysis to global impact and finds a 3 °C increase would reduce global energy costs and increase wealth by +0.05% of gross world product (GWP) using empirical data, while FUND projects a wealth impact of -1.59% of GWP. The total economic impact of a 3 °C increase of global mean temperatures would increase wealth by +0.20% while FUND project -0.68% loss of wealth, assuming an climate sensitivity of 3.0 °C for double CO2. At a realistic ECS of 1.0 °C, the impact of a 2 °C temperature increase (in 2147) using empirical energy data would be +1.07% of GWP. This positive impact of global wealth increased to 1.45% of GWP when including an updated estimate of CO2 fertilization. This study shows that CO2 emissions have a large social benefit, so policies to restrict CO2 emissions are harmful and misguided.



Test of FUND’s Temperature Response to CO2

FUND is a widely cited integrated assessment model used to study the impacts of climate change. The FUND's temperature response to increasing CO2 alone at various equilibrium climate sensitivity values is tested by setting the CO2 increasing at 1% per year to a doubling of CO2 then held constant. At ECS = 1.5 °C the TCR is equal to the ECS, also 1.5 °C! This implies that the oceans are instantaneously in temperature equilibrium with the atmosphere, with no delay. This is physically impossible. The temperature responses to greenhouse gas emissions in FUND with ECS at or below 1.7 °C are much too high. The calculated social and economic impacts are therefore too high.



Climate Sensitivity, Agricultural Productivity and the Social Cost of Carbon in FUND

This paper by Dayaratna, McKtrick & Michaels evaluates the implications of recent empirical findings about CO2 fertilization and climate sensitivity on the social cost of carbon (SCC) in the FUND economic model. New satellite and experimental evidence suggests that the agricultural productivity gains due to CO2 fertilization are at least 30% greater than what is parameterized in the FUND economic model. The equilibrium climate sensitivity (ECS) probability distributions used are from the Lewis & Curry 2018 (L&C) and Christy & McNider 2017 (C&M) empirical studies, which gives ECS best estimates of 1.5 °C and 1.4 °C, respectively. Using a 5% discount rate, the 30% increase of CO2 fertilization and L&C ECS parameters, the FUND model calculates a best estimate SCC in 2020 of 2018US$-4.08/tCO2 and there is a 0.78 probability that SCC is negative.




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