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You will pay The Economics cost of Global Climate Change

What are the potential costs of cutting greenhouse gas emissions? Can these emissions be reduced without sacrificing economic growth or our standard of living? These are questions frequently raised by industrialized countries such as the United States in respond to the challenges of global climate change. In recent years there has been a great deal of scientific analysis of the factors which could be causing global climate change and the possible consequence of any change that may be taking place. Scientists believe that human activities are contributing to global climate change by adding large amounts of heat trapping gases to the atmosphere. Scientist also contributes our use of fossil fuel as the main source of these gases. “Every time we drive a car, use electricity from coal fired power plants, or heat our homes with oil or natural gas, we release carbon dioxide and other heat trapping gases into the air. These gases are trapped in the atmosphere by the greenhouse gases, causing our world to heat up”. Any effort to significantly limit greenhouse gas emissions will require changes in human behavior, economic activity and investments in new technology. The effect of directly tackling climate change could impose the costs on society. However, if left unaddressed, climate change could have a devastating effect on the world economy.

According to Sir David King (the British Government Chief Scientific Adviser), “climate change is the most severe problem that we are facing today, more serious even than the threat of terrorism”. Much of the debate about global climate change focused on the causes and the urgency of finding solutions, rather than on the costs of tackling it, or the economic implications of it. Many people are unaware of the important economic prospective, such as the role of technologic in reducing greenhouse gas emission, the linkage between world economy and global climate change, and the time between taking actions now and the effects of those actions later. It is extremely important that the public are aware of these preventative measures so that the costs are better understood, and the risk cost and trade offs are better appreciated. There is an educative role to be played by a more open and honest discussion of the economic issues involved in tackling climate change, and the public deserves to be better informed.

The scientific community has reached an agreement regarding the science of global climate change. Global climate change is expected to have real consequences for the United States and the world. Increasing global temperatures are causing sea level to rise, which is steadily overwhelming coastal areas and increasing beach erosion and flooding from coastal storms. Scientists contribute recent natural disaster such as Hurricane Katrina, California wildfire and the heat wave seen across Europe to global climate change.

Although it is difficult to precisely put a price on global climate change, economists believe that the cost of global climate change could cost the world economy a “devastating $18 trillion; which is equivalent to 45 per cent of world gross domestic product for a year” (IPCC). The cost of dealing with global climate change is a big business. Some economists believe climate change could benefit the agricultural sector by providing conditions feasible for certain corps. While markets such as property insurers are predicting that disastrous storms caused by global climate change could eventually bankrupt the insurance industry. Insurance companies are now trying to form strategic alliances, and pool resources which could cover severe economic loss from climatic changes.

In addition to the $ 18 trillion to combat global climate change, the costs of implementing a worldwide plan to cut the production of carbon dioxide and other gases which contribute to global climate change would cost approximately 3 percent of the World’s total GDP said the Intergovernmental Panel on Climate Change (IPCC). In the report the panel made cleared that “the consequences of global warming will require different lifestyles, higher prices for basics including gasoline and electricity, and a much greater investment in research and development efforts. The impact of those costs, however, would be significantly offset by the benefits of a less carbon-dependent economy, including a cleaner environment, more secure sources of energy and in some cases reduced costs for more energy-efficient cars, and homes”(IPCC).

The IPCC based their costing on the assumption that “cutting global warming would require reducing the world’s consumption of oil and energy, and that this in turn would reduce global growth by half a percentage points a year. The $18 trillion figure is the net present value of that reduction. The most ambitious option, aimed at stabilizing the level of greenhouse gases from fossil fuels by 2030, would require measures that would add $100 to the costs associated with each ton of carbon dioxide pumped into the atmosphere, said the report by the Intergovernmental Panel on Climate Change (IPCC).

Although the terms of the Kyoto Protocol (negotiated in 1997) is excepted by many industrialize countries (except the United States and Australia), is said make little difference to future rates of warming, even if

implemented in full. It must be emphasized that these international

agreements will have to be supplemented with far more telling initiatives if

climate change is to be tackled in any significant way. Ultimately, a public

that is not adequately informed may react adversely to the discovery that

more and more cost burdens will fall on them, and on their children, in the

name of warming control. The fuel protests of 1999-2000 are testimony to

the sensitivity of the public to even modestly rising energy prices. Substantial

increases in energy prices must be an integral part of any policy for reducing

carbon emissions.

arguments such as the have been left-out fore in the public presentations on the issue.

But, like insurance against any other

risk, insurance costs money. Box 1 shows the time-profile of oil prices from 1970 to