Talk:Economic analysis of climate change

Expert review in May 2023

As part of this project, we had approached several experts to help us improve this article. We have now received inputs by Elisabeth Gilmore and Debby Ley. They have proposed that the article's name is changed to "Economic analysis of climate change" (I'll start a separate talk page thread on that). They have also proposed some deletions (which I have now carried out, see below). They have also proposed a new structure as follows:

A. Economic analysis of climate change

· A brief history of the economic analysis of climate change o Stern Report versus Stavins o Social cost of carbon o AR5 to AR6

B. Benefit-cost analysis of climate change

· The steps – e.g. scenarios, the physical chain from emissions to damages, estimating the costs (link to economics of mitigation), distributional and equity considerations in BCA and treatment of uncertainty · Discount rates and intergenerational equity · Top down versus bottom-up analysis

C. Risk and uncertainty in BCA and the economics of climate change 

· Uncertainty in scenarios · Physical damages · Economic and human responses · Treatment of autonomous adaptation

D. Applications of economic analysis and BCA to mitigation and adaptation

· Global mitigation targets · Carbon taxes, cap and trade · Technology push and household incentives · Adaptation decision-making · Insurance and markets · Transition versus physical risks for the financial sector

E. Alternatives to conventional economic analysis 

· Critiques of conventional analyses · Ecological economics · Degrowth

So this would be the plan of action unless there is any objections or additional suggestions from anyone who has this article on their watchlist? EMsmile (talk) 08:44, 23 May 2023 (UTC)

I've asked Elisabeth Gilmore why she made it benefit-cost analysis and her reasoning was "A quick response to "benefit cost" versus "cost benefit" analysis. You are correct that it has conventionally been called cost-benefit analysis, but leading scholars and practitioners have called for it to be called benefit cost analysis as you would not undertake an action where the benefit did not exceed the costs. You see this reflected in the professional association for benefit-cost analysis: https://www.benefitcostanalysis.org/. - I am fine with either benefit-cost or cost-benefit".

So I've changed it back to CBA for now. EMsmile (talk) 12:24, 24 May 2023 (UTC)

Removed section "Factors affecting emissions growth"

I've removed this section based on the advice by reviewing expert Elisabeth Gilmore. This is digressing from the main topic and better covered in other Wikipedia articles. EMsmile (talk) 07:57, 23 May 2023 (UTC)

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Factors affecting emissions growth: See also: I PAT Changes in components of the Kaya identity between 1960 and 2016. Includes global energy-related CO 2 emissions, world population, world GDP per capita, energy intensity of world GDP and carbon intensity of world energy use. Historically, growth in GHG emissions have been driven by economic development. One way of understanding trends in GHG emissions is to use the Kaya identity. The Kaya identity breaks down emissions growth into the effects of changes in human population, economic affluence, and technology: CO 2 emissions from energy ≡ Population × (gross domestic product (GDP) per head of population) × (energy use / GDP) × (CO 2 emissions / energy use) GDP per person (or "per capita") is used as a measure of economic affluence, and changes in technology are described by the other two terms: (energy use / GDP) and (energy-related CO 2 emissions / energy use). These two terms are often referred to as "energy intensity of GDP" and "carbon intensity of energy", respectively. Note that the abbreviated term "carbon intensity" may also refer to the carbon intensity of GDP, i.e., (energy-related CO 2 emissions / GDP). Reductions in the energy intensity of GDP and/or carbon intensity of energy will tend to reduce energy-related CO 2 emissions. Increases in population and/or GDP per capita will tend to increase energy-related CO 2 emissions. If, however, energy intensity of GDP or carbon intensity of energy were reduced to zero (i.e., complete decarbonization of the energy system), increases in population or GDP per capita would not lead to an increase in energy-related CO 2 emissions. The graph on the right shows changes in global energy-related CO 2 emissions between 1971 and 2009. Also plotted are changes in world population, world GDP per capita, energy intensity of world GDP, and carbon intensity of world energy use. Over this time period, reductions in energy intensity of GDP and carbon intensity of energy use have been unable to offset increases in population and GDP per capita. Consequently, energy-related CO 2 emissions have increased. Between 1971 and 2009, energy-related CO 2 emissions grew on average by about 2.8% per year. Population grew on average by about 2.1% per year and GDP per capita by 2.6% per year. Energy intensity of GDP on average fell by about 1.1% per year, and carbon intensity of energy fell by about 0.2% per year. References EMsmile (talk) 07:56, 23 May 2023 (UTC)

Removed section on equity and GHG emissions

I've removed this section based on advice by Elisabeth Gilmore who said: "This content is old and not really relevant to economic analysis."EMsmile (talk) 08:07, 23 May 2023 (UTC)

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Equity and GHG emissions: See also: Greenhouse gas § Regional and national attribution of emissions, and Climate change mitigation § Sharing In considering GHG emissions, there are a number of areas where equity is important. In common language equity means "the quality of being impartial" or "something that is fair and just". One example of the relevance of equity to GHG emissions are the different ways in which emissions can be measured. These include the total annual emissions of one country, cumulative emissions measured over long time periods (sometimes measured over more than 100 years), average emissions per person in a country (per capita emissions), as well as measurements of energy intensity of GDP, carbon intensity of GDP, or carbon intensity of energy use (discussed earlier). Different indicators of emissions provide different insights relevant to climate change policy, and have been an important issue in international climate change negotiations (e.g., see Kyoto Protocol#Negotiations). Developed countries' past contributions to climate change were in the process of economically developing to their current level of prosperity; developing countries are attempting to rise to this level, this being one cause of their increasing greenhouse gas emissions. Equity is an issue in GHG emissions scenarios, and emerging markets countries, such as India and China, often would rather analyze per capita emissions instead of committing to aggregate emissions reduction because of historical contributions by the industrialized nations to the climate change crisis, under the principle of Common But Differentiated Responsibilities. References

Removed section on Global futures scenarios and emissions scenarios

I've removed this section based on advice by Elisabeth Gilmore: "Update to SSPs and other GDP and GHG scenarios. This content is old and not the mainstream scenarios used by the IPCC and those who really do climate economics." EMsmile (talk) 08:38, 23 May 2023 (UTC)

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Global futures scenarios and emissions scenarios: See also: Global Scenario Group "Global futures" scenarios can be thought of as stories of possible futures. They allow for the description of factors which are difficult to quantify but are important in affecting future GHG emissions. The IPCC Third Assessment Report includes an assessment of 124 global futures scenarios. These scenarios project a wide range of possible futures. Some are pessimistic, for example, 5 scenarios project the future breakdown of human society. Others are optimistic, for example, in 5 other scenarios, future advances in technology solve most or all of humanity's problems. Most scenarios project increasing damage to the natural environment, but many scenarios also project this trend to reverse in the long-term. In the scenarios, no strong patterns in the relationship between economic activity and GHG emissions were found. By itself, this is not proof of causation, and is only reflective of the scenarios that were assessed. In the assessed scenarios, economic growth is compatible with increasing or decreasing GHG emissions. In the latter case, emissions growth is mediated by increased energy efficiency, shifts to non-fossil energy sources, and/or shifts to a post-industrial (service-based) economy. However, in a study completed with several countries in 2022, a positive relationship was defined between renewable energy and economic growth. Most scenarios projecting rising GHGs also project low levels of government intervention in the economy. Scenarios projecting falling GHGs generally have high levels of government intervention in the economy. In scenarios designed to project future GHG emissions, economic projections, for example changes in future income levels, will often necessarily be combined with other projections that affect emissions, for example nationalism. Since these future changes are highly uncertain, one approach is that of scenario analysis. References EMsmile (talk) 08:38, 23 May 2023 (UTC)

Proposed name change

I am proposing to change the name of this article to economic analysis of climate change. I think it would make it clearer to our readers what to expect to see in the article. The word "economics" is too vague. Note the article economic impacts of climate change would be regarded as a sub-article for this article. EMsmile (talk) 08:46, 23 May 2023 (UTC)

I've made this name change (move) now. I had also posted about it at WikiProject Climate Change and there was no objection in a 3-week time period: https://wiki.riteme.site/wiki/Wikipedia_talk:WikiProject_Climate_change#Proposed_name_change_to_economic_analysis_of_climate_change EMsmile (talk) 08:56, 16 June 2023 (UTC)

Removed further reading list

I've removed the "further reading" list, I think it wasn't adding value here:

• "Central Banks and Climate Risks: Some researchers look at climate change and see economic uncertainty. Central banks are beginning to take notice", Econ Focus, Federal Reserve Bank of Richmond, Second/Third Quarter 2019.
• Maximilian Auffhammer. 2018. "Quantifying Economic Damages from Climate Change." Journal of Economic Perspectives—Volume 32, Number 4—Fall 2018—Pages 33–52.
• Solomon Hsiang and Robert E. Kopp. 2018. "An Economist's Guide to Climate Change Science." Journal of Economic Perspectives—Volume 32, Number 4—Fall 2018—Pages 3–32 EMsmile (talk) 14:03, 4 September 2023 (UTC)

Moving forward after recent merger

We need some inputs into the new structure and content of this article, now that the article economic impacts of climate change has been merged into it (a merge which I supported). I wonder if a name change would help and if it needs a refocus. Perhaps Climate change and economic aspects, keeping in line with the range of articles that are called "climate change and ...". Or perhaps it requires WP:TNT. Does anyone have any broad suggestions for this? I've put the same also on the talk page of WikiProject Climate Change. EMsmile (talk) 09:13, 7 September 2023 (UTC)

Suggestion:

1. start with definitions. What is economic analysis of climate change? What is it good for? What are its strengths and weaknesses? Which alternatives exist?
2. Make it easier for readers to read an analysis for their own country, their own climate. Structure by climate. Describe for each climate:

• the areas, which parts of the world share that climate?
• scenario's, what may happen? Which scenario is most likely?
• for the most likely scenario: economic impact, mitigation, adaptation, costs.

Uwappa (talk) 08:44, 10 September 2023 (UTC)

Hi Uwappa thanks for your suggestions. I've done a bit of work on this article today. Mainly it needs a lot of culling as a lot of the content is very outdated. Please help with that if you can. As for your second suggestion I would hesitate to generate such new content. I think this kind of content is better placed in effects of climate change and also in the country (or continent/region) specific climate change articles, like climate change in Europe, climate change in Africa, climate change in China and so forth. EMsmile (talk) 13:03, 12 September 2023 (UTC)

I have done a bit more culling and condensing today, e.g. removing excessive or outdated content from the IPCC report from 2001. More work is needed but I'll take a break for a few days. Hoping that others will chime in and help further. Everyone is welcome. EMsmile (talk) 09:01, 13 September 2023 (UTC)

Removed content about renewables

I've removed this paragraph as I felt it didn't fit with this high level article. Perhaps move to renewable energy? Pinging User:Chidgk1.

Technological change too slow

Since 2021 the cost of new wind and solar power has generally been less than existing gas and coal-fired power: both because of the rise in price of natural gas that year and the long-term trend of falling renewables prices. However it is estimated that the steady growth part of the S-shaped growth curve of renewable power will not be enough on its own to meet the goal of the Paris Agreement to limit global warming to 1.5 degrees. According to the World Resources İnstitute both non-economic and economic policies are needed to increase the rate of growth of renewables: for example they say some countries should invest more in upgrading power grids. EMsmile (talk) 10:56, 12 September 2023 (UTC)

References

EMsmile (talk) 10:56, 12 September 2023 (UTC)

Oh yes I wrote that if I remember right - I think it is still true - do whatever you like with it anyone - I am just glad when people work on economics articles as I find them very hard to understand and edit Chidgk1 (talk) 14:42, 12 September 2023 (UTC)

Section on trade offs deleted (outdated)

I regard this as outdated and better covered now in our other Wikipedia articles. Moved this to the talk page in case someone wants to argue against deletion.

Trade offs

See also: integrated assessment modelling

It is often argued in the literature that there is a trade-off between adaptation and mitigation, in that the resources committed to one are not available for the other. This is debatable in practice because the people who bear emission reduction costs or benefits are often different from those who pay or benefit from adaptation measures.

There is also a trade off in how much damage from climate change should be avoided. The assumption that it is always possible to trade off different outcomes is viewed as problematic by many people.

Some of the literature has pointed to difficulties in these kinds of assumptions. For instance, there may be aversion at any price towards losing particular species. This is related to climate change, since the possibility of future abrupt changes in the climate or the Earth system cannot be ruled out. For example, if the West Antarctic ice sheet was to disintegrate, it could result in a sea level rise of 4–6 meters over several centuries. EMsmile (talk) 11:14, 12 September 2023 (UTC)

References

EMsmile (talk) 11:14, 12 September 2023 (UTC)

For info: there is a recent Economist article https://www.economist.com/finance-and-economics/2023/06/27/the-choice-between-a-poorer-today-and-a-hotter-tomorrow and leader https://www.economist.com/leaders/2023/06/29/how-misfiring-environmentalism-risks-harming-the-worlds-poor about a different kind of trade off - between helping the poor and helping the environment Chidgk1 (talk) 11:10, 13 September 2023 (UTC)

Removed section on comments on relative impacts

I've removed this section for being (in my opinion) not encyclopedic, too much like a literature review, outdated:

Comments on relative impacts

Bostrom (2009) comments that:

Even the Stern Review on the Economics of Climate Change, a report prepared for the British Government which has been criticized by some as overly pessimistic, estimates that under the assumption of business-as-usual with regard to emissions, global warming will reduce welfare by an amount equivalent to a permanent reduction in per capita consumption of between 5 and 20%. In absolute terms, this would be a huge harm. Yet over the course of the twentieth century, world GDP grew by some 3,700%, and per capita world GDP rose by some 860%. It seems safe to say that (absent a radical overhaul of our best current scientific models of the Earth's climate system) whatever negative economic effects global warming will have, they will be completely swamped by other factors that will influence economic growth rates in this century.

Other analysts have commented on the risks of climate change damages. The German Advisory Council on Global Change (WBGU, 2007) comments that:

Although [the Stern Review's] figures tend to be at the upper end of the scale compared to other estimates currently circulating, even [its] quantitative estimates fail to include the economic upheavals that would arise as a consequence of climate-induced conflicts or might be triggered by climate-induced migration.

Several analysts have emphasized the importance of "catastrophic" risks due to climate change. WBGU (2007) states that due to climate change, "significant impairment" of the global economy is a "distinct possibility". Weitzman (2012) has commented:

Climate change potentially affects the whole worldwide portfolio of utility by threatening to drive all of planetary welfare to disastrously low levels in the most extreme scenarios. With global climate change, diversification [of risk] is limited because all eggs are inherently in one basket.

EMsmile (talk) 12:55, 12 September 2023 (UTC)

References

EMsmile (talk) 12:55, 12 September 2023 (UTC)

Removed content from "‎Non-market impacts" section

I've removed this content from "‎Non-market impacts" section. My justification is: doesn't really fit here in this high level article; too much detail about survey results by EIB..

Removed content:

Green companies in Europe outperform those in the United States in terms of green investment and digital uptake. In comparison to the United States, European businesses are less likely to have adopted digital technology, but they are more likely to invest in climate change mitigation or adaptation strategies. In Europe, the proportion of businesses that make green investments and are also digital adopters is slightly greater, at 32%. The same businesses are at 28% in the United States.

81% of the European Investment Bank's Investment Survey respondents cited uncertainty as the most severe obstacle to investment.

A European survey conducted in 2021 found that 45% of young Chinese people, 32% of young Americans, 31% of British, and 25% of Europeans fear they could lose their jobs because of the fight against climate change. Specifically, Europeans aged 20 – 29 (44%) fear they could lose their job if it is incompatible with the need to combat climate change. However, 55% of Europeans believe that initiatives to combat climate change will have a net positive impact on employment, generating more jobs.

The survey also found that 69% of EU, 71% of UK, 62% of US and 89% of Chinese respondents would support a tax on the items and services that contribute the most to climate change.

During the green transition, workers in carbon-intensive industries are more likely to lose their jobs. In the years to come, the transition to a low-carbon economy will put more jobs at danger in regions with higher percentages of employment in carbon-intensive industries.

The proportion of enterprises in Central, Southeastern and Eastern Europe who regard the transition to stronger climate regulations as a risk outnumbers the proportion that see it as an opportunity. This is 36% as a risk vs. 18% as an opportunity. In comparison, companies in the EU see it as 32% risk, 29% opportunity. Almost 90% of enterprises in CESEE have already taken steps to cut GHG emissions, which is comparable to the EU average.

Businesses in this region stated in a survey that climate change is having an impact on their business (a "significant impact" for one out of every 10 enterprises), which is lower than the EU (57%). EMsmile (talk) 12:59, 12 September 2023 (UTC)

References

EMsmile (talk) 12:59, 12 September 2023 (UTC)

Deleted section on relative impacts

I've deleted this section because this is all covered better in other articles by now, e.g. effects of climate change, climate change vulnerability.

Relative impacts

The effects of climate change can be compared to other effects on human society and the environment. Future socio-economic development may strongly affect climate change impacts. For example, projections of the number of people at risk of hunger vary significantly according to assumptions over future socio-economic development.

Some ecosystems are likely to be especially affected by climate change (e.g., coral reefs). In the long-term (beyond 2050), climate change may become the major driver for biodiversity loss globally.

The socio-economic impacts of climate change are likely to be greatest in communities that face other stresses. For example, poor communities are vulnerable to extreme weather events, and are likely to be especially affected by climate change. In general, however, other changes (e.g., demographic and technological) are likely to have a greater effect on human society than climate change. On the other hand, major ("non-marginal") impacts could occur with abrupt changes in natural and social systems. Scientific understanding of abrupt changes is limited.

Another consideration is how vulnerability to climate change varies with scale. At local scales, extreme weather events can have a significant impact, especially in vulnerable locations. Another potentially significant impact is the long-term effect of sea-level rise on low-lying coastal areas. EMsmile (talk) 07:56, 13 September 2023 (UTC)

References

EMsmile (talk) 07:56, 13 September 2023 (UTC)

Caption for File:Prim GRES.jpg（excerpt from Carbon tax）

It says "A coal-fired power plant in Luchegorsk, Russia. A carbon tax would tax the CO₂ emitted from the power station". Can we have the citation to support that Russia is to charge the power station with carbon tax? Thanks.--ThomasYehYeh (talk) 13:15, 15 October 2023 (UTC)

the caption didn't say that Russia is indeed charging a carbon tax, so no citation is needed. But to make it clearer, I have now changed the second sentence of the caption to: If there was a carbon tax, it would add a fee (or "tax") for the CO₂ emitted from the power station.. Is that better? EMsmile (talk) 16:36, 15 October 2023 (UTC)

Summary of edits made Jan-April 2024 and possible further improvements

There was quite a lot of new text, updating to IPCC AR6 and restructuring of the article following its merger with economic impacts article

1. improved the lead to better reflect and balance content
2. improved, more comprehensive purposes section
3. types of economic models following IPCC + new section on statistical models
4. analytical frameworks is more balanced in describing methods other than CBA
5. Costs of impacts of climate change is better structured into global estimates, regional and sectoral.
6. the global section was improved with information on the 'what' and the 'how' of these estimates and updated with AR6 findings
7. new separate sections detailing the costs of adaptation and mitigation measures excerpting from those sub- articles
8. reorgansing text in section on challenges and debates, and updating some which go back quite a long way

Possible further improvements are :

1. regional and sectoral estimates of economic impacts - main sectors and affected regions, including links to relevant articles still needs work and updating from old sources
2. Risk management method - I think this should be more focussed on the - iterative risk management concept that is embedded in IPCC work
3. additional analytical frameworks/methods to be added could be Real options analysis, multi-criteria analysis
4. there is quite a big reliance on excerpts from other articles which is not ideal
5. very few studies of climate change are integrated into main articles covering the economic frameworks here eg CBA, CEA

Richarit (talk) 16:40, 6 June 2024 (UTC)

Hi Richarit, thanks a lot for this useful summary and your work on this article! Do you have time for any of the possible improvements that you listed here, or is that more for others? Regarding the number of excerpts, I agree with you that it was quite a high number (five). This prompted me to remove the excerpt on social cost of carbon.

How do you (and others) feel about the general article quality now, is it still a C class article, or has it gone up to B? (see here for an explanation of the grading system: WP:ASSESS). EMsmile (talk) 12:32, 13 June 2024 (UTC)

Requested move 16 June 2024

The following is a closed discussion of a requested move. Please do not modify it. Subsequent comments should be made in a new section on the talk page. Editors desiring to contest the closing decision should consider a move review after discussing it on the closer's talk page. No further edits should be made to this discussion.

The result of the move request was: Not moved: Opposition is unanimous, early closure, request was withdrawn. (non-admin closure) HudecEmil (talk) 13:42, 22 June 2024 (UTC)

---

Economic analysis of climate change → Economic effects of climate change – Consistency with other pages such as Effects of climate change. Notability of the content more due to effects. HudecEmil (talk) 17:58, 16 June 2024 (UTC)

• Oppose. I think the current title is pretty good, as this is not just about the economic effects of climate change. See previous move discuss above. Also see discussion about content and structure above (from 9 months ago). Changing the title to "Economic effects of climate change" would narrow down the scope of this article. EMsmile (talk) 09:42, 17 June 2024 (UTC)
• Oppose. This article includes analysis of mitigation and adaptation policies and scenarios, and information about costing and impementing these measures, so I think that the renaming proposal would not be suitable as making it too narrow scope Richarit (talk) 11:11, 17 June 2024 (UTC)
• Oppose per EMsmile. As suggested in previous move discuss above, it might be appropriate to expand the section Economic analysis of climate change#Costs of impacts of climate change into an article at Economic effects of climate change in summary style. Daask (talk) 18:50, 20 June 2024 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.

Removed section on sensitivity analysis

I am taking this out as I regard it as outdated, overly detailed, not well sourced. Moving it to talk page in case someone wants to put it back in:

Sensitivity analysis allows assumptions to be changed in aggregate analysis to see what effect it has on results (Smith et al., 2001:943):

• Shape of the damage function: This relates impacts to the change in atmospheric greenhouse gas (GHG) concentrations. There is little information on what the correct shape (e.g., linear or cubic) of this function is. Compared with a linear function, a cubic function shows relatively small damages for small increases in temperature, but more sharply increasing damages at greater temperatures.
• Rate of climate change: This is believed to be an important determinant of impacts, often because it affects the time available for adaptation.
• Discount rate and time horizon: Models used in aggregate studies suggest that the most severe impacts of climate change will occur in the future. Estimated impacts are therefore sensitive to the time horizon (how far a given study projects impacts into the future) and the discount rate (the value assigned to consumption in the future versus consumption today).
• Welfare criteria: Aggregate analysis is particularly sensitive to the weighting (i.e., relative importance) of impacts occurring in different regions and at different times. Studies by Fankhauser et al. (1997) and Azar (1999) found that greater concern over the distribution of impacts lead to more severe predictions of aggregate impacts.
• Uncertainty: Usually assessed through sensitivity analysis, but can also be viewed as a hedging problem. EMF (1997) found that deciding how to hedge depends on society's aversion to climate change risks, and the potential costs of insuring against these risks. EMsmile (talk) 13:57, 31 July 2024 (UTC)

References