Studies make business case for fighting climate change
The anticipated high economic cost of climate action was the main reason behind the rejection of the Kyoto Protocol by the United States. In Europe, business circles have criticised the EU's CO2 trading scheme for pushing up electricity prices.
Researchers at the Global Development and Environment Institute at Tufts University (United States) now say that trillions of dollars of damage could be avoided by the end of the century if resolute action is taken now to reduce global warming.
Meanwhile, other research carried out for oil major Shell [*.pdf] for the first time quantified the potential size of the market for businesses [report *.pdf] that propose technologies or services to combat climate change.
A study commissioned by environmental group Friends of the Earth and published on 13 October looks at the potential costs and benefits of warmer weather around the globe. The Tufts study, "Climate change - the costs of inaction" [*.pdf], says possible benefits of global warming such as increased agricultural yields will quickly be offset by the costs of extreme weather events - droughts, floods, powerful storms, heat waves.
"The effects of variable and extreme weather events are bad for everyone, North and South - and outweigh any potential benefits," the researchers write. "Beyond 2° Celsius, all regions will suffer from the worsening average effects of climate change." Based on the assumption that average global temperatures would rise by 4°C above pre-industrial levels by 2100, the researchers predict that annual economic damages could reach US$20 trillion by 2100, or "6 to 8% of global economic output at that time".
In comparison, they say limiting the temperature increase to 2°C would eliminate more than half of these predicted damages. Citing an estimate by the German Institute for Economic Research (DIW), they say that, by 2100, this would result in $12 trillion worth of avoided annual damages - something that would be achieved by spending "only" $3 trillion per year on climate protection:
biomass :: bioenergy :: biofuels :: energy :: sustainability :: climate change :: CO2 :: carbon budget ::
For the researchers, the economic implication is that the cost of reducing the damage is worth more than the cost of reducing emissions of global warming gases.
For Friends of the Earth, the environmental NGO that commissioned the study, the report demonstrates that climate change "will not only be an environmental and social disaster, it will also be an economic catastrophe". It says a key tool that could be used at national and European levels would be to define a certain amount of carbon dioxide that the economy would be allowed to emit over a given period of time. Such a "carbon budget" [*.pdf] would differ from Kyoto-style emissions reductions targets in that it would be strictly limited and could not be exceeded without a penalty.
In a separate study carried out for Shell, researchers for the first time quantify the businesses opportunities of developing technologies or services to combat climate change. The study suggests that demand for these products and services could rise as a result of government action and provide a host of new opportunities for SMEs by the year 2010.
It says the market could reach £30bn for British business over the next ten years. Markets identified in the report include the building sector, renewable electricity, renewable road and transport fuels and energy efficiency.
Shell boss Lord Oxburgh said: "The urgent need to reduce greenhouse-gas emissions offers opportunities to the nimble. There is now scope for a wide range of devices and services, which a decade ago would have made no economic sense, and for which there would have been no demand."
The studies will feed in to a wide review on the economics of climate-change launched in Britain a year ago. The review, headed by Sir Nick Stern, tries to draw a comprehensive understanding of the economic challenges posed by climate change and how they can be met, in the UK and globally.
The review is expected to produce a report to the UK Prime Minister and Chancellor by autumn 2006.
More information:
British Treasury: Stern Review on the Economics of Climate Change
Global Development and Environment Institute at Tufts University (GDAE): Report - "Climate Change - The Costs of Inaction" [*.pdf] (11 Oct. 2006)
Tyndall Centre: Living within a carbon budget [*.pdf] (July 2006)
Ecofys: Developing a carbon budget for the UK with opportunities for EU action [*.pdf] (Sept. 2006)
Shell: New report on business and climate change for Shell Springboard (12 Oct. 2006)
Shell: Report - The business opportunities for SMEs in tackling the causes of climate change [*.pdf] (Oct. 2006)
Friends of the Earth UK: Economists Warn Climate Change Will Cost World Trillions If Governments Fail To Act [*pdf] (13 Oct. 2006)
Friends of the Earth UK: Briefing - New research on the economics of climate change [*.doc] (Oct. 2006)
Researchers at the Global Development and Environment Institute at Tufts University (United States) now say that trillions of dollars of damage could be avoided by the end of the century if resolute action is taken now to reduce global warming.
Meanwhile, other research carried out for oil major Shell [*.pdf] for the first time quantified the potential size of the market for businesses [report *.pdf] that propose technologies or services to combat climate change.
A study commissioned by environmental group Friends of the Earth and published on 13 October looks at the potential costs and benefits of warmer weather around the globe. The Tufts study, "Climate change - the costs of inaction" [*.pdf], says possible benefits of global warming such as increased agricultural yields will quickly be offset by the costs of extreme weather events - droughts, floods, powerful storms, heat waves.
"The effects of variable and extreme weather events are bad for everyone, North and South - and outweigh any potential benefits," the researchers write. "Beyond 2° Celsius, all regions will suffer from the worsening average effects of climate change." Based on the assumption that average global temperatures would rise by 4°C above pre-industrial levels by 2100, the researchers predict that annual economic damages could reach US$20 trillion by 2100, or "6 to 8% of global economic output at that time".
In comparison, they say limiting the temperature increase to 2°C would eliminate more than half of these predicted damages. Citing an estimate by the German Institute for Economic Research (DIW), they say that, by 2100, this would result in $12 trillion worth of avoided annual damages - something that would be achieved by spending "only" $3 trillion per year on climate protection:
biomass :: bioenergy :: biofuels :: energy :: sustainability :: climate change :: CO2 :: carbon budget ::
For the researchers, the economic implication is that the cost of reducing the damage is worth more than the cost of reducing emissions of global warming gases.
For Friends of the Earth, the environmental NGO that commissioned the study, the report demonstrates that climate change "will not only be an environmental and social disaster, it will also be an economic catastrophe". It says a key tool that could be used at national and European levels would be to define a certain amount of carbon dioxide that the economy would be allowed to emit over a given period of time. Such a "carbon budget" [*.pdf] would differ from Kyoto-style emissions reductions targets in that it would be strictly limited and could not be exceeded without a penalty.
In a separate study carried out for Shell, researchers for the first time quantify the businesses opportunities of developing technologies or services to combat climate change. The study suggests that demand for these products and services could rise as a result of government action and provide a host of new opportunities for SMEs by the year 2010.
It says the market could reach £30bn for British business over the next ten years. Markets identified in the report include the building sector, renewable electricity, renewable road and transport fuels and energy efficiency.
Shell boss Lord Oxburgh said: "The urgent need to reduce greenhouse-gas emissions offers opportunities to the nimble. There is now scope for a wide range of devices and services, which a decade ago would have made no economic sense, and for which there would have been no demand."
The studies will feed in to a wide review on the economics of climate-change launched in Britain a year ago. The review, headed by Sir Nick Stern, tries to draw a comprehensive understanding of the economic challenges posed by climate change and how they can be met, in the UK and globally.
The review is expected to produce a report to the UK Prime Minister and Chancellor by autumn 2006.
More information:
British Treasury: Stern Review on the Economics of Climate Change
Global Development and Environment Institute at Tufts University (GDAE): Report - "Climate Change - The Costs of Inaction" [*.pdf] (11 Oct. 2006)
Tyndall Centre: Living within a carbon budget [*.pdf] (July 2006)
Ecofys: Developing a carbon budget for the UK with opportunities for EU action [*.pdf] (Sept. 2006)
Shell: New report on business and climate change for Shell Springboard (12 Oct. 2006)
Shell: Report - The business opportunities for SMEs in tackling the causes of climate change [*.pdf] (Oct. 2006)
Friends of the Earth UK: Economists Warn Climate Change Will Cost World Trillions If Governments Fail To Act [*pdf] (13 Oct. 2006)
Friends of the Earth UK: Briefing - New research on the economics of climate change [*.doc] (Oct. 2006)
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