Royal Society - David Keith

of start-up companies active in engineered CDR and ocean
fertilisation. This may be positive, as it mobilises innovation
and capital, which could lead to the development of more
effective and less costly technology at a faster rate than
in the public sector. On the other hand, commercial
involvement could bypass or neglect the socio-economic,
environmental and regulatory dimensions of geoengineering.
Commercial activities have so far been concentrated on
CDR methods, where there is clear potential for future
earnings through carbon trading mechanisms. For SRM
methods, a clear financial incentive does not yet exist,
although there may be future income opportunities from
publicly funded deployment (especially of proprietary
technology). A sufficiently high carbon price, credits
for sequestration, and financial support for reduced
radiative forcing would be necessary to stimulate greater
entrepreneurial activity in developing geoengineering
technology. It is not yet clear if this would be desirable.
4.7 Economic factors
Economists have already started to try to model optimal,
least-cost paths to geoengineering development and even
to develop comparisons with mitigation in a common
framework. These attempts are of scientific interest but are
of limited practical or policy value. This is partly because
the present lack of knowledge about geoengineering costs
and risks means that the outputs of any cost modelling are
determined by uncertain input assumptions. Also, quite
apart from the limited capacity of simple economically
focussed cost-benefit climate impacts assessment models
to provide policy-relevant results, analyses of whether to
do either geoengineering or emissions mitigation are
inappropriate. A more relevant question is what combination
of mitigation and geoengineering might be desirable?
There is therefore significant potential for further economic
research to contribute to policy decisions about
geoengineering.
Costs
According to Stern (2007) the costs of conventional
mitigation are likely to be of the order of 1 or 2% of global
GDP (currently ~$70 trillion per year), that is about $1
trillion per year, to avoid current emissions, which are
approaching 10 GtC/yr. This corresponds to a carbon price
of around $100 per tonne of carbon (equivalent to ~$27
per tonne of CO 2 ). To be affordable, the costs of SRM
methods to offset a doubling of CO 2 would need to be
in the order of $1 trillion per year. Similarly the costs of
CDR methods would need to be comparable to mitigation
costs of $100 per tonne of carbon.
Establishing accurate cost estimates for geoengineering
technologies is however an inherently difficult process,
and only extremely tentative estimates are available for
most of the methods considered. There are two reasons for
this uncertainty. The first is that there is genuine technical
uncertainty about all the geoengineering options covered in
this report, as little serious research and development has
yet been carried out, let alone commercial scale
demonstration. The second is that there are systematic
biases towards under-estimating the costs of novel projects
and technologies of these kinds (Merrow et al. 1979; Bacon
et al. 1996; Flyvjberg et al. 2003).
These biases towards what the UK Treasury calls ‘appraisal
optimism’ arise from relatively straightforward political and
economic factors. Those players who stand to gain most
from the approval of large, new and risky projects are
rarely those who stand to lose if the costs of those projects
turn out to be far higher than forecast, or the benefits far
lower. This creates a powerful incentive for advocates of
new projects to underplay the risks and costs.
In addition, cost-benefit comparisons between
geoengineering and mitigation options need to be handled
with care. For many mitigation options, there is substantial
commercial-scale experience and estimates will usually be
based on solid empirical evidence. Attempts to establish
the relative cheapness of geoengineering should therefore
be treated with caution.
Financing
The tendency towards appraisal optimism usually extends
to estimates of R&D costs. However, when measured
against current international expenditure on energy or
mitigation R&D, it is likely that a relatively modest
investment in geoengineering research would enable
substantial progress to be made. Already there are moves
underway to support international collaborative research,
within Europe, the United States and across the G8. At this
early stage in the development of the field, government
and public sources can reasonably be expected to bear
many of the costs.
The economic attractiveness of CDR activities clearly
improves if there is a well-established international
valuation and trading system for carbon. Views on the
merits of carbon trading vary widely and it is easy to place
excessive reliance on emissions trading as a policy
instrument. However other systems of carbon valuation are
also plausible within the next few years, including a carbon
tax, or more likely, international agreement within a carbon
trading system to establish a stable minimum carbon price.
Should such a minimum value of carbon be established,
the economic attractiveness of CDR methods (as well as
mitigation) R&D would be much improved. However it is
important to stress that the absolute cost of geoengineering
R&D, even on a national UK basis, is unlikely to be a critical
constraint, provided that political approval and sufficient
public support for such R&D is forthcoming.
4.8 Option of last resort?
Even vocal advocates of geoengineering are mostly
somewhat reluctant champions. It is usually presented
as an insurance policy against the possible failure of
conventional mitigation policies; an option of last resort
44 I September 2009 I Geoengineering the Climate The Royal Society