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7. Global Warming, Uncertainty, Irreversibility & LongTerm Policymaking (SPRING 2006)

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  1. 7.Global Warming, Uncertainty, Irreversibility & LongTerm Policymaking(SPRING 2006) Larry D. Sanders Dept. of Ag Economics Oklahoma State University

  2. INTRODUCTION (ch. 10 Hackett; other sources) • Purpose: • to become aware of the concept of uncertainty & irreversibility with respect to environmental & natural resource policies • Learning Objectives. To understand/become aware of: 1. To understand uncertainty & irreversibility. 2. To become aware of the issue of global warming. 3. To consider the policy options with respect to possibly irreversible actions/events such as global warming. 4. To provide natural resource managers with tools to apply to the climate change issue

  3. Background on concepts • Risk—the measurable probability of an event occurring and the significance of the consequence of the occurrence (flood, life expectancy w/adverse behavior) • Uncertainty--the likelihood that some event/action will or will not occur is indefinite or not measurable, perhaps with conditions such as time frame (death, species extinction, terrorist attack) • Irreversibility--suggests that some action/event will transform a resource to the extent it cannot be returned to its original state (or cost is prohibitively high), limiting future options • clear-cutting a forest; draining a wetland; damming a river • urbanizing former farmland (blacktop, residences, businesses)

  4. Risk Perceptions: may vary w/knowledge, severity of result, whether individual choice . . . Unknown Risk A A: not observable, unknown to exposed, effect delayed, new risk, risk unknown to science Desire for regulation Nitrogen Fertilizers x x Nitrites x RadioactiveWaste x Pesticides x Lead Paint x Caffeine DDT Minor Risk D x B Severe Risk X Global warming/ climate change Skate- boarding x x Smoking D: controllable, not dread, not global catastrophe, not fatal, equitable, individual, low risk to future gen., easily reduced, risk decreasing, voluntary x Nuclear War Rec. Boating x x Commercial Flying x Handguns B: uncontrollable, dread, global catastrophe, fatal, not equitable, hi risk to future generations C: Observable, known to exposed, effect immediate, old risk, risk known to science C Known Risk Adapted from Carlson et al. Agricultural & Environmental Resource Economics, 1993; also Sanders

  5. Economic Questions for Natural Resource/Environment Managers Considering Climate Change • What factors are within my ability to control and manage? • Can risk be insured? • Can/should government act/intervene (& at what level; & should it be coordinated)? • Can I estimate the range of benefits and costs, adjusted for probability of occurrence of realistic range of likely events? (consider supply & demand factors) • Is the downside risk negligible (and therefore not worthy of private concern), or significant? • Are there contingent adjustments that could be planned for and reasonably made if necessary?

  6. Case Study: Global Warming/Climate Change--background • Greenhouse gases--carbon dioxide, chlorofluorocarbons, methane, nitrous oxide, ozone, hydrofluorocarbons, perfluorinated carbons • Their function--filter solar energy, limiting infrared energy radiated back in to space • Greenhouse effect--as greenhouse gas concentration increases, capturing of infrared energy increases, & temperatures are likely to rise

  7. Global Warming/Climate Change—background (cont) • The common ground in the debate is that this is likely a natural and cyclical process • The points of departure/disagreement: • What does global warming mean? • Warming? How soon? How severe? • More erratic fluctuations in weather (warming, cooling, increased incidence in & severity of storms)? How soon? How severe? • Is human activity worsening the natural & cyclical process? • How significant? How fast?

  8. "Global warming is 'the greatest hoax ever perpetrated on the American people.” Sen. James Inhofe (R-Okla) The mainstream scientific consensus on global warming is becoming clearer every day: changes in our climate are real and they are underway. Now. . . . The evidence that human-induced global warming is real is increasingly clear and compelling. Union of Concerned Scientists The Debate over Global Warming

  9. The Debate over Global Warming “That an elected official would call global warming a ‘hoax’ borders on the criminal . . .” --Barry Lopez, nature writer, 2005.

  10. Global Warming:Is it real? “Greenland's glaciers are melting into the sea twice as fast as previously believed, the result of a warming trend that renders obsolete predictions of how quickly Earth's oceans will rise over the next century, scientists said yesterday.” (17 Feb 06, The Washington Post)

  11. Global Warming:What Scientists Say “Most climate scientists believe a major cause for Earth's warming climate is increased emissions of greenhouse gases as a result of burning fossil fuels, largely in the United States and other wealthy, industrialized nations such as those of western Europe but increasingly in rapidly developing nations such as China and India as well. Carbon dioxide and several other gases trap the sun's heat and raise atmospheric temperature.” (17 Feb 06, The Washington Post)

  12. Global Warming & Agriculture • Possible benefits: • Enhanced CO2 assimilation • Longer growing seasons • Increased precipitation • Possible costs: • More frequent & severe droughts with heat stress • Faster growth, shorter growing periods, shortened lifecycle • Sea-level rise; increased flooding & salinization Consequences Vol. 1, No. 2, Summer 1995, US Global Change Research Information Office.

  13. The Importance of Greenhouse Gases • Provides a blanket that “insulates the Earth by trapping heat, a lot like panes of glass in a greenhouse. . . ‘part of what makes the planet of work’. • “Without greenhouse gases, the Earth would be much too cold for comfort . . . problem now is that humans are thickening the blanket . . . & . . . nature’s thermostat is nudged up.” --From cnn.com special section on global warming article “Messing with the thermostat can be devastating”, Miles O’Obrien, November 27, 1997.

  14. Recent US Ag Situation related to weather (since 1970s) • Enhanced productivity, higher variability in crop yields, prices, farm income • Extreme weather events resulted in severe crop damage & economic loss ($56 b. in ’88) • Increased pest damage & pesticide use • Ranges of several crop pests expanded • Greater prevalence of crop pests

  15. Potential Impacts to Agriculture • Increase in CO2 increases water use efficiency of plants, resulting in decreased water requirements & yield loss due to water stress • Increasing global temp decreases agricultural production 0.5-1.3%, resulting in increased grazing lands and some increase in livestock production

  16. Potential Impacts to Agriculture • Impacts geographically distributed • SE Asia crop production down 2.6-4.8% • Japan up 6.2-10.4% • US crop production varies • US ag income down 10.9% • US prices down 5.1% • Increase in insects, molds

  17. Potential Climate Change Effects on US Ag • Expected temperature increases likely to speed maturation of annual crop plants, reducing yield potential; extreme hi temps may cause more severe crop losses • Increase in floods and droughts; variability of precipitation increases instability, resulting in risk to crops and livestock and management planning more difficult • Higher temps and precipitation likely to increase spread of pests and diseases

  18. Potential Climate Change Effects on US Ag (cont) • Increased crop pests likely to increase chemical use, possibly increasing health, environmental & economic risks • Increased incidence of weeds and invasive species, resulting in increased chemical use and economic cost; possibly increasing health, environmental & economic risks • Shift the ranges of optimal production centers for specific crops; could reduce US comparative advantage in ag commodities for export • All of this occurring in a more volatile political world, with possible military adventurism

  19. Direct effects of increasing atmospheric CO2 on agriculture production NOTE: estimates based on 225-ppmv increase in atmospheric concentration of CO2 when applied to climatic & economic conditions 1990 (ERS-USDA)

  20. Major Contributors to Greenhouse Gases Per Capita Energy World CO2 Country Emissions (%) Consumption (mil. Btu)Emission (%) US 19 335 23.8 China 10 13.6 Japan 5 171 5.0 Brazil 4 33 1.3 Germany 4 3.6 India 4 4.6 UK 2 169 2.4 Indonesia 2 1.0 Italy 2 1.8 Russia 6.7

  21. Sea level will rise 2-3 feet, covering many islands, changing coast lines & contaminating water supplies Southern US climate becomes tropical changing ag production Northern US climate moderates, more like Southern US today Increase in heat-related deaths/diseases (malaria, dengue fever) Political crises, volatility could increase Only 24% of public is concerned Models under-estimate complex global ecosystem (can’t predict 7 days out, much less years) Models under-estimate the “technological fix” & market economics Doubtful that government intervention will do anything but create more immediate problems Let the market & private property rights manage the situation The Claims about Global Warming:“It’s Real”“Skeptical”

  22. ATMOSPHERIC FORCING FACTORS Epstein

  23. 3 Av. temp. over past 10,000 years =15 ºC Mesopotamia 2 flourishes Agriculture Vikings in 1 emerges Greenland 0 Temp. change (ºC) End of last ice age Global Temperature: the Past 20,000 Years, & the Next 100 Years IPCC (2001) forecast: + 1.4-5.8oC, with band of uncertainty Black Death Holocene Optimum 21st century: rapid rise Medieval Warm 1940 Little Ice Age in Europe (15th-18th centuries) -2 -3 -4 Younger Dryas -5 20,000 10,000 2,000 1,000 300 100 Now +100 Epstein

  24. Case Study: Global Warming --Science in Conflict • Scientists continue to debate: 1. whether global warming is in fact occurring, & • the level of severity of impact • Are causes natural, man-made or both? • Trade-offs—Is our action or inaction irreversible? 1. If worst-case predictions are true & nothing done to stop it, large-scale changes in global climate that will severely affect the planet & our geo-political-economic system; inaction is generally irreversible. 2. If predictions are not true, or wildly over-stated but actions are taken to minimize global warming (Kyoto Agreement), wide-scale economic impacts on the US will reduce competitiveness (30-50% increase in fuel & utility bills; loss of economic gains); action is reversible, but cost of action and cost of reversal could be high.

  25. What the data say: • “The concentration of CO2 in Earth’s atmosphere is now higher than at any time in the past 400,000 years, and the rate of increase is accelerating.”* • “Climate change already claims more lives annually than terrorism does: . . . Perhaps 160,000 people die each year due to the ancillary effects of climate change, such as malaria and malnutrition.”** • Current trends suggest: • the Arctic Ice Cap could be gone by 2060 • Glacier National Park (Montana) could be “glacier-less” by 2020 * Worldwatch Institute, p.112. ** Worldwatch Institute, p. 113.

  26. Recent studies: “…although climate models will always be improving, there are certain changes we can already predict with a level of confidence. First, most studies indicate . . . more droughts and more floods, more variable and more extreme rainfall. Second, . . . Longer growing seasons mean more generations of pests . . . . Third, climate change will hit farmers in the developing world hardest.”* “. . . Estimates that grain yields in the tropics might fall as much as 30 percent over the next 50 years—a period when the region’s already malnourished population will increase by 44 percent.”** “… the wheat-growing prairies of Canada and the Great Plains of the United States would eventually no longer produce enough food to support their populations if nothing were done to fight climate change.”** * Worldwatch, p. 73.; ** Worldwatch, p. 72.

  27. Global Warming as an Externality • Global warming may be viewed as an open access or common property problem* • All hold the right to pollute the atmosphere. • No one can be excluded and nobody can charge anybody else for the right to emit greenhouse gases. • Whether costs are negligible or uncertain or potentially high, potential for problems still real because of absence of property rights • Distributional issues are significant; those who create problem may not suffer the costs • Alternatively, costs of reducing production of gases may lead to significant economic losses *Ancev, T. (2002)

  28. If Global Warming Perceived as Market Failure MCs MCp Price P2 MBp=MBs P1 Quantity (production; Development) Q2 Q1 Consider govt intervention such as a Pigouvian tax to shift to a production or development level that reduces human-caused factors that contribute to global warming; ex: carbon tax

  29. If/when Global Warming begins to have serious impacts? • More severe weather likely in Europe soon because of decline in force of North Atlantic Current • The “Great Ocean Conveyor” controls climate for Northern Hemisphere, and possibly the world by transporting heat throughout the world oceans • Cold, salty denser waters sink, pulls warm, salty Gulf Stream waters north • Heat transferred to atmosphere above N. Atlantic, prevailing winds carry heat east to warm Europe • What to monitor if global warming impacts the Conveyor • Look for water temp drops of 10-30 degrees (Grand Banks buoy) • Arctic air surface temps rising to 40-50 degrees in autumn/15-30 degrees in winter (Barrow, AK; polar ice cap melt) • Upper atmosphere temps drop

  30. Deep Ocean Warming Levitus et al. Science 2000; 287: 2225

  31. FRESHENING OF THE ARCTIC Hoerling and Kumar: Science 2003 January 31; 299: 691-694

  32. If/when Global Warming begins to have serious impacts? (continued) • Sudden climate change, exhibited in locally severe weather & shifts in regional weather patterns • Local weather storms more violent • Western Europe becomes more like Canada with shorter growing seasons • Summer pollution events more significant (hotter temps & less air movement) • Coastal areas will be inundated • Fish/bird species habitats will be harmed • Likely increased incidence in communicable disease, pests • Political/military conflict to control natural resources & environmental assets • Ocean damage could be severe • The cost of uncertainty and flux in weather could be high

  33. Global Warming & Oceans • Medicine from the sea could be at risk • Includes compounds for chronic pain, Alzheimer’s, Schizophrenia, cancer, inflammation, asthma • Ocean food sources could be at risk • 16% of global animal protein comes from sea • The sea is Asia’s primary source of protein • Omega-3s from fish help protect against heart disease • If unchecked, US percapita consumption of seafood likely to rise to 16 pounds by 2020

  34. Debate continues on what occurs next: Global warming or Global Cooling? • Continued warming & associated impacts for extended period • Look 200-500 miles south to see what your weather will look like • Perhaps more weather volatility OR • Snap into global cooling • Warming melts glaciers • Fresh water causes current to slow, then stop • Extended droughts and intense rain/snow storms • Leads to ice age or superstorm period “Look 500 miles north if you want to see what your weather will look like.” H. Willis • Again, the cost of uncertainty and fluctuations could be high

  35. EXTREME WEATHER EVENTS & DISEASE CLUSTERS Epstein

  36. Epstein

  37. Costs of Extreme Weather Events Insurance & Reinsurance, FEMA, OFDA, NGOs, Nation States, Companies UNEP $150b/yr w/in this decade Epstein

  38. Agriculture’s Impact on Climate Change: • Contribute to emissions directly from: • Deforestation • Biomass burning • Ruminant animals cause methane (may be the major driver of greenhouse gases • Decomposition of soil organic carbon from tillage practices (plowing is major cause of CO2 emissions from cropland) • Rice cultivation • Fertilizer application • Use of manure • Degradation/elimination of wetlands • Indirect factors account for most ag emissions: • Nitrous oxides/other gases from concentrated livestock operations • Microbial activities in soil/water after fertilizer/manure application

  39. Agriculture’s Impact on Climate Change: management response • Carbon sequestration • Reducing emissions or taking CO2 out of atmosphere & storing in terrestrial, oceanic or freshwater aquatic ecosystems • Carbon sink is process/activity that removes greenhouse gas from atmosphere • Restore degraded soils, adopt soil conservation (minimum tillage), grow plants/trees with longer life cycle

  40. Economic Impacts of Carbon Charges • Goal: Decrease US greenhouse gas emissions to 1990 levels, minus 7% by 2010 • Not yet approved by US • Alternative charges: • $14/mt: modest impact • Producer, consumer surplus down less than 0.5% • Price increases and production declines less than 1% • $100 & $200: more significant impacts • Others suggest gas/diesel be carbon taxed at the pump

  41. The Kyoto Accords and Global Warming • Much of the world absent the US has agreed to slow/scale back generation of greenhouse gases • Carbon targets and trading are key in this process • Agriculture is a tool to assist in carbon storing & reduction

  42. Economic Questions for Natural Resource/Environment Managers Considering Climate Change • What factors are within my ability to control and manage? • Can risk be insured? • Can/should government act/intervene (& at what level; & should it be coordinated)? • Can I estimate the range of benefits and costs, adjusted for probability of occurrence of realistic range of likely events? (consider supply & demand factors) • Is the downside risk negligible (and therefore not worthy of private concern), or significant? • Are there contingent adjustments that could be planned for and reasonably made if necessary?

  43. Choices: Individual or Public Response? • Individual response • Appropriate if property rights are clear, the market is functioning effectively & impacts are internal • Public response • Appropriate if property rights not clear, the market isn’t functioning effectively & some impacts are external • The current evidence suggests a public response is necessary

  44. Climate Change Public Policy Options • Alternatives for limited protective response to help the market function • Assist development/management of hypothetical trading markets • Subsidize carbon storing • No-tillage • Tree production • Wetlands protection • Impose a carbon tax • Provide tax credits for alternatives that produce less greenhouse gas • Fund research & development

  45. Climate Change Public Policy Options (cont) • Alternatives for expansive protective response because the market is part of the problem, especially with limited time & irreversibility • Command & control • Strong restrictions with heavy fines & penalties to proscribe/prescribe specific individual, group & business behavior • Nationalization of energy production, especially utilities • Confiscation of carbon producing equipment/activities • Martial law if/when abrupt climate change begins to occur • Loss of democratic & market freedom

  46. Climate Change Risks Affecting Agriculture Do producers have the ability to manage this risk? If not, can/will the market respond? If not, can/will government intervene? • Extreme event risks • Tendency for more days of extreme heat/cold, heavy precip/long droughts • Field-time availability risks • Extreme weather affects timing of field operations • Yield risks • Extreme weather reduces crop yields

  47. Climate Change Risks Affecting Agriculture (continued) • Technology adoption risks • New technology may be a management response to climate change; may not perform as expected (untested or operator inexperience) • Interactions between risk factors • Risks not likely to occur individually and isolated, but multiple at same time • Policy risks • Public policy may accentuate problems or be a disincentive for managers to change

  48. Some tools/options now available • Agriculture • Government-subsidized crop insurance • Government-subsidized conservation programs • Government-funded research, development & education • Futures markets • Conservation tillage • Organic farming • Holistic farm management