Can we talk about cost and benefit of avoiding climate change?

After a long week of deadlines I finally had the time to reading Alex Morale's post on Bloomberg "The Two Numbers Climate Economists Can´t Stand to See Together" with the calm and attention I wanted to give it, after all, I'm an economist working in climate so the title itself got me. 

At the end I got a bit disappointed, not because the article is bad, but mostly because it doesn´t tell you anything new. Cost/benefits estimate for climate change mitigation (and I've calculated some for a few policies/projects myself) are always tricky. The longer the scope, the trickier they get which is unavoidable when trying to estimate the future in such complex systems. Broadly speaking Morale goes into the discussion of whether we should compare the costs of the estimated damage caused by global warming, with the estimated costs of avoiding such warming; then he goes into how this can be misleading as it doesn´t acknowledge the risks of catastrophic natural disasters, regional differences in costs and benefits, changes in technology over time, so called co-benefits (effects in health for example), differences in assumptions, etc. etc. etc. After all these confusing arguments, Morale concludes that whatever the estimates the costs are inevitable and getting higher the longer we wait. The good news is that, those estimates are still useful... as long as you know how to used them.

Global estimations are also misleading because they lack the geographical component: some regions will suffer the damages, other might even enjoy some benefits, and it is not clear who exactly should paid for the solution. However when these estimates are done with a practical intention they can be very useful and beneficial. A good example is Uruguay energy revolution (use the captions -> Translate captions to see subtitles in your language)

The economic analysis for energy source in Uruguay proved that a balance of 90% of renewable energy (75% in dry season) was the answer that gives lest cost and lowers vulnerability. Even without considering the environmental impacts, this option was decided to be the best and will be implemented in the next 15-20 years. This is a great example of how economic analysis can be useful and how environmental policies can also be economical and national security policies.

Well made, protecting the environment is not just a matter of principles, but it provides economic and social benefits that can make it a strategic investment for development.


If you want to get deep into the numbers, check the IPCC report Climate Change 2013: The Physical Science Basis (don´t worry there is a summary)