Posted by: Dr Churchill | October 2, 2012

Climate Change is a big part of our economy


The Green Bonds Summit at the UN convened by the Environmental Parliament in New York has just concluded and it gives us some fresh intelligence of what’s to come:

As the world faces up to the worst global financial crisis since the Great Depression of the 1930s, the economic case for tackling the global climate crisis is more compelling than ever.

The moment of the CRASH in 1929 is staring us in the face and is clearly ahead of us if we fail to act…

Because as we embark upon the long trek to sustainability and economic recovery for growth, we need a technological revolution that will drive sustainable growth and development of a low-carbon global economy. And as it turns out this is not just behavioural economic changes we need but real technical economic changes for an emergent and complex new economy.

We need the tools that will augment our ability to respond and the economic impetus without it being hampered by ideology and politics or business interests and ignorance…

Yes, we need to act now. Act now and forcefully because Climate change now costs more than the emissions cuts that are needed to tackle global warming…

And it costs far more than inaction…

Truly Global Warming screws up our economies.

Because Climate Change inaction costs us our wealth today  —  not just tomorrows’ wealth.

Never mind what’s going to happen in ten or twenty or even a hundred years form now…

The end of the century 2100 is too far to matter really for most of us.

Yet today climate change is Real, it is harming our lives and is already a Big part of our lives.

And something you didn’t now:

Climate Change is already shrinking the global economy.

SHORT-TERM thinking is a criticism often levelled at corporations and banks by anti-capitalist protesters, and they may well be right. A lack of concern for the future is built mathematically into economic theory, and this carries through to the behaviour of companies and governments. But a different way of putting a financial value on the future is changing that.

Economists assume that society will gradually get richer, typically by about 3 per cent a year – occasional crashes notwithstanding. To account for this, they “discount” future events: models might value a resource at $100 if it’s immediately available, but only $97 if it is only available in a year’s time.

The problem, is that models shave off the same percentage every year. As a result, the value of assets decreases exponentially, and is effectively zero within decades or centuries. So economics effectively ignores far-future events, even if they are world-shattering.

According to the Climate Vulnerability Monitor – a report by Spanish non-profit organisation DARA – in 2010 climate change shaved 1.6 per cent off global gross domestic product. The figure was calculated by adding the harmful effects of climate change to the problems of the carbon-based economy, such as air pollution.

Previous studies, such as the 2006 Stern Review, concluded that climate change would not become a net cost for decades. But they had not considered climate’s impact on productivity.

As the temperature increases,people work less well. It has been assumed that a hotter living and working environment is nothing to worry about, but the 5 billion people living in the hot parts of this planet are already constrained by heat.

Climate change now costs more than the emissions cuts that are needed to tackle global warming. Such cuts would cost 0.5 per cent of global GDP, whereas the cost of climate change will be 3.2 per cent of GDP by 2030.

This boosts the case for urgent action, because it proves that Caps on CO2 emissions should be much tighter, and carbon prices ought to be very much higher, than they are now.

The international framework for a climate change agreement is up for review as the initial Kyoto period to 2012 comes to an end. Though there has been much enthusiasm from political and environmental groups, the underlying economics and politics remain highly controversial as we are gearing up to go to Doha for the United Nations talks aptly named COP.
Yet today we need to take a cool headed look at the critical roadblocks to agreement, by examining the economics of climate change, the incentives of the main players (the US, EU, China) and policies governments can put in place to reduce greenhouse gas emissions, and ultimately shift our economies onto a low-carbon path.
The Environmental Parliament wants to bring together leading climate change policy experts to set out the economic analysis and the nature of the negotiations after RIO+20 to Doha for the UN and beyond.
 This high level conference will take place in Oxford this November and we will be reviewing all of the main issues, because the priority is a reassessment of the economics of climate change.
This is fundamental as it goes well beyond what might be called conventional wisdom. The geography of the costs and benefits of climate change along with the very different perspectives of Africa, China, the US and Europe comprise what I term CARBONOMICS.
Carbonomics details the building blocks needed to tease out a tenuous global agreement. It needs to examine the very different interests that will have to be reconciled.
We will invite politicians and officials from the relevant ministries at the civil service level – the true practitioners of policy who tune the instruments of policy at the global level and we will invite you too.


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