Scenarios in a Post-Copenhagen World

Yale economics professor William Nordhaus has published a new analysis of alternative outcomes for emissions, climate change and potential damages under different policy scenarios after the Copenhagen Accord using a integrated model that divides the world into 12 regions and incorporates pertinent economic data, key geophysical inputs, including carbon dioxide emissions, the carbon cycle, radiative forcings and a simple climate model, and a series of policy scenarios, including baseline, an optimal approach that maximizes economic welfare with full participation by States, a temperature-limited scenario that limits temperature increases to 2C above 1900 levels, and a Copenhagen Accord scenario, Nordhaus, Economic Aspects of Global Warming in a Post-Copenhagen Environment, 107 PNAS 11721-11726 (2010) (open access).

Among the key take-aways from the study:

  1. An optimal path scenarios would require a cut in global emissions of 50% from 2005 in 100 years, while the temperature-limited path would mandate zero emissions by 2075;
    • Atmospheric concentrations of carbon dioxide would rise to 793 ppm by 2100 under a baseline scenario; under the optimal and temperature-limited paths, atmospheric concentrations would peak at between 500-600ppm;
    • Under the baseline scenario, global temperatures rise 3.5C in 2100 and 5.7C in 2200, and ultimately peaks at 6.7C; the peak for the temperature-limited scenario is obviously 2C and 3C for the optimal path
    • Under the Copenhagen accord atmospheric concentrations of carbon dioxide rise substantially above levels consistent with capping temperatures at 2C
  2. Carbon prices under the optimal and temperature-limited scenarios are $38 and $79 per ton by 2015, compared to average of $5 per ton;
  3. One of the most valuable aspects of the piece is the “cautionary notes” section, outlining the economic disincentives for effective, concerted international action. This includes the following:
  • If each of the 12 regions acts non-cooperatively, carbon prices are approximately 1/10th of optimal levels;  thus, countries have strong incentives to free ride by not participating or cheating in the context of climate change agreements, a class tragedy of the commons scenario;
  • Another barrier to escaping from a “low-level noncooperative equilibrium” is the “intertemporal tradeoff,” i.e. effective climate change policy requires costly short-term abatement measures while many damages will occur in the distant future. Through 2055, the ratio of costs to benefits is 5-1; after this, the ratio is reversed, with benefits outweighing costs by 4.1. Asking the current generation to reduce its standard of living for the benefit of future generations would require “a level of political maturity that is rarely observed;”
  • There is also “spatial asymmetry between winners and losers,” with the major emitters facing a price tag of more than $1 trillion in discounted costs by 2055. While poorer countries can make arguments based in equity for why this outcome is fair, politics will invariably result in richer countries seeking to “weigh their own costs and attempt to share the burden more widely.”

Nordhaus’s models have been hotly contested by many in the past, so there should be ample opportunities in more advanced classes to “look under the hood” of the model he employs to critique some of the underlying assumptions which heavily influence his conclusions. Also, some good discussion with students could be generated around the question of how to cut through the Gordian knot of economic disincentives described in the article. For example, are there methods to obviate free riding? And is it entirely clear that the current generation must sustain a substantial financial hit to benefit future generations?

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