COP26 Produced More Than Blah, Blah, Blah: But How Much More?

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Some good things emerged from the COP26 conference in Glasgow earlier this month; not enough to be presented as completely wrong Greta ThunbergAssess that the discussion at COP26 was nothing more than “blah, blah, blah”.

To be fair, I think there were at least three important developments to come out of COP26. First, the delegates managed to decide what was unfinished business. Article 6, left over from COP21 in Paris: Doing so paves the way for a system to price and trade carbon on a global scale. Second, China and AmericaThe world’s two largest GHG emitters announced that they have agreed to cooperate on a range of climate issues. Third, Glasgow Financial Alliance for Net Zero (GFANZ), a group of private financial institutions that represent 40% of the world’s financial assets, pledged to meet the goals set out in the Paris Climate Agreement.

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It is easy to understand the dismay of some as to what the parties of COP26 actually achieved. Consider COP26’s stated goal of keeping global temperature rise below 1.5 °C relative to pre-industrial times. As COP26 concluded, its president Alok Sharma said: “We have kept 1.5 alive. This was our overarching objective when we started this journey two years ago as COP President. But I would still say that the pulse of 1.5 is weak.”

Some argue that this weak pulse is indicating a condition that is terminal because already funded projects, when introduced, will absorb the rest of the carbon budget associated with keeping 1.5 alive.

The DICE model developed by Nobel laureate William Nordhaus is an important tool for maintaining a clear vision of the climate change landscape. DICE is an acronym for Dynamic Integrated Climate-Economy. It is an integrated assessment model designed to analyze the interaction between the global economy and the global climate.

Nordhaus usually updates DICE every few years, but the most recent version, called the 2016 model, dates from late 2015 when the Paris Agreement was negotiated at COP21. Below I describe what the 2016 model predicts about temperature change in general, and specifically about targets like 1.5 and 2.0.

At the end of 2014, the global atmospheric temperature had risen by 0.85 degrees. The 2016 DICE model predicted that atmospheric temperatures would rise to 1.1 degrees after 2020; and it actually did a little earlier, in March 2020,

The 2016 DICE model predicts that global temperatures will exceed 1.5 degrees Celsius just before 2035. This is quite worrying. Even more worrying is that, according to the model, in the preceding statement, even if we manage to establish a global system today, that will price carbon at a social cost.

The last statement is controversial, and relies critically on the phrase “according to the model”. Controversy includes whether setting up a global system for pricing carbon fails to prevent this, but delays occur when there are only 1.5 crossing points.

At the heart of the controversy is the fact that according to Nordhaus’s 2016 DICE framework, the optimum carbon price, meaning the tax rate per metric ton of carbon linked to its social cost, is currently between $35 and $40; and will rise above $50 by 2030. In contrast, other economists, notably Sir Nicholas Stern and Nobel laureate Joseph Stiglitz, argue that the cost of carbon should be $100 by 2030 to keep global temperatures above 1.5 degrees, while simultaneously achieving net zero emissions by 2050. Doing.

The 2016 DICE model predicts that if humans continue to do business as usual, global temperatures will rise by 1.55 degrees by the end of 2035. If we put in place a system to price carbon at its societal cost, then by the end of 2035, global temperatures will rise by 1.52 degrees. This temperature difference, 0.03 degrees, between what happens to business in general, and what happens to a business with reasonable carbon pricing, is very small. However, I should add that after 2035, the 2016 model forecast for a temperature difference between a carbon-priced economy and a non-carbon-priced economy increases substantially, a difference that is critical to the development of the climate crisis.

Most estimates of the current global price of carbon are somewhere between $2 and $20. The 2016 model predicted that the current price of carbon would be a little over $2.20. According to International Monetary Fund, Carbon currently costs $3. According to a new study by the investment firm Kepos CapitalTaking full account of all taxes imposed, and adjusting for subsidies, carbon currently costs less than $20 globally.

Forecasts from Nordhaus’s DICE model have historically exhibited extreme optimism, which Nordhaus has documented in the reports it publishes. Proceeding of National Academy of Sciences. However, for the period 2016–2020, actual industrial emissions of carbon dioxide, 35.9 Gt, were 39.4 Gt, slightly lower than the DICE model forecast. The Covid-pandemic certainly provides a possible reason for the downward bias. Specifically, had carbon been priced at its social cost during this period, the forecast said industrial emissions would have been 33.1 Gt.

The concentration of carbon in the atmosphere is an important metric for global temperature. In 1988, climate scientist James Henson testified before the US Congress, stating that 350 parts per million (ppm) would be a high, but acceptable concentration level. At the end of 2015, carbon concentrations were around 400 ppm, a level not reached last 3.2 million yearsOf course, until now. The DICE model predicted that the concentration would increase to 418 by the end of 2020. At the end of 2020, the actual concentration was 415 ppm; And it is currently at 417 ppm.

The 2016 DICE model predicts that annual emissions will peak around the year 2050, at which time atmospheric carbon concentrations will be around 517 ppm, and global temperatures will rise by 2 degrees, with a price on the societal cost of carbon. It has been more than 16 million years since atmospheric carbon concentrations exceeded 500 ppm.

It is important to understand that according to the DICE model characterized by optimal carbon pricing, annual emissions are projected to peak in 2050; That is, in 2050 they will not come to Net Zero! Therefore, the model predicts that both atmospheric carbon concentration and global temperature will continue to rise after 2050. by the end of 21scheduled tribe Over the century, the DICE model forecast for carbon concentrations is 628 ppm, with global temperatures rising by about 3.5 degrees. It has been 56 million years since atmospheric carbon concentrations last crossed 600 ppm.

If the scenario just described isn’t bad enough already, it gets worse if there is a delay in pricing on the social cost of carbon.

Conversely, consider how long-term emissions forecasting has been developed by a consulting firm. wood mackenzie It is compared to Nordhaus’s Dice model. Wood Mackenzie refers to his best-guess forecast as his base case, and that emissions peak around 2027, and decline gradually thereafter. Analysts at Wood Mackenzie say that achieving either the 1.5 target, or the 2.0 target, will require a much faster decline in emissions than in their original case, to achieve the 1.5 target around 2022 and 2027. To achieve the target around 2.0. , Notably, Wood Mackenzie’s forecast for decade-end global temperatures is between 2.5 and 2.7 degrees, well above 2.0.

An important reason is the estimate provided by Nordhaus for the trajectory of the social cost of carbon to be lower than the estimate provided by other economists. Nordhaus built his model by assuming that people would evaluate tradeoffs related to climate change in the same way they evaluate other tradeoffs. By this I mean having a present-bias focused perspective when weighing the cost of consuming less today to provide an investment that generates profit in the form of consuming even more in the future. The assumptions used by other economists are slightly different, in that they assume less current-bias than Nordhaus, a perspective that is consistent with the long-term view of human life on the planet as well as broader issues such as biodiversity.

Relatedly, I should mention that Nordhaus’s model considers climate-related losses to be significant, but not catastrophic. This statement is also valid for a global temperature increase of up to 4 degrees, which is what the DICE model forecast will occur during the next century. In this regard, the model predicts that atmospheric temperatures will reach about 4 degrees Celsius in the year 2145, assuming that the cost of carbon is at its societal cost, which is just beginning.

The “beginning” qualification is important, because at its societal cost the delay in pricing carbon leads to forecasts of temperature change that exceeds 4 degrees. The model’s 2145 temperature forecast…

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