Global Climate Change: Mitigation vs Adaption.

[Sam_Stone]

@DSeid

So using round numbers if we accept $5million/statistical life in Western countries then $50K/statistical life is the value for developing world lives. In the medical world we often actually calculate it according to expected year of life saved (and that certainly makes sense from an economic analysis, considering effect on GDP) and the developing world’s expected increased mortality will be largely in the young. That could move those numbers up some but for simplicity I think we can ignore that.

Okay, 50K sounds like a more reasonable number, but I still don’t understand how it can be applied in any reasonably rigorous way to an event 50 years in the future. Also, you again would have to apply a discount rate.

A quick digression: You expressed confusion about the discount rate, so let me give you a quick example. Let’s say we need to pay off a 1 trillion dollar insurance claim in 2109. We know that bill is coming. How much money would it cost us today to eliminate that liability? Well, if we earned 3% on our money, we could take out a 100 year T-Bill for $47 million dollars (if such a thing existed), and in 100 years, it would be worth a trillion bucks. So 47 million is the net present value of a 100 trillion liability owed 100 years from now. It’s absolutely critical to factor this in to any activities today that have payoffs in the future.

The other factor to price in is the effect on the rest of the world due to potential geopolitical instabilities introduced.

We have absolutely no idea what kind of effects these would be. For all we know, global efforts to mitigate damage could bring people closer together and improve the geopolitical situation. And for that matter, if you want to include that, we’ll have to include the costs today of geopolitical instability introduced by driving up energy prices and attempting to enforce climate treaties. So I’d suggest we just ignore this.

Again, here the question for now is the cost of investing in adaptation systems now, versus not dealing with adaptation until the need is banging at the door, and comparing those potential savings to the potential marginal savings from that much additional mitigation investment.

Another completely unquantifiable effect. And you’d have to consider the opportunity cost of diverting resources to those things instead of all the other things we could be doing.

Another complication to that analysis are the offsetting contemporaneous benefits from each investment type. In other threads we have discussed the possibility that mitigation investments have some offsetting present day pay-offs (the possibility of providing an economic stimulus by creating a new industry in “green collar jobs”, etc.). Here we must consider that present day investments in preparing for adaptation in the future have potential similar global present day economic stimulus effects, present day morbidity and mortality effects, and present day effects on geopolitical stability that offset their costs some as well. Truth be told if the value of $50K was used* then I highly suspect those offsetting benefits would likely more than justify the costs of adaptation investments on their own.

I completely reject this line of thinking. The notion that you can increase economic efficiency and create economic growth through government spending is flawed, in my opinion. Every dollar the government spends is a dollar that is taxed or borrowed from the larger economy.

You can’t even make a ‘stimulus’ argument, since the debt will have to be paid back during the timeframe in question. The only way you can make the claim that government ‘investment’ will create net economic growth is if you believe that governments are better at allocating goods and services than is the market. And every history we have of government planning suggests that the opposite is true.

So again, to avoid this turning into a partisan slinging match, I suggest that this whole line of thinking be dropped.

Going forward, I suggest we focus on the following things:

1. Come to an agreement on the discount rate. This is not going to be a trivial exercise, but we can start by figuring out the low end and high end of current estimates. Stern’s .1 % is clearly the low end, On the high end, the OMB used a rate much higher rate of 10% when calculating the present value of future lives saved. It uses this to do cost-benefit analysis of regulatory costs such as drug trials and social costs such as that of cigarette smoking. This was challenged in court and lowered to 7%. Here’s a legal brief that I believe was used to argue for a lower discount rate for human life of around 1%.

Really, there are two different discount rates we should use. One would be the discount rate against future economic damage. That I think is more straightforward - simply use the average funds rate for economic investment. The other is the ‘social discount rate’ of lives lost or quality of life in the future, and this one is much, much harder to figure out because it involves issues of philosophy and non-economic factors. One paper I read argued that you could use the current savings rates, which indicate the real preference of people for quality of life in the future vs quality of life now. I think that’s specious reasoning. I did a little scanning of the some of the literature around this, and as best I can tell most estimates fall in the range of 1% to 3%.

2. If we can agree on that, then let’s look at the IPCCs estimates for future warming and economic damage and work the cost of the median, then work the cost of the high and low models and come up with some kind of average number. Hopefully, we can separate out economic effects from costs in terms of lives, so we can apply our different discount rates to each.

3. Apply the discount rates, and see what we come up with for the net present value of a ton of carbon, which should tell us how drastic the solution needs to be.
   Anyway, that’s the way I’d approach the problem. If we can get that far in the debate, then we can move on to discussing how to actually implement some kind of plan to slow down warming. From this point, we’d then have to start all over on the cost side by looking at the costs of various solutions, and how much warming each one could prevent, to determine if it’s worth doing.

[DSeid]

There is a certain irony here in coming up with a discount rate given intention’s discussion of the survey of experts’ risk assessment study. Boy, ranges vary from 0.1 to 10% and all points in between. We’ve seen returns on “secure” investments vary through recent history between those numbers and into net losses, in which case we’d be using a net negative discount rate. You’d would also need to factor in inflation wouldn’t you? More unknowns than the climate predictions and even less inclusion of the error bars!

As to how to apply the economic value of a statistcal human life, well the same as any other economic cost.

We have a fairly good idea of how to predict what the effects of refugee populations without much education or training have on regional geopolitical stability. Nature and war have provided us with quite a few test case, both internationally due to floods, famine, hurricanes, and wars, and even domestically. (Think Katrina. Even domestically with relatively small numbers from the POV of these analyses there were consequences to the stability of cities that received large “refugee” populations.) This can be modeled based on these experiences with real data.

I would not ignore the effects of rising energy prices in the calculations just because they are difficult to predict. Neither would I ignore trying to quantify the benefit of anticipatory adaptation. They may be difficult to do. I may not personally have the expertise to do them. But they are quantifiable with reasonable educated assumptions as debated as each assumption might be.

As far as cost of opportunity lost, well that is why I specifically phrased this as I did. The problem assumes a fixed available investment for dealing with global climate change in the present day. It specifically asks about how to balance the spending of that hypothetical money between the marginal mitigation efforts (trying to prevent the climate change) vs on preparatory adaptation efforts. I noted that some spending could indeed serve both purposes simultaneously (such as investments designed to facilitate energy efficient water management including but not limited to desal technology). Thinking about it, that set up somewhat diminishes the importance of discounting as it applies to each investment similarly. (Different only to the degree that infrastructure and lives may be subject to different discounting values.)

Duly noted that you reject any stimulatory effects. Some of course do not reject it. For the purposes of this exercise however the important bit is merely if X amount of spending would have significantly different stimulatory effects if spent on mitigation vs adaptation. (Or decreased harm to your POV I guess.) You are free to compare it to the option of investing it somehow in the equivalent of T-bills if you wish, but it is not part of the set up asked.

[DSeid]

A small illustration of the kind of investment that makes the most sense: (article behind Science’s subscription wall, sorry)

In the 1950s, wheat breeder Norman Borlaug launched the Green Revolution by dwarfing wheat varieties, which diverts plant energy from stalk to grain and boosts yields several-fold. Today, a golden dwarf sea stretches from the U.S. Great Plains to southern Australia’s Wimmera Plains. But dwarfs have a major shortcoming: short coleoptiles. That’s a serious problem in many regions, where water availability is a key constraint for crop yields. With a rallying cry of “more crop per drop,” Borlaug exhorted fellow breeders to foment a Blue Revolution.

After 3 decades of dogged effort, Richards, a soft-spoken geneticist at CSIRO Plant Industry in Canberra, has nudged wheat to the brink of a Blue Revolution. “Richards uses a surgeon’s scalpel” to tweak just the right physiological processes, says Brett Carver, a wheat breeder at Oklahoma State University, Stillwater. As a result, although most breeders these days content themselves with wheat yield gains of about 0.5%, Vigour X-25 and another Richards creation, Drysdale, are yielding 10% to 20% gains in arid conditions. … Richards scoured seed banks for wheat with larger embryos and wider leaves. Jinghong, a Chinese variety, has embryos that are 50% bigger, on average, than those of other wheats. And Kharchia from India has wide leaves. After crossing, the hybrids were even more vigorous than barley and cut evaporation from a field by 30%.

To Richards’s surprise, the hybrids also had long coleoptiles. Those of Green Revolution varieties are 5 to 7 centimeters–short enough to lead to crop failure in parched conditions. “It’s the baggage of the Green Revolution,” Richards says. The new varieties had another advantage: more highly branched roots, which double nitrogen uptake from soil. To add the benefits of dwarfing, Richards began crossing the hybrids with varieties of dwarf wheat with long coleoptiles. His newly developed Vigour X-25 is the result of a cross between an Italian dwarf and the Chinese-Indian hybrids. … Plants take in CO2 through stomata, which open and close like mouths. Farquhar imagined that some plants are like sponge divers, taking big gulps of air, then holding their breath for minutes. Other plants are like swimmers taking frequent sips of breath. With fresh CO2 every few seconds, swimmers have the luxury of picking out lighter carbon. Divers consume most CO2 in each gulp, including carbon-13. Compared with swimmers, the isotope ratio in divers should be closer to that of air. Crucially, because divers keep their stomata closed longer, they should lose less water. … With that tool, he bred Drysdale, a variety that’s more like a gulper than a sipper. Richards’s isotope-discrimination technique, “Delta,” has revolutionized breeding for drought tolerance, says CIMMYT’s José Luis Araus, who is applying it to breed drought-tolerant maize in sub-Saharan Africa.

As Australia’s summers get hotter and drier, a new challenge is to breed wheat that matures faster and can be harvested before the grain withers.

To put this in context:

During the green revolution, researchers and breeders focused on improving productivity by providing optimal environments–fertilizing poor soils, irrigating dry lands, destroying weeds and pest insects–and developing high-yielding crops that thrive under those conditions. But looming water shortages are changing the equation. Agriculture consumes 70% of the water people use, and its needs will increase 17% by 2025, according to the International Water Management Institute (IWMI), based in Sri Lanka. But competition from urbanization and development means that “less water is becoming available for agriculture,” says Henry Nguyen, a plant geneticist at the University of Missouri, Columbia. … Given this anticipated shortfall, IWMI’s Comprehensive Assessment of Water Management in Agriculture, released in 2003, called for a 40% improvement by 2025 in yields of crops where water is the limiting factor. Unfortunately, historically, improvements have inched along by only about 10% per decade, says John Passioura of CSIRO Plant Industry in Canberra, Australia, and it’s not clear that even that pace can be sustained.

Climate change also has agronomists worried. Rainfall in some areas is declining and becoming more erratic, wreaking havoc on markets.

Let me highlight a critical part of that. Agriculture consumes 70% of the water people use. Much of the world has been experiencing an increased frequency of droughts and climate change is expected to increase that situation fairly quickly. Meanwhile improvements in plant genetics usually take decades. Richards has been at it for decades. Water takes energy to produce and to transport especially in a time of shortage. Currentlydesal’s state of the art is very expensive from an energy POV.

“It is destructive. A desalination plant here will have a footprint bigger than the MCG [Melbourne Cricket Ground] and four stories high. To produce 50 gigs of water they will have to emit 1 million tones of CO2 into the atmosphere.” … a 150 billion litre desalination plant would use 90mW of electricity per annum. Lobby group against desalination, ‘Your Water, Your Say’, say this would be enough to power 170,000 homes a year or equivalent to 280,000 cars on the road. Coal is the primary source to generate electricity in Victoria but it is highly greenhouse intensive.

The time to develop the adaptations to deal with drought in agriculture is now and in a concerted effort. Just as Richards scoured the wheat seed bank to find the raw material to develop his new drought tolerant hybrids, so should the complete bank of native African crops be scoured for raw material to develop a tool box of new hybrids that can tolerate the coming conditions without irrigation and during drought conditions. The technology do desal with less CO2 emission and less expense needs research support before the need is critical as well.

We might not succeed in stopping the proverbial 40 days and nights of rain and you can’t build an ark after you’ve begun to flood. Some key investments require advance planning.

[MrDibble]

@Sage_Rat

Nothing. I’m talking about adaptation not mitigation. The countries that are going to be unable to adapt to the climate change are more likely to be unable to due to their leadership than because there aren’t the resources. Or at least that would be my guess.

Actually, I think Africa would have the least adaptation to do, with regard to GCC. Yes, it will affect the continent severely with desertification etc., but Africa isn’t, on the whole, industrialised, car-dependent, or likely to be as heavily-affected by rising sea levels as Asia, Western Europe or the US East Coast.

[Maillard_Duck]

Really good and interesting discussion you all are having. I just wanted to clarify one point regarding the net present value examples given by Sam Stone, so that no one else is confused.

@Sam_Stone

If you assume a discount rate of 3%, the net present value of that damage is only 52 million dollars, and we’d be losing money in the long run if we spent any more than that. If the discount rate is closer to the historical average of what looks to be around 5.5%, the net present value is only $4.7 million dollars. If you go to the other extreme, and assume that you can fund this with a 1% discount rate, the net present value jumps to 369 million dollars.

Did anyone else read this and think, “Golly, wouldja look at the magic of compound interest! That means that if I invest $4700 today, then in a mere hundred years my great-grandchildren will be billionaires!” That’s what I thought, until I realized that Sam is off by a factor of 1000. All of the millions above should be billions. When we’re talking about the price of averting a future catastrophe, this is not small change. I know it’s only an example, but people could get the wrong idea about the magnitude of the effect of discounting.

This assumes, of course, that you’re using the standard American meanings of million, billion, etc. and not some wacky UK system where a trillion is equal to 10^18 hogsheads.

@Sam_Stone

So 47 million is the net present value of a 100 trillion liability owed 100 years from now.

I want to bank where you’re banking!