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A cost-benefit analysis of slowing climate change

David Maddison
Centre for Social and Economic Research on the Global Environment (CSERGE), University College London, Gower St, London WC1E 6BT, UK

This paper attempts to condense a mass of information relating to economic growth assumptions, carbon emissions forecasts, abatement cost estimates, and global warming damage functions and incorporate it into a cost-benefit analysis of slowing climate change. By these means it is possible to provide evidence on the extent to which society ought to incur control costs now in order to prevent future climate change using the rules commonly associated with project appraisal. In a business as usual scenario, the model predicts a temperature rise of 3.6deg.C above preindustrial levels by the end of the next century indicting damage with a present value of US$8.9 trillion. An optimal policy, however, seems to involve an immediate 12.7% cut in emissions and the establishment of 37.1 million hectares of forests. The optimal tax on carbon emissions for the year 2000 is estimated to be US$16.84 per tonne and the optimal policy reduces temperature rise by 0.3deg.C relative to business as usual. By following the optimal policy, costs are reduced by US$700 billion. It is also suggested that policies to halt deforestation and remove the subsidies paid to fossil fuel producers might reduce overall costs by a further US$1.1 trillion.

Keywords: Climate change; Integrated modelling; Cost-benefit analysis

 

 

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