UNIB10007 Lecture Notes - Lecture 9: Transpiration, Asian Development Bank, Stern Review
16 May 2018
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TOPIC 9: ECONOMIC COSTS OF CLIMATE CHANGE
• Link between GHG emissions + costs to the economy of climate change
• Estimate of the cost function: cost of climate change =f(global stock of GHG’s)
o Changed opportunity available to business, households + governments
▪ Choose less desired products + costlier production methods
• Basic Economic Problem: choose products + production methods for unlimited wants + scarce resources
o Maximise welfare, where W = f(g&s, environment, equity, safety)
o Subject to limited constraints: natural resources, available labour, technology + education –
climate changes adversely alters these to reduce welfare
Total Cost Function
• Estimates range between 5-20% decrease of income by 2100
Marginal Cost Function
• Marginal External Cost (MEC): a derivative of the total cost
curve
• X axis: stock of GHG emissions
• Y axis: additional income loss for extra unit of GHG emission
Economic Costs of Climate Change
• Most costs will appear in the long run, not in next decades – cost falls on future generations
• Yet most reduction costs will come from current generations
• Uncertainty: about magnitudes of costs of climate change
Sea level rises: result of ocean water expansion at higher temps + ice melts
• Predicted by 0.8 metres by 2100
• Economic Effects/Costs
o Flooding of low lying areas – population relocation, need to build higher dykes
o Loss of mangroves + swamps – adverse effects on food chain + biodiversity
Changes in freshwater availability: main effects on mid latitudes + arid areas
• Main c.c predictions: higher temps (more transpiration) + less rainfall
• Challenges for agriculture (uses 66% of freshwater): relocation, more efficient water use
• Costlier replacement water supply for households
• More resources required per unit output, seen in higher costs of water + higher prices for water intensive
products
o More money to get same amount of water
Agriculture + Food Supply
• Most climate sensitive activity we have
• Physical effects: temp + rainfall, more sever events, more CO2 improves photosynthesis
• Context: population + income growth to increase demand, supply growth restricted by limited land +
increased concern for environment
• Adaptive changes will result in higher food prices: developing countries worse off
Impact on Ecosystems
• Concern many land based + ocean based plant + animal ecosystem will not be able to adapt fast enough,
resulting in:
o Loss of biodiversity – therefore losing benefits of market goods + services, + public good
amenity benefits
o Spending more on protecting biodiversity
