More nonsense from Eli Rabett

Tales of Ethon and Eli are now featured on the report of all good things about the Forschungsstelle Nachhaltige Umweltentwicklung der Universitaet Hamburg. Still, it is good to know that a Professor has a sense of humor. We are helping him with the sense tho.

Eli's doings are part of the first two items, but the fourth is an interesting article in the Handelsblatt, which the bunnies taking have translated

The Economic Consequences of Climate Change

By Oliver Voss

In spite of many studies, the economic consequences of climate change are subject to debate. Even small changes in the complex models shift the results. Worse, how do you calculate the effects of irreversible damage, illness, deaths or the extinction of families of animal and plants

Many proposals to rescue the World sound dangerously adventurous: the Chemistry Nobel Prize winner Paul Crutzen would pump tons of sulfur dioxide into the atmosphere. This would reflect a portion of the sunlight slowing global warming. NASA is examining the development of a sun shade for the globe, consisting of tens of thousands of plastic pieces in space. The costs of such rescue operations are 25 to 140 billion dollars a year. A lot of money, but peanuts compared to potential damages that could be caused by global warming.

The British economist Nicholas Stern stirred up the world a year ago in the Stern Review prepared for the British Government. He estimated that annual losses of 5.5 trillion (US) euros or 20 percent of global economic output would be the worst economic consequences if nothing were done about climate change. Stern message: Climate protection is worthwhile financially, because in order to prevent the worst, the world community would have to devote only one percent of its yearly economic output to the fight against global warming.

Since then new studies have continued to appear on possible damage from climate change and the cost of counter-strategies. The fluctuation range of calculations is enormous. Claudia Kemfert, Environmental Economist of the German Institute for Economic Research (DIW), estimates that unlimited climate change would cost Germany not 20, but "only" 0.5 percent of its gross domestic product. And the Uno-Climate Agency estimates the cost for curbing climate change as not 1, but only 0.12 percent of the World Social product.

The studies are based on different assumptions and methodologies, so theybcan only be compared in limited ways. But even within individual investigations the range of estimates is immense.

"Half of the uncertainty comes from the climate models, and the other half from the economic calculations," says Richard Tol, environmental economist at the Economic and Social Research Institute Dublin. According to DIW-researcher Kemfert the economic calculations especially are on thin ice. "There are many, many unknowns and uncertainties are exponential."

One difficulty is that the costs of climate protection are incurred in the near future, but the benefits are felt only much later. To take generational equity into account, economists build the so-called discount rate {n.B.probably means social discount rate} into their climate models. It is "perhaps the most important parameter," says economist Tol. The higher the discount rate, the lower the value of future benefits. As a result early costs have a higher value. The lower the discount rate, the greater - over a long period - the costs. A discount rate of zero means that future generations will be treated just like today. Stern used in his calculations, a relatively low discount rate of 0.1 percent. This is one of the main reasons his model leads to particularly high costs - and it has earned him much criticism from other economists.

In addition to the discount rate, there are other difficulties for estimating the economic consequences of climate change, how do you calculate irreversible damage, disease, deaths or the extinction of entire species of animals and plants? Such questions are not treated in many models. The same goes for the cost of nuclear energy, both because of millennia long storage costs for radiating nuclear waste, as well as the scarcely predictable risks of a meltdown. The damage estimates of the "most likely accident" in a German nuclear power plant of ranges between 500 billion {500E9} up to five Bill. Euro {5E12}. Such a wide range is typical for other issues.

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