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Scope for and New Developments in Analyses for Climate Change Decisions
Climate change is profoundly different from most other environmental problems with which humanity has grappled. A combination of several features gives the climate problem its unique feature, which include:
Moreover, the long-term nature of climate change originates because it is the concentration of GHGs that is important, rather than annual emissions; this feature raises the thorny issues of intergenerational transfers of wealth and environmental good and bad outcomes. Next, human activities associated with climate change are so widespread that narrowly defined technological solutions are impossible and the interactions of climate policy with other broad socioeconomic policies are strong. Finally, large uncertainties or in some areas even ignorance characterize many aspects of the problem and require a risk management approach to be adopted in all DMFs that deal with climate change.
Experiments with cost–benefit models framed as a Bayesian decision-analysis problem show that optimal near-term (next two decades) emission paths diverge only modestly with perfect foresight and even with hedging for low-probability, high-consequence scenarios. Cost-effectiveness analyses seek the lowest cost that will achieve an environmental target by equalizing the marginal costs of mitigation across space and time. Long-term cost-effectiveness studies estimate the costs to stabilize atmospheric carbon dioxide (CO2) concentrations at different levels. While there is a moderate increase in the costs when passing from a 750 ppmv to a 550 ppmv concentration stabilization level, there is a larger increase in costs passing from 550 ppmv to 450 ppmv unless the emissions in the baseline scenario are very low. The total costs of stabilizing atmospheric carbon concentrations are very dependent on the baseline scenario: for example, for scenarios focusing on the local and regional aspects of sustainable development costs are lower than for other scenarios. Rather than seeking a single optimal path, the tolerable windows or safe landing approaches seek to delineate the complete array of possible emission paths that satisfy externally defined climate impact and emission cost constraints. Results indicate that a delay in near-term effective emission reductions can drastically reduce the future range of options for relatively tight climate change targets. Less tight targets offer more near-term flexibility.
International Regimes and Policy Options
Different mitigation policy options include the timing of responses to climate change, the choice between mitigation and adaptation responses, the role of technological innovation and diffusion, the choice between domestic action and the adoption of international mechanisms, the combination of climate change mitigation with actions towards other environmental or socio-economic objectives, and others. The costs and benefits of these crucially depend on the characteristics of the international agreement on climate change that is adopted. In particular, they depend upon two main features of the international regime: the number of signatories, and the size of their quantitative commitment to control GHG emissions. The number of signatories depends on how equitably the commitments of the participants are shared. Cost-effectiveness (minimizing costs by maximizing participation) and equity (the allocation of emissions limitation commitments) are therefore strongly linked.
There is therefore a three-way relationship between the design of the international regime, the cost-efficiency of climate policies, and the equity of the consequent economic outcomes. Thus, it is crucial to design the international regime in a way that increases both its efficiency and its equity. The literature presents different strategies to optimize an international regime. For example, countries can be encouraged to participate in an international group committed to specific emissions limits and targets if the equity (and therefore efficiency) is increased by a larger agreement. This may include measures like an appropriate distribution of targets over time, the linkage of the climate debate with other issues (“issue linkage“), the use of financial transfers to affected countries (“side payments”), and technology transfer agreements.
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