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Providing Insight
Into Climate Change

The Economics of the IPCC’s Special Report on Limiting Temperatures to 1.5 °C

The Intergovernmental Panel on Climate Change (IPCC) published a special report (SR15) on the impacts of global warming of 1.5 °C above pre-industrial levels on October 8, 2018. The report says the cost of mitigating CO2 emissions in 2030 to meet the 1.5 °C target is about 880 US$/tCO2. Using a climate sensitivity based on observations including effects of natural climate change, urban warming and the best available economic model, the mitigation proposal will prevent a benefit of 8 $/tCO2, for a total loss of 888 $/tCO2 mitigated.

Calculating the “Social Cost�? of CO2 Emissions Using FUND

The social cost of carbon dioxide (CO2) emissions (SCCO2) is defined as the social worldwide costs (net of benefits) of emitting one tonne of CO2 into the atmosphere. The estimated SCCO2 is used for doing cost-benefit calculations for proposed government regulations. Integrated assessment models are used to estimate the SCCO2 considering demographic and economic variables in addition to the physical climate system. The temperature responses in IAM approximately match complex climate models. One of the IAMs, FUND, is freely available. This article presents plots and tables that give some idea of what FUND does. Using a 3% discount rate FUND calculates net damages of US$8.3/tCO2 if the climate sensitivity is 3.5 °C, and US$4.4/tCO2 of net benefits if the climate sensitivity is 1.0 °C for emissions in 2010, in constant US$2016.

Solar and Wind Power Cost about 9 times That of Electricity from Other Sources

Europe provides an example of what happens to electricity prices with increasing levels of wind and solar installed capacity per person. The plot below shows the average 2017 residential cost of electrical power against the installed capacity of solar and wind power per capita in each country. Germany, with 1144 W/capita of installed solar plus wind capacity in 2017, generated only 25.8% of its electricity from solar and wind. The best-fit line implies that the effective average solar and wind electricity costs in Europe are 9.2 times that of electricity from other sources, mainly fossil fuels. The resulting high electricity costs in countries with high installed solar and wind capacity is severely harming the economies of those countries. Industries that require large amounts of electric power are moving to less efficient countries which reduces wealth and increases global CO2 emissions.

Examining the Social Cost and Benefit of Carbon Dioxide; Dr. Michaels

Climate scientist Patrick Michaels provided testimony before the U.S. House of Representatives Committee on Science, Space and Technology on February 28, 2017 about the Social Cost and Benefit of Carbon Dioxide (SCC). His testimony shows that the US Interagency Working Group (IWG) used too high and outdated estimates of climate sensitivity despite at least 16 new studies that show much lower values. Using more current values from empirical studies, the SCC in the DICE model falls by 30-50% and in the FUND model it falls by over 80%. The climate models over-warm the bulk atmosphere by a factor of 2.5. Two of the models used by the IWG do not contain the any significant benefits of CO2 fertilization or benefits of warming. The SCC would likely be negative if the models used parameters from the current scientific literature.

Empirically Constrained Climate Sensitivity and the Social Cost of Carbon Dioxide

The authors applied the 2015 Lewis and Curry equilibrium climate sensitivity (ECS) distribution to the widely-used DICE and FUND Integrated Assessment Models. Previously the developers of these models (and others) have relied on model-simulated distribution of ECS values. using the empirical ECS distribution, the estimated SCC drops substantially in both the DICE and FUND models, and in the latter there is a large probability it is no longer even positive. The FUND model calculates that emissions in 2010 using a 5% discount rate have a SCC of -$0.65/tCO2, that is, emissions are beneficial. The ECS used however, is too high because it fails to account for urban contamination of the surface temperature record nor natural long-term climate change.