Climate Change: Working with Uncertainty

2. Working with Uncertainty Population, technology, production, consumption Emissions Cumulative CO2 Emissions Atmospheric concentrations Radiative forcing % Change in Global Cereal Production Temperature rise and global climate change Probability Direct impacts (e.g. crops, forests, ecosystems) Socio-economic impacts

3. SCIENCE

4. Stabilisation and Commitment to Warming 400 ppm CO2e 5% 95% 450 ppm CO2e 550 ppm CO2e 650ppm CO2e 750ppm CO2e Eventual temperature change (relative to pre-industrial) 0°C 1°C 2°C 3°C 4°C 5°C 4

5. DAMAGES

6. Projected impacts of climate change Global temperature change (relative to pre-industrial) 0°C 1°C 2°C 3°C 4°C 5°C Food Falling crop yields in many areas, particularly developing regions Fallingyields in many developed regions Possible risingyields in some high latitude regions Water Significant fall in water availability e.g. Mediterranean and Southern Africa Small mountain glaciers disappear – melt-water supplies threatened in several areas Sea level rise threatens major cities Ecosystems Extensive Damage to Coral Reefs Rising number of species face extinction Extreme Weather Events Rising intensity of storms, forest fires, droughts, flooding,heat waves Risk of Abrupt and Major Irreversible Changes Increasing risk of dangerous feedbacks and abrupt, large-scale shifts in the climate system

7. Socially Market ‘Non - Market’ contingent Limit of coverage of some studies, including Mendelsohn Projection None Some studies, e.g. Tol Bounded None risks System Limited to Nordhaus and Boyer/Hope change/ None None surprise Models only have partial coverage of impacts Values in the literature are a sub-total of impacts Source: Watkiss, Downing et al. (2005)

8. The PAGE model and other Integrated Assessment models

9. Market impacts Broad impacts Baseline climate 5% (0-12%) 11% (2-27%) High climate 7% (1-17%) 14% (3-32%) Aggregate Impacts Matrix • Essential to take account of risk and uncertainty • Models do not provide precise forecasts • Assumptions on discounting, risk aversion and equity affect the results Rough estimate of equity weighting: 20%

10. Sensitivity analysis: discounting 10

11. STABILISATION

12. Economics of Stabilisation Stabilising below 450ppm CO2e would require emissions to peak by 2010 with 6-10% p.a. decline thereafter. If emissions peak in 2020, we can stabilise below 550ppm CO2e if we achieve annual declines of 1 – 2.5% afterwards

13. MITIGATIONCOSTS

14. Strategies for Emission Reduction Four ways to cut emissions: • reducing demand • improving efficiency • lower-carbon technologies • non-energy emissions

15. Estimating Costs of Mitigation Expected cost of cutting emissions consistent with 550ppm CO2e stabilisation trajectory averages 1% of GDP per year. • Macroeconomic models: 1% of GDP in 2050, in range +/- 3%. • Resource cost: 1% of GDP in 2050, in range –1% to +3.5%. Costs will not be evenly distributed: • Competitiveness impacts can be reduced by acting together. • New markets will be created. Investment in low-carbon electricity sources could be worth over $500bn a year by 2050. Strong mitigation is fully consistent with the aspirations for growth and development in poor and rich countries. 15

16. Illustrative Marginal Abatement Option Cost Curve

17. The Relationship Between the Social Cost of Carbon and Emissions Reductions Social cost of Social cost of Marginal abatement Marginal abatement carbon carbon costs costs 2005 2050 Marginal abatement costs rise Innovation may reduce average costs Emissions Emissions Time Time reductions reductions

18. Illustrative Distribution of Emission Savings by Technology

19. Average Cost of Reducing Fossil Fuel Emissions to 18 GtCO2 in 2050

20. POLICY

21. Mitigation policy instruments • Pricing the externality- carbon pricing via tax or trading, or implicitly through regulation • Bringing forward lower carbon technology- research, development and deployment • Overcoming information barriers and transaction costs– regulation, standards • Promoting a shared understanding of responsible behaviour across all societies – beyond sticks and carrots

22. Global carbon markets can be expanded • Increasing the size of global carbon markets – by expanding schemes to new sectors or countries, or linking regional schemes – can drive large flows across countries and promote action in developing countries

23. Adaptation Adaptation is inevitable: climate change is with us and more is on the way Adaptation cannot be a substitute for mitigation • only reduce the costs of climate change... • ...but these are rising rapidly • for severe impacts there are limits to what adaptation can achieve • Doesn't address risks and uncertainty Adaptation crucial in developing countries 23

24. Conclusion from Stern analysis Unless emissions are curbed, climate change will bring high costs for human development, economies and the environment • Concentrations of 550ppm CO2e and above - very high risks of serious economic impacts • Concentrations of 450ppm CO2e and below - extremely difficult to achieve now and with current and foreseeable technology Limiting concentrations within this range is possible. The costs are modest relative to the costs of inaction. Decisive and strong international action is urgent: delay means greater risks and higher costs 24

25. www.sternreview.org.uk 25