Current Economic Models

The median projection based on the 2001 IPCC data is that inaction will reduce global Gross Domestic Product (GDP) by 5 percent annually, resulting in an annual global loss of $3.341 quadrillion using a rounded World Bank 2006 global GDP projection of $67 quadrillion (in 2006 values). Assuming that emissions can be stabilized by 2025, the projected annual reduction in the global GDP due to climate change will be one percent annually, resulting in an annual global loss of $670 trillion (in 2006 values) using the World Bank 2006 GDP projection of $67 quadrillion. This study asserts that the costs escalate radically if the cost of feedback loops is integrated; that is, changes in one variable can lead to changes in another variable, such as the melting of the permafrost releasing more carbon dioxide into the air. This study assumes a net social cost of carbon dioxide of $85/ton, but other studies assert that the cost is less, perhaps as little as $2.50/ton. This study also does not offset the mitigation savings ($2.68 trillion annually) with the cost of mitigation.

Chris Hope's University of Cambridge PAGE (Policy Analysis of the Greenhouse Effect) model estimates the cumulative cost of climate change approximates a much smaller estimate of $74 trillion (in 2000 prices from the then value of the Euro) by 2200, and asserts that if mitigation efforts are begun immediately that the estimate would be reduced to less than half that amount. These projections vary from those of the IPCC report partly because different economic and climate change models and modeling assump tions, the inclusion of different variables in the models, and different means of calculating the variables that are in common.

Claudia Kemfert's World Integrated Assessment General Equilibrium Model (WIAGEM) from the German Institute for Economic Research estimates the cost of inaction to be $20 trillion annually by 2100, approximately 6-8 percent of the projected 2100 GDP. This estimate assumes the implementation of climate change mitigation policies limiting the increase in the average global temperature to 3.6 degrees F (2 degrees C). WIAGEM estimates the annual cost of mitigation to be $3 trillion annually. The WIAGEM cost estimate rises to $32 trillion annually if no mitigation is undertaken. The WIAGEM estimates assert that the net loss of abating the rise the average global temperature by only 3.6 degrees F (2 degrees C) until 2100 results in a net savings of $9 trillion annually. The WIAGEM study asserts that if mitigation does not begin until 2025 that this underestimate the costs of climate change by 2100, and correlatively the sooner, the more widely, and the more actively that mitigation is pursued, the more this figure overestimates over project the cost. The IPCC Third Assessment Report (TAR) Climate Change 2001 projects annual mitigation costs of $78-$141 billion. Other studies assert that at present values, the cost of mitigation exceed $2.5 trillion annually, in agreement with the WIAGEM study.

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