The 21st Century climate challenge

1The 21 st Century climate challengeMeasured in economicterms the case forstringent mitigation makesgood business senseThe 1.6 percent of global GDP required to achievethe 450 ppm targets for CO 2e represents less thantwo-thirds of global military expenditures. In thecontext of OECD countries, where governmentexpenditure typically represents 30 to 50 percentof GDP, the stringent mitigation goals hardlyappear unaffordable, especially if expendituresin other areas—such as military budget andagricultural subsidies—can be reduced.The human and ecological costs of dangerousclimate change cannot readily be captured insimple cost–benefit analysis. However, measuredin economic terms the case for stringent mitigationmakes good business sense. Over the longterm the costs of inaction will be larger than thecosts of mitigation. Estimating the costs of climatechange impacts is intrinsically difficult. Withwarming of 5–6°C economic models that includethe risk of abrupt and large-scale climate changepoint to losses of 5 to 10 percent of global GDP.Poor countries could suffer losses in excess of 10percent. 66 Catastrophic climate change impactscould push the losses above this level. Reducingthe risk of catastrophic outcomes is one of themost powerful arguments for early investment inmitigation to achieve the 450 ppm target.It has to be emphasized that there are largemargins of uncertainty in any assessment ofmitigation costs. Most obviously, the cost structuresfor future low-carbon technologies, thetiming of their introduction, and other factorsare unknown. Higher costs than those indicatedabove are perfectly plausible—and politicalleaders need to communicate the uncertaintiesof financing for a 2°C climate change threshold.At the same time, it is also possible that costscould be lower. International emissions tradingand the integration of carbon taxation into widerenvironmental tax reforms have the potential todrive down mitigation costs. 67All governments have to assess the financialimplications of achieving climate change mitigationtargets. Multilateral climate protectionarchitecture will be left on an insecure foundationif it is not rooted in financial commitments.The 1.6 percent of average global GDP requiredfor stringent mitigation implies a claim onscarce resources. But the alternatives are notcost-free. Political debate on financing mustalso address the question of whether dangerousclimate change is an affordable option.That question goes to the heart of the twincase for urgent action set out in this chapter. Giventhe momentous nature of the catastrophic ecologicalrisks that will accompany dangerous climatechange, 1.6 percent of global GDP might be seenas a small price to pay on an insurance policy toprotect the well-being of future generations. Giventhat the same investment has the potential toprevent large-scale and very immediate reversalsin human development for millions of the morevulnerable people across the world, the crossgenerationaland the cross-country social justiceimperatives are mutually reinforcing.1.5 Business-as-usual—pathways to an unsustainableclimate futureTrend is not destiny and past performance can bea weak guide to future outcomes. In the case of climatechange that is unequivocally a good thing. Ifthe next 20 years look like the past 20 the battleagainst dangerous climate change will be lost.Looking back—the world since 1990Experience under the Kyoto Protocol providessome important lessons for the developmentof a 21 st Century carbon budget. The Protocolprovides a multilateral framework thatsets limits on greenhouse gas emissions.Negotiated under the auspices of theUNFCCC, it took 5 years to reach anagreement—and another 8 years before thatagreement was ratified by enough countries tobecome operational. 68 The headline target forgreenhouse gas emissions cuts was 5 percentfrom 1990 levels.52 HUMAN DEVELOPMENT REPORT 2007/2008