"The Arctic will retain its power to amaze for a long time. Yet it is now changing beyond the usual regional and annual variations in sea-ice formation, glacier melt and so forth. The Arctic is clearly melting. Its floating ice cap is shrinking and thinning and its glaciers are retreating. By the end of this century, maybe much sooner, there will be frequent Arctic summers with almost no sea...
Quotes on Economic Impacts of Climate Change
"The United States is strongly committed to the IPCC process of international cooperation on global climate change. We consider it vital that the community of nations be drawn together in an orderly, disciplined, rational way to review the history of our global environment, to assess the potential for future climate change, and to develop effective programs. The state of the science, the social and economic impacts, and the appropriate strategies all are crucial components to a global resolution. The stakes here are very high; the consequences, very significant."
"In a climate of poverty or persistent economic struggle, protecting the environment becomes a far more difficult challenge. Cold statistics don't begin to capture the harsh realities that are at stake. Development doesn't mean just another point in the gross national product, the GNP; it's measured in human lives, an end to hunger, lower infant mortality, longer life expectancy -- not just quality of life but life itself.
Environmental policies that ignore the economic factor, the human factor, are destined to fail. But there's another reason to consider the economic factor when the issue is the environment. There is no better ally in service of our environment than strong economies: economies that make possible the increased efficiencies that enable us to make environmental gains, economies that generate the new technologies that help us arrest and reverse the damage that we've done to our environment. We need new economies that allow us to make vital investments in our common future."
"The third principle is that we must embrace solutions that will allow us to continue to grow our economy as we honor our global responsibilities and our responsibilities to our children. We've worked far too hard to revitalize the American dream to jeopardize our progress now. Therefore, we must emphasize flexible marketbased approaches. We must work with business and industry to find the right ways to reduce greenhouse gas emissions. We must promote technologies that make energy production and consumption more efficient.
There are many people here today from companies that are addressing the climate change in innovative ways, taking steps that will save money for American families even as we reduce the threat of global warming."
"The fourth principle is that we must expect all nations, both industrialized and developing, to participate in this process in a way that is fair to all. It is encouraging that so many nations in so many parts of the world are developing so rapidly. That is good news for their people, and it is good for America's economic future. But as we've seen right here at home, rising energy demands that accompany economic development traditionally have meant large increases in greenhouses gas emissions. In fact, if current trends continue, emissions from the developing world will likely eclipse those from the developed world in the next few decades."
"In the pessimistic view of the Intergovernmental Panel on Climate Change (IPCC), the costs of global warming might be as high as 1.5 percent of the U.S. gross domestic product by the end of the next century. The cost of reducing carbon dioxide emissions, however, would be much higher. William Cline of the Institute for International Economics has calculated that the cost of cutting emissions by one-third of current levels by the year 2040 would be 3.5 percent of worldwide gross domestic product. The IPCC also reviewed various estimates of losses from stabilizing emissions at 1990 levels, a more modest objective, and concluded that the cost to the U.S. economy would be at least 1.5 percent of gross domestic product by 2050, with the burden continuing to increase thereafter."
"As you know, I oppose the Kyoto Protocol because it exempts 80 percent of the world, including major population centers such as China and India, from compliance, and would cause serious harm to the U.S. economy. The Senate's vote, 95-0, shows that there is a clear consensus that the Kyoto Protocol is an unfair and ineffective means of addressing global climate change concerns."
"To a great extent, the cost of controlling greenhouse gas emissions and stabilizing atmospheric concentrations will ultimately depend on technological developments over the next century. Innovation that dramatically reduces the cost of producing energy from nonfossil sources or of sequestering carbon dioxide emissions will ease the process of controlling emissions; innovation that tends to reduce the cost of finding, extracting, and using fossil fuels will complicate it."
"Suppose the utility damage from global warming to generations 50 years from now is equivalent to about $2 trillion of their welfare. At a 3 percent discount rate, this major damage would have a value today of about $500 billion. With a 3 percent discount rate, then, it would not pay to eliminate these harmful effects on future generations if it cost $800 billion (or, more generally, at least $500 billion) to ameliorate the harm through steep taxes on emissions, carbon sequestration, and other methods. To be sure, the benefits would exceed the present value of costs of greenhouse warming if damage were discounted at zero percent, 1 percent, or as high as almost 2 percent. When analyzing effects much further into the future, say 150 years, the discount rate used is even more crucial. The main reason for the much larger estimates of damage in the Stern Review, compared with the work of Nordhaus and others, is its use of a negligible discount rate.
To illustrate the advantage of using a discount rate that reflects the return on capital, assume that the long-term return on investments in physical capital is 3 percent. Instead of spending $800 billion on eliminating greenhouse gases, suppose the present generation invested it in physical capital, and that all the income yielded by the investment were also invested at a 3 percent rate of return. Then, the amount saved to generations 50 years from now would be more than $3 trillion. Hence, future generations would be better off if the present generation, instead of investing the $800 billion in greenhouse gas–reducing technologies, invested the same amount in capital that would be available to future generations."
"For the most part, it [the Stern Review] accurately describes the basic economic questions involved in global warming. However, it tends to emphasize studies and findings that support its policy recommendations, while reports with opposing views of the dangers of global warming are ignored. Such are the rules of the game, but we should be alert in reading the Review that – even though it was published by a university press – it is not standard academic analysis.
Putting this point differently, we might evaluate the Review in terms of the ground rules of standard science and economics. The central methodology by which science, including economics, operates is peer review and reproducibility. By contrast, the Review was published without an appraisal of methods and assumptions by independent outside experts. Nor can its results be easily reproduced."
"The mountain resort industry is a $ 5 billion industry that employs 165,000 people. When you add in real estate, the equipment and apparel side of the industry, and all of the other businesses that rely on winter tourism to stay afloat, we have profound economic impacts. The ski industry’s economic health is particularly crucial for a number of rural economies across the country."
"Global warming has taken center stage in the international arena over the last decade. Serious and disinterested analysts across the entire spectrum of economic and scientific research take the prospects for a warmer world seriously. A careful look at the issues reveals that there is at present no obvious answer as to how fast nations should move to slow climate change. Neither extremes – do nothing, or stop global warming in its tracks – are sensible targets today. Any well-designed policy must balance the economic costs of actions today with the economic and ecological benefits in the future."
"In practice, an economic analysis of climate change weighs the costs of slowing climate change against the damages of more rapid climate change. On the side of costs of slowing climate change, this means that countries must consider whether, and how much, to reduce their greenhouse-gas emissions. Reducing GHGs, particularly deep reductions, will require primarily taking costly steps to reduce CO2. Some steps involve reducing the use of fossil fuels. Others involve using different production techniques or different fuels or energy sources. Societies have considerable experience in employing different approaches to changing energy production and use patterns. Economic history and analysis indicate that it will be most effective to use market signals, primarily higher prices of carbon fuels, to give signals and provide incentives for consumers and firms to change their energy use and reduce their carbon emissions. In the longer run, higher carbon prices will provide incentives for firms to develop new technologies to ease the transition to a low-carbon future."
"The true economic impact of climate change is fraught with 'hidden' costs. Besides the replacement value of infrastructure, for example, there are real costs of re-routing traffic, workdays and productivity lost, provision of temporary shelter and supplies, potential relocation and retraining costs, and others. Likewise, the increased levels of uncertainty and risk, brought about by climate change, impose new costs on the insurance, banking, and investment industries, as well as complicate the planning processes for the agricultural and manufacturing sectors and for public works projects."
"... resources expended on solving today's climate-sensitive problems and advancing sustainable economic development will build human capital, advance technology, and enhance the adaptive and mitigative capacities of future generations."
"If one believes that developed countries have a moral and ethical obligation to deal with climate change, that obligation cannot, and should not, be met through aggressive emission reductions at this time - 'cannot' because the planet is already committed to some climate change - and 'should not' because the threats that climate change would exacerbate can be reduced more effectively, not to mention more economically, through focused efforts to reduce vulnerability or through broader efforts to advance economic development. Any such obligation is best discharged through efforts to reduce present-day vulnerabilities to climate-sensitive problems that are urgent and could be exacerbated by climate change."
Regarding Calls to reduce GHG emissions by 80% by 2050:
"Consider the residential sector. At the present time, American households emit 1.2 billion tons of CO2 - 20% higher than the entire nation's emissions must be in 2050. If households are to emit no more than their present share of CO2, emissions will have to be reduced to 204 million tons by 2050. But in 2050, there will be another 40 million residential households in the U.S.
Today, the average residence in the U.S. uses about 10,500 kilowatt hours of electricity and emits 11.4 tons of CO2 per year (much more if you are Al Gore or John Edwards and live in a mansion). To stay within the magic number, average household emissions will have to fall to no more than 1.5 tons per year. In our current electricity infrastructure, this would mean using no more than about 2,500 KwH per year. This is not enough juice to run the average hot water heater."
"There is abundant empirical economic evidence that an increase in climatic temperature of 2-3 degrees C may well benefit many regions of the United States in the form of enhanced amenity value, increased agricultural productivity, reduced deaths and disease resulting from cold weather, and increased value from warm weather recreational pursuits."
"Carbon-reduction schemes that depend on fees or taxes attain their goals of lower atmospheric carbon by slowing carbon-based economic activity. Producers and consumers respond to the carbon taxes both by switching to less carbon-intensive production and consumption and by simply reducing production and consumption."
"The laudable goal of both carbon markets and carbon taxes is basically the same: make polluters pay for the costs they involuntarily impose on others. So all that remains is to calculate the costs and let policy makers impose either the appropriate markets or taxes. The problem is that in the real world things are never as simple as economic theory would have it. Estimates of the potential damage caused by global warming range widely, depending on estimates of how the climate is likely to react to extra carbon dioxide, future economic growth, and, most crucially, the discount rate.
That term refers to the fact that most people prefer to have a dollar today than a dollar a year from now. This means that current dollars are worth more than future dollars; that people discount the value of future dollars. In other words, a person might be willing to forego a dollar now, but only in exchange for more than a dollar next year. From this insight, economists have developed the concept of discount rates. Let's say someone is willing to forgo a dollar today in exchange for $1.10 next year. The discount rate would be 10 percent. So here's the question that bedevils those trying to calculate the future damages caused by climate change: How much is a dollar in 2100 worth in terms of dollars foregone today? Let's just say that experts have a wide range of opinions on what the proper discount rate should be."
"Looking at recent reports by the Pew Charitable Trusts and the activist group the Natural Resources Defense Council, U.S. GDP in 2100 is projected to be between 0.6 and 3.6 percent lower than it would otherwise have been. Assuming the $14 trillion U.S. economy grows at 2.5 percent per year, GDP in 2100 would be $130 trillion. If climate change damages push GDP 3.6 percent below what it would otherwise have been that means that GDP in 2100 would be about $125 trillion, or $5 trillion lower. That's not nothing, but the loss is more than double ($12 trillion) what would occur if U.S. economic growth were depressed from 2.5 to 2.4 percent per year between now and 2100."
"Clearly, econometric models tell us that implementing smart policies could avoid some damage from climate change. But whether or not the benefits outweigh the costs depends entirely on the policies being optimally adopted. ...
Along similar lines, numerous econometric models project that while climate change will have relatively minor effects on developed countries it will significantly harm poor countries. One proposed policy solution is to have rich countries that emit a disproportionate share compensate poor countries. While this idea might seem appealing to some, one must also consider the sorry 50-year record of wealth transfers in the form of foreign development aid. As development economist William Easterly has argued, most of the $2.3 trillion in aid that rich countries have poured into developing countries over the past half century has been wasted. Is there any reason to think that trillions in climate change aid would be any more effectively managed?
Man-made global warming may simply be a negative externality for which the transaction costs are too high. In other words, any benefits achieved from trying to mitigate global warming will most likely be swamped by the costs of distributing the corporate welfare used to buy the political acquiescence of various industries."
"Many of the natural changes that are likely to result from climate change (such as more frequent storms, hurricanes, and floods) will affect agriculture, forestry, and fishing; the demand for energy; and the nation’s infrastructure. Despite the wide variety of projected impacts of climate change over the course of the 21st century, published estimates of the economic costs of direct impacts in the United States tend to be small. ... Most of the economy involves activities that are not likely to be directly affected by changes in climate. Moreover, researchers generally expect the growth in the U.S. economy over the coming century to be concentrated in sectors—such as information technology and medical care—that are relatively insulated from climate effects. Damages are therefore likely to be a smaller share of the future economy than they would be if they occurred today."
"By gradually increasing the prices of fossil fuels and other goods and services associated with greenhouse-gas emissions, climate legislation—including the cap-and-trade provisions of H.R. 2454—would tend to reduce long-run risks from climate change. Such legislation would also reduce economic activity through a number of different channels, although the total effect would be modest compared with expected future growth in the economy."
"Climate change is an international problem. The economic impacts of climate change are extremely uncertain and will vary globally. Impacts in the United States over the next 100 years are most likely to be modestly negative in the absence of policies to reduce greenhouse gases, but there is a risk that they could be severe. Impacts are almost certain to be serious in at least some parts of the world."
"Agriculture and forestry are not covered sectors under the cap-and-trade system of H.R. 2454. Therefore producers in these sectors are not required to hold allowances for GHG emissions. Nonetheless, U.S. agriculture would be affected in a variety of ways. Energy providers’ compliance with GHG emissions reductions legislation will likely increase energy costs. Higher prices for fossil fuels and inputs would increase agricultural production costs, particularly for more energy-intensive crops. This would, in turn, affect plantings and production, which would affect the livestock sector through higher feed costs. Higher energy prices could also result in increased biofuel production."
"Beyond the impact on individuals and households, cap-and-trade legislation also affects employment, especially in the manufacturing sector. We estimate job losses averaging over one million. Note that these are net job losses, after the much over-hyped new green jobs are taken into account. Some jobs will be destroyed entirely, others will be outsourced to nations like China or India that have no intention of hampering their own growth with similar measures to raise energy prices.
I should add that the costs are not distributed evenly. The burden of higher energy costs disproportionately hurts the poor, who spend a larger percentage of their incomes on energy."
"Free economies tend to be prosperous economies, and wealthy societies are the ones with the means and the desire to address environmental problems. In addition, free economies tend to foster technological development that allows people to produce more with less. Markets are the best way of improving efficiencies, and that includes efficiency in energy use.
This is evident with regard to carbon dioxide emissions. The freest economies lead the way with technologies that reduce carbon intensity, that is, carbon emissions per unit of production. A recent study by the Cascade Policy Institute comes to a similar conclusion as a forthcoming Heritage study: The freest economies have lower carbon intensity, and thanks to constant technological improvements, those carbon intensities continue to fall. Less-free economies emit more carbon dioxide per unit output, and are not improving in the way of freer economies.
So I would argue against command and control and against large-scale interference with the economy. I would argue in favor of free markets, which will leave us wealthier and more technologically advanced and thus better equipped for the future. And that’s a policy that makes sense whether or not global warming turns out to be a problem."
"Businesses rightfully have an interest in protecting their bottom lines. Many of them have calculated that some hodgepodge of green policies is inevitable and that their interests will be best served by trying to influence how Congress creates those policies. The best way to do that will be to position themselves as supporters of the legislation and then to provide helpful suggestions on how to 'improve' it. Representatives from the oil, coal, gas, wind, and solar industries, among others, have a stake in the game one way or another—either to stave off harmful legislation or to ensure that legislation is favorable to their business.
This process, known as rent-seeking (because it causes businesses to lobby for rules in their favor at the expense of others), is bad economics and bad for the consumer. Not only is there an opportunity cost to lobbying (business resources spent on lobbying could be spent elsewhere); politics governed by special interests typically worsens conditions for the consumer. Consumers are the ones who bear the costs of these government policies; meanwhile, industry receives a seemingly free windfall. The more that government becomes involved in energy decisions, the more money will be used for special interest politicking."
"Recognizing policymakers’ commitment to reducing greenhouse gases, businesses shaped their plans around government policies, despite the fact they are based on poor scientific evidence. Companies worldwide are taking climate change into consideration when making short-term and long-term business decisions. ...
Businesses are not just changing day-to-day operations and preparing for higher energy costs, but also how they invest for the future. Johnson & Johnson is investing in renewable energy and now uses the most hybrid vehicles of any company in America. ... Wal-Mart CEO Scott Lee made a pledge that each of his stores would eventually run on 100 percent renewable energy. ... Coca Cola’s environmental initiative focuses not only on water stewardship and sustainable packaging, but also climate protection. ...
There is nothing wrong with these business decisions if they are made voluntarily. But if they are made in response to government policies favoring renewable energy over other sources, especially on questionable scientific grounds, it misallocates private resources, crowds out innovation, and wastes taxpayer money."
"The Copenhagen conference last year quickly devolved from a discussion on how to cost-effectively curtail greenhouse gas emissions—the primary culprit behind global warming, according to the U.N.—into a browbeating session designed to get developed countries to accept massive economic costs arising from carbon dioxide cuts and to provide billions of dollars in wealth transfers (up to $100 billion annually was discussed in Copenhagen last year) to help developing nations cope with the projected consequences of a changing climate."
"No one likes to pay higher taxes. But every realistic observer knows that closing our humongous federal budget deficit will require a mix of higher taxes and lower spending as shares of GDP. Forget about value-added taxes and other new levies you may have heard about. A CO2 tax trumps them all.
Among the major benefits is that a carbon tax would reduce oil imports. Everyone knows that we import too much oil—even if we ignore the fact that much of what we pay for it goes to countries that are not exactly friendly to us. In recent years, our imports of energy-related petroleum products have accounted for nearly two-thirds of our overall trade deficit in goods and services.
Everyone also knows that CO2 emissions are the major cause of global climate change, that climate change poses a clear and present danger to our planet, and that the U.S. contributes a huge share of global emissions. Up to now, our country has done approximately nothing to curb CO2 emissions. A stiff tax would make a world of difference."
"When the savings of new, more energy efficient technologies exceed the costs of adopting those technologies, markets have the incentive to adopt them. Indeed the difference between the savings and the costs is the measure of the increased value the economy generates. But it is the voluntary participants in these market transactions that best know the full spectrum of the costs and benefits that matter most to them. While engineers, accountants, technicians, and others might help to inform consumers and producers, no number of green eyeshades, calculators, and lab equipment can substitute for a consumer’s or firm owner’s own determination of value.
In other words, policies mandating energy technologies that markets resist will reduce national income and slow the economic growth that generates good new jobs."
"In addition, it does not matter how an economy’s scarce resources are diverted from their most valued uses. Whether by a cap-and-trade law, or regulatory policy, or by subsidies, when consumers or producers are forced to use or pay for expensive or less suitable energy sources or technologies, the value of their production and consumption drops."
"A popular misconception encouraged by many in the debate over the cap-and-trade bills, such as Waxman–Markey, was that restricting access to affordable fossil fuels leads to even greater economic activity as markets adapt to the new, artificial constraints. Such a conclusion implies that the new substitutes, whether they be products or processes, are so superior and/or so much cheaper in comparison to the old technology that consumers and producers find the benefits exceed the costs. However, it is exactly this sort of better substitute that markets are constantly striving to find."
"In common with many other environmental problems, human-induced climate change is at its most basic level an externality. Those who produce greenhouse-gas emissions are bringing about climate change, thereby imposing costs on the world and on future generations, but they do not face directly, neither via markets nor in other ways, the full consequences of the costs of their actions.
Much economic activity involves the emission of greenhouse gases (GHGs). As GHGs accumulate in the atmosphere, temperatures increase, and the climatic changes that result impose costs (and some benefits) on society. However, the full costs of GHG emissions, in terms of climate change, are not immediately – indeed they are unlikely ever to be – borne by the emitter, so they face little or no economic incentive to reduce emissions. Similarly, emitters do not have to compensate those who lose out because of climate change. ... In this sense, human-induced climate change is an externality, one that is not ‘corrected’ through any institution or market, ... unless policy intervenes."
"According to calculations by Lombard Street Research in the UK, any global treaty that would stabilise the climate at today's temperatures would cost a total of £8 trillion--45% of the world's current annual economic output, causing permanent economic depression.
Economic growth is an absolute pre-requisite for improved health. One study has shown that if economic growth in the developing world had been a mere 1.5% higher in the 1980s, at least 500,000 child deaths could have been prevented.
This is because much of the disease burden in developing countries is a direct result of poverty. Diarrhoea, chest infections from burning wood and dung indoors, water-borne infections and malnutrition are the biggest killers of children, killing millions regardless of any changes in the climate."