Cancún 2010

The Price of Heat – The Costs of Climate Change

Climate protection is affordable.  Photo: Jan Will © iStockphotoClimate protection is affordable.  Photo: Jan Will © iStockphotoCancún has consequences. The necessary and ambitious goals of the United Nations Climate Change Conference place enormous costs on economies. The sooner countries begin to reduce their greenhouse gas emissions, the cheaper it will be.

The Statue of Liberty is half-submerged in water. Only the tip of the Cheops pyramid protrudes from the waves and, with its arms outspread, the statue of Christ the Redeemer over Rio de Janeiro pleads for a lifebuoy. This scenario was part of a Greenpeace demonstration during the 16th United Nations Climate Change Conference in December 2010. On the shores of Cancún, environmental activists submerged models of famous cities’ landmarks in the sea as a warning. Cancún itself has already had painful experiences of climate change. In 2005, Hurricane Wilma devastated the city on the Yucatán Peninsula of Mexico.

Minimum goal: 2 degrees

There are hardly any places that would be immune to climate change.  Photo: dmitry 7 © iStockphotoAfter the unsatisfactory results at Copenhagen in 2009, the representatives of the 194 States party at least agreed on a minimum goal in Cancún: to limit global warming to a maximum of 2 degrees Celsius between 1990 and 2100. In order to achieve this, global emissions of carbon dioxide would have to be cut by at least half by 2050, estimate researchers at the Alfred Wegener Institute for Polar and Marine Research in Bremerhaven. Otherwise there would be the threat of a rapid increase in the number of floods, hurricanes, forest fires, crop failures and epidemics. While these effects are very unequally distributed, there are hardly any places that would be immune to climate change altogether. Climate change also means enormous costs for global economies. The weekly magazine Stern reported that the damage caused by Hurricane Katrina in the USA alone was put at some 100 billion dollars.

The weakest are hit harder

Claudia Kemfert is head of the department Energy, Transportation, Environment at the German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung - DIW Berlin). For years, the professor of energy economics and sustainability has been studying the economic costs of climate change. An increase in the global surface temperature of approximately 4.5 degrees Celsius by the year 2100 would result in cumulative costs for Germany of up to 800 billion euro in the next 50 years, Kemfert believes – for direct consequential damage alone. Agriculture and forestry are particularly vulnerable. The effects of climate change vary greatly between Germany’s federal Länder. The hardest hit (in absolute figures) are the large federal Länder of Baden-Württemberg (129 billion euro), Bavaria (113 billion) und Lower Saxony (89 billion). However, these economically powerful Länder can better compensate for damage than economically weaker Länder. If the costs are calculated as a proportion of the respective Land’s gross value added, the Länder to lose out most from climate change are Saxony-Anhalt (2.7 per cent), Rhineland-Palatinate (2.6 per cent) and Thuringia (2.4 per cent).

Seen in global terms, poorer countries are disproportionately badly hit.  Photo: cogal © iStockphotoThe costs of damage resulting from hurricanes, floods and drought comprise only part of the total costs. Seen in global terms, poorer countries are disproportionately badly hit – and this is all the more so when one considers their very much smaller share of CO2 emissions. In addition to this direct damage resulting from climate change, there are the so-called alleviation costs: expenditures to avoid or at least alleviate possible damage resulting from climate change, for example through resettlements, dam-building and artificial irrigation. The most important budget items are undoubtedly the investments required to slow down climate change (adaptation costs). They cover all the measures taken to reduce CO2 emissions, to save energy generally and to protect forests, which serve as vital carbon dioxide stores.

Climate protection is affordable

The longer those who are responsible wait, the more expensive it will be. The experts agree on that. There is no alternative to climate protection. The British economist Nicholas Stern published a comprehensive report in 2006 according to which it will cost economies at least 5 per cent of gross domestic product each year, or, according to less favourable estimates, as much as 20 per cent if they do not take any measures to combat growing CO2 emissions. In contrast, immediate action would be comparatively inexpensive, costing only approximately one per cent of GDP. In their joint study on climate, Modell Deutschland. Klimaschutz bis 2050, which was commissioned by World Wide Fund for Nature Germany, the Freiburg Institute for Applied Ecology and the Basle-based economic research institute Prognos reach a similar conclusion. In order to achieve its climate objectives, Germany would have to reduce its greenhouse gas emissions by 95 per cent of its 1990 values by 2050, which means emissions of less than one tonne per person per year.

The longer those who are responsible wait, the more expensive it will be.  Photo: Sara Winter © iStockphotoThe study’s proposals include reducing the heating energy in buildings by 85 per cent, fitting all vehicles with electric motors and producing energy nearly CO2 neutrally. The researchers calculate that by making investments, the expenditures resulting from oil and coal consumption will be reduced. It is estimated that the peak of the burden will be reached in 13 years from now: “In the year 2024, the maximum overall net cost to the economy will be just under 16 billion euro (approximately 0.6 per cent of gross domestic product - GDP). After that, the burden will decrease”, according to the report. Investing in climate protection could pay off in other ways too: the global increase in demand for energy-saving products could boost Germany’s technology exports. And it will become increasingly beneficial for consumers to reduce their dependence on oil and gas.

Jonny Rieder
is a freelance writer in Munich.

Translation: Eileen Flügel
Copyright: Goethe-Institut e. V., Online-Redaktion
February 2011

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