Lecture 22

Climate Change I: The Nature of the Challenge

Byeong-Hak Choe
bchoe@geneseo.edu

SUNY Geneseo

October 28, 2024

Broad Strategies

1. Sequestration

  • Carbon Capture, Utilization, & Storage (CCUS):
    • Geological Storage: Injecting captured CO₂ into underground formations.
    • Utilization: Converting CO₂ into alternative fuels, building materials, or other products.
    • Several government acts, including the Inflation Reduction Act, includes Section 45Q tax credit to boost investment in CCUS.
  • Natural Sequestration:
    • Afforestation & Reforestation: Planting new forests and restoring degraded ones.
    • Ocean Uptake: Enhancing the ocean’s capacity to absorb CO₂ through various methods.

Broad Strategies

2. Adaptation

  • Enhancing Resilience of Systems:
    • Infrastructure Relocation: Moving transportation and waste facilities away from vulnerable areas.
    • Public Health Systems: Preparing for increased disease burdens due to climate-related factors.
    • Forest Protection: Implementing measures to reduce wildfire risks and preserve forest health.
    • Electric Grid Resilience: Strengthening the grid to withstand climate-enhanced storms and extreme weather.

Broad Strategies

3. Mitigation

  • Reducing GHG Emissions:
    • Market-Based Policies:
      • Carbon Taxes: Imposing taxes on carbon emissions to incentivize reductions.
      • Cap-and-Trade Systems: Setting emission caps and allowing trading of emission permits.
    • Regulatory Approaches:
      • Transition to Low-Carbon Energy: Promoting renewable energy sources like solar and wind.
      • Energy Efficiency Standards: Implementing strict efficiency requirements for buildings, vehicles, and appliances.

The Evolution of Targets

Paris Climate Agreement (2015)

  • Primary Targets:
    • Below 2°C: Limit global average temperature rise to well below 2°C above pre-industrial levels.
    • Pursue 1.5°C: Aim to limit the temperature increase to 1.5°C if feasible.
  • Rationale:
    • Benefits vs. Costs: Limiting temperature rise reduces the risk of severe and irreversible climate impacts.
    • Insurance Principle: Lower targets provide a buffer against uncertainties and potential tipping points.

The Evolution of Targets

Emissions Targets

  • Carbon Budget:
    • Defined as the cumulative amount of CO₂e emissions that can be emitted while staying within the agreed temperature limits.
  • Carbon Neutrality:
    • Definition: Achieving zero net human-caused CO₂ emissions annually.
  • Climate Neutrality:
    • Definition: Achieving zero net CO₂e emissions annually, encompassing all GHGs.

The Evolution of Targets

Net Zero Commitments

  • Adoption Status:
    • 131 countries, representing 72% of global emissions, have pledged to achieve net zero targets.
  • Challenges:
    • Accounting Systems: Ensuring accurate tracking and reporting of emissions and removals.
    • Transparency and Verifiability: Strengthening systems to prevent overstatement, double-counting, or other inaccuracies in emission reductions.

Economic Insights on Targets and Timing

Optimal Emissions Control

  • Efficiency Condition:
    • Marginal Cost of Control (MCC): The cost to reduce an additional unit of emissions.
    • Marginal Reduction in Damages (MRD): The benefit from reducing that unit of emissions.
    • Optimal Point: When MCC = MRD.

Economic Insights on Targets and Timing

Discount Rate Debate

  • Normative Discounting:
    • Basis: Ethical principles regarding the treatment of future generations.
    • Implication: Supports a lower discount rate, valuing future benefits more highly.
  • Opportunity Cost Discounting:
    • Basis: Economic opportunity costs of capital.
    • Implication: Supports a higher discount rate, prioritizing present benefits over future ones.
  • Current Trends:
    • A convergence towards lower discount rates, emphasizing long-term impacts and sustainability.

Economic Insights on Targets and Timing

Current Findings

  • Carbon Prices vs. Social Cost of Carbon (SCC):
    • Observation: Current carbon prices are significantly lower than SCC estimates.
    • Implication: There is substantial economic justification for increasing carbon pricing to reflect the true social cost of emissions.

Economic Insights on Targets and Timing

Impact of Delay

  • Cost Escalation:
    • Economic Costs: Delaying action can triple the necessary carbon price and increase macroeconomic costs by approximately 30%.
    • Climate Costs: Higher future emissions lead to greater damages and increased likelihood of crossing tipping points.