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Restructuring the Climate Change Science Program

Societies’ ability to respond to climate change depends in part on the magnitude and speed of changes in the climate system and on the resilience of human and environmental systems in the face of these changes. Air and ocean temperatures are increasing, resulting in widespread melting of snow and ice and rising sea levels. This global warming has been occurring over the past century, but has greatly accelerated in the past few decades, driven by the addition of greenhouse gases, especially CO2, to the atmosphere at an ever increasing rate. A warming in excess of 3°C is possible (cf., Figure 2.1) and could push components of the climate system past various tipping points (e.g., Schneider and Mastrandrea, 2005; Lenton et al., 2008), including the possible loss of the major ice sheets and glaciers. The bell-shaped curve of the warming with a wide range of 1.5°C to 4.5°C and a “fat tail” shown in Figure 2.1 illustrates the large uncertainty in our understanding of the response of the climate system to human perturbation. It also suggests that we cannot entirely dismiss the possibility of irreversible changes in the way Earth’s climate operates and how human and ecological systems respond.



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2 Restructuring the Climate Change Science Program S ocieties’ ability to respond to climate change depends in part on the magnitude and speed of changes in the climate system and on the resilience of human and environmental systems in the face of these changes. Air and ocean temperatures are increas- ing, resulting in widespread melting of snow and ice and rising sea levels. This global warming has been occurring over the past cen- tury, but has greatly accelerated in the past few decades, driven by the addition of greenhouse gases, especially CO2, to the atmos- phere at an ever increasing rate. A warming in excess of 3ºC is possible (cf., Figure 2.1) and could push components of the climate system past various tipping points (e.g., Schneider and Mastran- drea, 2005; Lenton et al., 2008), including the possible loss of the major ice sheets and glaciers. The bell-shaped curve of the warm- ing with a wide range of 1.5ºC to 4.5ºC and a “fat tail” shown in Figure 2.1 illustrates the large uncertainty in our understanding of the response of the climate system to human perturbation. It also suggests that we cannot entirely dismiss the possibility of irre- versible changes in the way Earth’s climate operates and how human and ecological systems respond. 21

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22 RESTRUCTURING FEDERAL CLIMATE RESEARCH FIGURE 2.1 Probability distribution of the predicted increase in global mean surface temperature due to a 3 Wm-2 radiative forcing from in- creases in greenhouse gases from preindustrial times to 2005. The probability density of the expected warming adopts the IPCC (2007a) climate sensitivity of 3°C warming due to a doubling of CO2, with a 90 percent confidence level of 2°C to 4.5°C warming. The realized warming is the warming from 1750 to 2005 that has been attributed to greenhouse forcing. Because of the small amount of warming that has been realized to date and the presence of strong cooling by aerosols, temperature in- creases above 2°C are likely not imminent but could be very large before the end of the century. The temperature thresholds for various climate tipping points are marked by the blue words. The ranges, taken from Len- ton et al. (2008), are not shown, but are 0.5°C to 2°C for the melting of Arctic summer sea ice; 1°C to 2°C for radical shrinkage of the Greenland Ice Sheet and 3°C to 5°C for shrinkage of the West Antarctic Ice Sheet; 3°C to 4°C for the dieback of the Amazon rain forest due to drastic reduc- tions in precipitation; 3°C to 6°C for persistent El Niño conditions; and 3°C to 5°C for a shutoff in the North Atlantic deep water formation and the associated thermohaline circulation. The tipping point of Himalayan- Tibetan glaciers is based on the IPCC (2007a) finding that these glaciers may suffer drastic melting when warming exceeds 1°C to 2°C above pre- industrial levels. SOURCE: Ramanathan and Feng (2008).

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 23 What measures society should, can, and will apply to slow the growth of greenhouse gases and/or reduce the dangers posed by the expected large climate system changes are still far from settled. Changes in greenhouse gas emissions reflect behavioral patterns, energy consumption, population growth, and societal responses to climate change. These changes are happening in the context of complex socioecological systems in which nature and society are mutually dependent and are constantly affecting one another (posi- tively and negatively) across space and time (Folke, 2006). The fundamental dilemma faced by policy makers is how to forge ef- fective strategies both to mitigate further climate change and to adapt to the changes already under way, in view of the uncertain- ties in our knowledge about how climate affects humans and vice versa and of the political difficulties of taking costly action now for benefits that accrue in the future. The fat tails of the distribu- tion of climate sensitivity (Figure 2.1), rather than the average, may drive the economic trade-offs associated climate change (Weitzman, 2009). Policy and decision makers must have better information that meets their needs (NRC, 2009). Improving understanding of the interactions and feedbacks of the physical climate system with human and environmental sys- tems, improving predictions of longer-term causes and trends, and preparing the nation for future climate changes are grand chal- lenges. They are particularly difficult to tackle if we do not understand the system as a whole. Under the Climate Change Sci- ence Program (CCSP), much has been learned about components of the natural climate system, including the composition of the at- mosphere, the water and carbon cycles, and changes in the land surface (NRC, 2007c). It is now time to take a more holistic ap- proach and integrate across natural and social science disciplines and across the science and policy worlds to find solutions to cli- mate change-related problems that are of major concern to society. This chapter provides seven examples of societal issues that motivate the need for an integrated approach to the research pro- gram. Two are current issues stemming from changes in the climate system (weather and climate extremes, sea level rise and melting ice) and five focus on impacts of climate change (avail- ability of freshwater, agriculture and food security, managing ecosystems, human health, and impacts on the economy of the

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24 RESTRUCTURING FEDERAL CLIMATE RESEARCH United States). The examples connect societal issues widely rec- ognized as essential to the well-being of the planet with high- priority science and application needs. Although not a comprehen- sive list, they show how the CCSP could be organized to yield both improved understanding of the climate system and the knowledge foundation needed to support sound decision making. EXTREME WEATHER AND CLIMATE EVENTS AND DISASTERS Extreme (severe) weather and climate events are the most visible manifestations of climate-related hazard. In the worst cases, such extreme events interact with socioeconomic, political, and ecological factors (e.g., food and water supply) to create economic or health disasters (Wisner et al., 2004). Especially at risk are the poor, uneducated, very old or very young, and the sick. How soci- ety deals with extreme weather events today provides an analog for understanding our vulnerability to hazard in a changing climate (Adger et al., 2003). The impact of climate-related hazard depends on two factors: (1) the level of exposure to the danger (e.g., storms, heat waves, droughts) and (2) the capacity of the vulnerable party to respond, cope, and adapt (Wisner et al., 2004; Tompkins et al., 2008). For example, Hurricane Mitch killed thousands when it struck Honduras in 1998, but had a much less devastating impact on Florida (Glantz and Jamieson, 2000). The reasons for the dispa- rate consequences relate both to the changing nature of exposure (Mitch started as a category 5 hurricane in the Caribbean and ended as a tropical storm in Florida) and to the high levels of pov- erty in Honduras, where many died because they did not have the means to flee or to “ride out the storm.” Even in a country as wealthy as the United States, the growing frequency and cost of climate-related disasters have taken a toll. In the 1990s there were 460 presidential disaster declarations, nearly double the number of the previous decade, and 498 declarations were made from 2000 to October 2008.1 Of the 62 weather-related disasters that cost more than $1 billion between 1980 and 2004, one-quarter hap- 1 http://www.fema.gov/news/disaster_totals_annual.fema.

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 25 pened after 2000 (DOC, 2005, cited by Burby, 2006: 172). Hurricane losses since 1990 have risen dramatically, both in absolute terms and as a fraction of gross domestic product (Nordhaus, 2006), mostly be- cause of increases in the population and the value of assets in exposed coastal regions (Pielke et al., 2008). Higher costs can be expected as climate continues to change (IPCC, 2007a). Research on climate vulnerability has identified many factors, both positive and negative, that shape the level of exposure and sensitivity of people and settlements (Eakin and Luers, 2006; see also Backlund et al., 2008; Gamble, 2008; Savonis et al., 2008). For example, changing demographics in U.S. coastal areas have likely increased overall vulnerability to storm-related flooding and damaging winds. Not only are more people living permanently (rather than seasonally) on coasts, they also are older (retirees), more racially and ethnically diverse, and more likely to have low- wage jobs (Cutter and Emrich, 2006). Approximately half of the U.S. population, 160 million people, lives in a coastal county (Gamble, 2008). By 2050, 86 million people in the United States will be 65 or older and potentially more sensitive to the effects of heat waves and flooding. Managing this vulnerability requires both short-term actions to prevent disasters and assist recovery efforts (e.g., evacuation; supply of clean water, shelter, and food; recon- struction of infrastructure) and longer term structural reforms to reduce people’s vulnerability to disasters (e.g., land-use regulation; Lemos et al., 2007). By definition, extreme events occur infrequently, typically as rare as, or rarer than, the top or bottom 10 percent of all occur- rences. A relatively small shift in the mean climate, caused by human activities or natural variability (e.g., changes in atmospheric circulation associated with the El Niño/Southern Oscillation [ENSO] phenomenon), can produce a larger change in the number of extremes. In a changing climate system, some extreme events will be more intense, some will occur more frequently, and others will occur less frequently (Karl et al., 2008). Yet building codes and insurance premiums are based in part on the occurrence of ex- treme events in the past. Over the past few decades, the number of heat waves and warm nights has increased in the inhabited continents, while cold days, cold nights, and days with frost have become rarer (Figure 2.2). The

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26 RESTRUCTURING FEDERAL CLIMATE RESEARCH FIGURE 2.2 Observed trends (days per decade) for 1951 to 2003 in the frequency of extreme temperatures, defined on the basis of 1961 to 1990 values, as maps for the 10th percentile, (a) cold nights and (b) cold days; and 90th percentile, (c) warm nights and (d) warm days. Trends were calculated only for grid boxes that had at least 40 years of data during this period. Black lines enclose regions where trends are significant at the 5 percent level. Below each map are the global annual time series of anomalies (with respect to 1961 to 1990). The orange line shows decadal variations. Trends are significant at the 5 percent level for all the global indices shown. SOURCE: From Trenberth et al. (2007), FAQ 3.3, Figure 1, Cambridge University Press. Adapted from Alexander et al. (2006).

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 27 United States has experienced fewer severe cold episodes over the past decade than for any other 10-year period in the U.S. historical climate record, which dates back to 1895 (Kunkel et al., 2008). One of the adverse consequences of warmer winters (along with pro- longed drought stress and forest management practices) is the spread of the pine bark beetle, which has decimated forests in the western United States (Negrón et al., 2008). Global warming also influences changes in precipitation. Air holds more water as it warms (Dai, 2006; Santer et al., 2007), result- ing in more moisture for storms and thus heavier rainfalls or snowfalls and greater potential for flooding. For the contiguous United States, statistically significant increases in heavy (upper 5 percent) and very heavy (upper 1 percent) precipitation have been observed over the past three decades (Kunkel et al., 2008), and heavy rain events are contributing more to the total precipitation (Klein Tank and Können, 2003; Groisman et al., 2004; Alexander et al., 2006). At the same time, warmer air leads to greater evaporation and surface drying in some areas and thus contributes to drought and increased risk of wildfires. Over the past several decades, drought has increased, especially in Africa, southern Asia, the southwestern United States, Australia, and the Mediterranean region (Figure 2.3). The extent of very dry land across the globe has more than doubled since the 1970s (Dai et al., 2004) as a result of decreases in precipitation and the large surface warming. Like other climate- related impacts, the impacts of drought depend on a combination of stressors at different scales (Wilbanks et al., 2007). For exam- ple, populations already stressed by poverty, warfare, or AIDS are more vulnerable to drought (see “Freshwater Availability,” below). Understanding how these stressors combine and interact is essen- tial for informing policy. Intense extratropical cyclones can produce extremely severe local weather, such as thunderstorms, hail, and tornadoes. Such storms appear to be increasing in number or strength (e.g., Wang et al., 2006), and their tracks have been shifting northward in both the North Atlantic and North Pacific over the past 50 years (e.g., Gulev et al., 2001; McCabe et al., 2001). Climate models project these storms to be more frequent over the next century, with stronger winds and higher waves (Meehl et al., 2007).

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28 RESTRUCTURING FEDERAL CLIMATE RESEARCH FIGURE 2.3 (Top) Spatial pattern of drought for 1900 to 2002, as repre- sented by the monthly Palmer Drought Severity Index (PDSI), which measures the cumulative deficit (relative to local mean conditions) in surface land moisture. The lower panel shows how the sign and strength of this pattern has changed since 1900. Red and orange areas in the top panel are drier (wetter) than average and blue and green areas are wetter (drier) than average when the values shown in the lower plot are positive (negative). The smooth black curve shows decadal variations. Wide- spread drought is increasing in Africa, especially in the Sahel, while some regions are getting wetter, especially in eastern North and South America and northern Eurasia. SOURCE: Trenberth et al. (2007), FAQ 3.2, Figure 1, Cambridge University Press. Adapted from Dai et al. (2004).

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 29 Of all extreme events, however, tropical cyclones cause the greatest property damage (e.g., Box 2.1), and so any changes in their frequency and intensity are vital to residents who live in their paths, state and local disaster preparedness organizations, and the insurance industry (Murnane, 2004). The number of tropical storms and hurricanes affecting the United States fluctuates from decade to decade, and data uncertainty is larger prior to 1965, when the satellite era began (Gutowski et al., 2008). Nonetheless, it is likely that the annual number of tropical storms and hurricanes in the North Atlantic has increased over the past 100 years, al- though there appears to be no trend in the proportions of major hurricanes or in overall intensity (Holland and Webster, 2007). When multiple storms hit the same region, as happened in Florida and Louisiana in 2005, communities have little time for recovery and resilience building. Since about 1970, and likely since the 1950s, Atlantic tropical storm and hurricane destructive potential has increased (Emanuel, 2005, 2007). The destructive potential is strongly correlated with tropical Atlantic sea surface temperatures. Model simulations sug- gest that for every 1ºC increase in tropical sea surface temperature, core rainfall rates will increase by 6 to 18 percent and the surface wind speeds of the strongest hurricanes will increase by about 1 to 8 percent (Gutowski et al., 2008). Other changes in the climate system (e.g., higher sea level) as well as growing populations and development in coastal zones will worsen the impacts of hurricanes and the associated storm surges and beach and wetland erosion. Research Needs Because humans both contribute to extreme weather and cli- mate events and suffer from their consequences, research is needed to understand the underlying physical and human processes and their interactions, feedbacks, and impacts, as well as to meet the information needs of stakeholders developing warning systems and response and adaptation options. For example, states need improved understanding and prediction of storm events with the potential to generate major regional flooding (CDWR, 2007). Research is also needed on how to account for changing socioeconomic conditions, including adaptation over time, to improve our understanding of

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30 RESTRUCTURING FEDERAL CLIMATE RESEARCH BOX 2.1 Hurricane Katrina Hurricane Katrina was one of the worst disasters in U.S. history and offers important lessons on how U.S. coastal regions may be vulnerable to potential increases in hazard related to future climate change. The cate- gory 3 storm, which hit New Orleans in August 2005, caused $81 billion in total damage and $40.6 billion in insured losses. On the northern Gulf coast, 1.2 million people were evacuated from their homes and 1,833 people were killed, directly or indirectly. In its wake, 43 tornadoes touched ground in Florida, Georgia, Alabama, and Mississippi. The different levels of vulnerability of individuals and communities became painfully clear in the aftermath of the hurricane. Preventing similar disasters will require research from a wide range of disciplines, including atmospheric physics, biology, sociology, engineering, political science, economics, anthropol- ogy, and psychology (Gerber, 2007). However, science alone will not solve the problem if integrated approaches and better communication, disaster management, and policy capacity are not in place (e.g., Waugh, 2006).

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 31 FIGURE People’s ability to flee or to recover from the negative impacts of Hurri- cane Katrina revealed the many social, physical, structural, and political dimensions of extreme weather or climate events. (Left) Vehicles leave New Orleans ahead of Hurricane Katrina on August 28, 2005. SOURCE: AP Photo/Bill Haber. (Right) Thousands wait to be evacuated from the Superdome in New Orleans, September 2, 2005. SOURCE: REUTERS//David J. Phillip/Pool. ____________________________ SOURCE: Weather Channel, http://www.weather.com/newscenter/topstories/060829katrinastats.html.

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74 RESTRUCTURING FEDERAL CLIMATE RESEARCH prepare for, and respond to climate-related health hazard and to build adaptive capacity among vulnerable segments of the U.S. population Risk assessments are needed to address these aims, including well-established methods—such as time-series studies to describe the current relationships between meteorological variables and health risks—and rapidly developing fields, such as empirical and biological modeling of climatic and other factors affecting the dis- tribution of infectious diseases. Of particular difficulty and importance are hybrid models or protocols that effectively bring these two types of assessments into a common framework. IMPACTS ON THE ECONOMY OF THE UNITED STATES The Kyoto Protocol set binding targets for 37 industrialized countries and the European Community to reduce greenhouse gas emissions. President Bush did not support signing the agreement in 2001 because it “would cause serious harm to the U.S. econ- omy.”12 The United States has a new president, and economic impacts of climate change are of high near-term policy relevance. The economic impacts from greenhouse gas mitigation policies are among the most important unknowns in the climate policy debate. Broadly speaking, there are two mechanisms by which climate change has a fundamental impact on the economy of the United States (and on the world economy). First, economic activities that depend on climate (e.g., agriculture) are affected by a change in the climate, and for large climate changes, that effect will undoubtedly be negative. Whatever the damages, they are expected to rise rap- idly as the magnitude of climate change increases. For example, one study (Nordhaus, 2008) estimates that the annual economic damages from a 2.5°C temperature increase are only 20 percent of the annual damages from a 6°C temperature increase. There is, of course, a great deal of uncertainty in the likely damage caused by climate change, as discussed below. These damage estimates typi- 12 Letter from G.W. Bush to Senators Hagel, Helms, Craig, and Roberts, March 13, 2001, available at www.whitehouse.gov/news/releases/2001/ 03/20010314.html.

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 75 cally assume that adaptation will be pursued to soften the potential impacts of climate change. Adaptation itself will involve costly actions, but if adaptation is not pursued, damages would be higher. For larger increases in temperature, the bulk of the damage is ex- pected to occur through unanticipated and abrupt change. One of the biggest impacts from climate change on the econ- omy of the United States will be through coastal flooding. The damage and disruption that accompanies hurricanes and other se- vere weather events will be magnified by a rise in sea level. Nearly every sector of the economy as well as the welfare of individuals will be affected in some way by climate change. The second way that climate change will affect the U.S. econ- omy is the cost of reducing greenhouse gas emissions—mitigation. Although there may be pleasant surprises as emissions of green- house gases are reduced (such as energy-saving innovations or companies that do better than expected in achieving reductions), there will be costs and those costs will be borne by everyone. Higher prices for energy and energy-intensive goods are usually needed to reduce consumption. People will reduce their energy consumption and carbon generation, but not entirely painlessly. The more slowly emissions are reduced, the easier it will likely be. For instance, allowing more time to reduce emissions avoids pre- mature retirement of energy-inefficient capital. Of course, the down side is the delay in reducing emissions. A primary tool for evaluating policy options is integrated assessment models (Box 2.10). Research Needs Despite work cited here, in IPCC reports, and elsewhere, our knowledge of the economics of climate change is surprisingly incomplete and imprecise. Given that we are making decisions on trillion-dollar investments to control greenhouse gases based on what we know now, it seems clear that gaining a better under- standing of the economics of climate change should be a high social priority. Many of the economic research problems associ- ated with climate change can be categorized into five broad issues: mitigation of greenhouse gases, regulatory response, im- pacts of climate change, incidence, and adaptation. Other issues

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76 RESTRUCTURING FEDERAL CLIMATE RESEARCH BOX 2.10 Integrated Assessment Models of the Climate and the Economy Integrated assessment models have become one of the most use- ful and well-developed approaches to examining the climate problem and what to do about it. The concept is simple. A pure climate model represents how the climate will evolve given exogenous drivers from the economy, where emissions originate. A pure economic model of climate treats the consequences of emissions as exogenous. An inte- grated assessment model captures in a compact fashion how the climate evolves in response to emissions, how the changed climate impacts economic activity in the world, and how those impacts in turn are combined with mitigation costs to affect policy and the evolution of the economy. Integrated assessment models differ in the level of detail on climate and/or the economy and in the level of closed feedback between climate evolution and economic evolution. One of the earliest integrated assessment models was developed in the 1970s by Edmonds and Reilly (1983). Other early examples in- clude models developed by Manne and Richels (1991) and by Nordhaus (1977, 1991). The mid 1990s saw major progress on this front, with the development of the Dynamic Integrated Climate Econ- omy (DICE) model (described in Nordhaus, 1994) and other more advanced models (see review in IPCC, 1995). In the DICE model, the atmosphere is represented by a two-box dynamic model and the econ- omy is represented by a single sector. The decision variables are capital investment and investment in mitigation, and all else flows from them. Over the past 15 years, a good deal of progress has been made in developing more sophisticated integrated assessment models. The primary advance has been to better represent regional differences in the models, rather than view the world as a single economy with aver- age climate impacts. Furthermore, the number of integrated assessment models has multiplied. A recent comparison of global climate-economy models involved 19 different models and modeling groups (Weyant et al., 2006). Although there are many dimensions on which integrated assessment models can be improved, one of the most important is improved data and understanding related to underlying costs, benefits, and economic processes. that touch on climate, such as discounting and uncertainty and risk, are not discussed here. A review of some of the issues in the economics of climate change can be found in Kolstad and Toman (2005) and Heal (2009).

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 77 Mitigation The cost to reduce carbon emissions in particular sectors by particular amounts is subject to a great deal of uncertainty, in both the short run and the long run, and for consumers as well as busi- nesses. Although there have been a number of studies of this problem, a great deal of uncertainty remains. Some analysts suggest a low or negative cost for significant reductions; others suggest sig- nificant positive costs (see the discussion in Fischer and Morgenstern, 2006). For example, the state of California estimated that costs of reducing emissions would be negative (there would be a savings due to mitigation), a result roundly criticized by peer reviewers.13 A re- cent comparison of economic models found that the cost of controlling an extra ton of carbon in 2025, assuming policies to limit greenhouse gas concentrations to double preindustrial levels, ranged from $2.8 per ton to $482 per ton (Weyant et al., 2006). Estimates of the costs to reduce carbon emissions have been produced for the economy as a whole (e.g., Nordhaus, 2008) as well as at the sectoral level, particularly by the IPCC. For example, IPCC (2007d) suggests that substantial emission reductions can be obtained in the building sector at negative cost; other negative cost opportunities exist in other sectors. However, the IPCC estimates are neither specific to the U.S. context nor comprehensive, and they do not deal with the rate of change of mitigation as it affects costs. The Economics of Climate Change attempted to quantify both the costs and benefits of mitigation (Stern, 2006). However, the data underlying the analysis are sparse (see Symposium on Stern Review in the Winter 2008 issue of the Review of Environ- mental Economics and Policy). The United States has successfully reduced emissions of air pol- lutants such as SO2 (Ellerman et al., 2000). However, the policy challenge of reducing CO2 emissions is economically different in two ways: (1) CO2 emissions come from many diverse sources throughout the economy, whereas the bulk of SO2 emissions came from a few hundred electric power plants, and (2) behavioral change and technological innovation are both likely to play a more profound role with CO2 reduction because carbon is integral to fossil fuel, 13 See http://www.arb.ca.gov/cc/scopingplan/economics-sp/peer- review/peer-review.htm.

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78 RESTRUCTURING FEDERAL CLIMATE RESEARCH whereas sulfur is a contaminant that can be removed. Therefore, it is important to develop a better understanding of the determinants of behavioral change and technological innovation. A research program including cost engineering studies, econometrics, and field experi- ments (e.g., artificially changing rate structures and observing how behavior changes) would seek to answer questions such as the short- run and long-run marginal cost of reducing CO2 emissions by vari- ous levels for the automobile industry, and ways to accomplish the reduction most effectively (e.g., by changing vehicle design or the CO2 content of fuels, reducing miles traveled per vehicle). Regulatory Response Emission reduction responses depend on policies such as fuel efficiency standards, fuel taxes, feebates,14 technology-push regu- lations,15 and cap-and-trade systems. Experience with cap-and- trade systems is limited to the European Trading System for Car- bon (see papers in the Winter 2007 issue of the Review of Environmental Economics and Policy), the U.S. sulfur trading sys- tem (e.g., Ellerman et al., 2000), and a number of localized trading systems. We have learned a great deal about these economic incen- tive systems, although our experience with economy-wide trading systems is limited. Other economic incentives are in use as well as prescriptive regulation (Freeman and Kolstad, 2006) and regula- tions that rely on voluntary actions (e.g., Morgenstern and Pizer, 2007). Little experience exists for carbon regulation (Box 2.11), which will be fundamentally different from many previous regula- tory regimes in that behavior as well as technology will be affected. For example, if electric utilities face a price of carbon permits equal to $100 per ton of CO2, what investments in renew- able energy can be expected? How will drivers and automobile manufacturers respond to an upstream (regulation at the energy producer) cap-and-trade system versus a carbon tax or a down- stream (regulation at the energy consumer) cap-and-trade system with a similar carbon price? 14 A feebate involves a rebate to above-average performers, financed by a fee on below-average performers, so that no net revenue is collected. 15 A technology-push regulation is one designed to spur innovation and expand the menu of technological options.

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 79 BOX 2.11 The Energy Price and Economic Effects of Reducing U.S. Carbon Emissions A number of bills have been introduced in the U.S. Congress to limit the emissions of greenhouse gases over the coming decades (e.g., see Appendix A). As of January 2009, none have passed, in part because of questions about how much reducing greenhouse gas emissions will cost and what will happen to energy prices as a result. Virtually all the pro- posed legislation relies in large part on a cap on emissions of greenhouse gases nationwide, implemented through a system of tradable emissions allowances. A leading proposal in the most recent (110th) Congress was the Lieberman-Warner Climate Security Act of 2007. One of its key fea- tures was a cap-and-trade system, capping greenhouse gas emissions 7 percent below 2006 levels beginning in 2012, gradually tightening to 29 percent below 2006 levels by 2030. A detailed analysis by the U.S. Energy Information Administration found that most of the emission reductions would come from the electric power sector via changes in the way electric- ity is generated (EIA, 2008a). The effects on price would be too modest for consumers to strongly reduce energy consumption. Gasoline prices were assumed to be 10 to 20 percent higher in 2020 and 20 to 40 percent higher in 2030 than in the reference case. Although these are not trivial increases, they are within the variation in prices consumers experienced in 2008. Losses in total national economic output (gross domestic product) would be less than 1 percent in 2030. The EIA (2008a) analysis reports precise dollar figures for the conse- quences of reducing greenhouse gases, but there is considerable uncertainty regarding many of the assumptions and conclusions emerging from this report and others like it. The critical nature of the potential impacts on the U.S. economy illustrates the importance of research to better understand the economic impact of greenhouse gas regulations. Damage from Climate Change Costly damages to society are among the consequences of cli- mate change. These costs are poorly understood from a physical point of view, let alone an economic point of view. Figure 2.8 summarizes several studies of the damage to the overall economy from a change in the global mean temperature. It is important to emphasize that the figure suggests more precision in these estimates than is warranted. For instance, for moderate temperature changes (e.g., less than 3°C), the estimates are similar, suggesting consen- sus. However, there is little consensus regarding the damage from modest climate change. In fact, the degree of uncertainty of climate impacts on the economy is generally considered to be very large.

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80 RESTRUCTURING FEDERAL CLIMATE RESEARCH FIGURE 2.8 Some estimates of the global damage from a change in the global mean temperature, as used in several integrated assessment models of climate policy. SOURCE: Dietz and Stern (2008). Reproduced by permission of Oxford University Press. Adapted from Smith et al. (2001), Figure 19-4. A number of studies have focused on impacts for individual economic sectors. Agriculture costs have been studied most, but many important sectors of the economy have received virtually no attention (Mendelsohn et al., 1994; Mendelsohn and Neumann, 1999). The effects of warming can be mixed, bringing benefits in some cases and costs in others. If the temperature rises when it is cold, there can be less crop damage from freezing, less energy needed for heating, and fewer deaths from cold. However, if the temperature rises too much when it is already hot, crop damage can be severe, more energy is needed for air-conditioning, and some will die from heat waves. The net impact of a given climate change scenario can therefore be quite ambiguous. There is some evidence that substantial damages from climate change may be associated with extreme weather events, but such events (by definition) are rarer and less well studied in both the natural and social sciences (see the “Extreme Weather and Climate Events and Disasters” sec- tion). Understanding the damages from temperature extremes is a crucial issue that will likely require more refined spatial and tem- poral detail than exist in most datasets.

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 81 Incidence Aggregate net benefits (market plus nonmarket environmental benefits minus market plus nonmarket costs) is not the only metric to use in evaluating greenhouse gas policies. The distribution of net benefits and costs from controlling greenhouse gas emissions or from the impacts of climate change and adaptation also has ramifications for environmental justice. For instance, with a cap- and-trade system covering the entire U.S. economy, what income groups end up paying for the costs of greenhouse gas regulation and where do job losses and gains occur? Although some work has been done on who ultimately pays and/or benefits (the incidence) from environmental regulations generally (Metcalf, 1999; West and Williams, 2004), this topic remains largely uninvestigated. This literature generally finds carbon taxes to be moderately re- gressive. Greenhouse gas regulation will reduce energy consumption and thus, in all likelihood, emissions of associated non-greenhouse- gas pollutants. The levels of changed emissions of these copollut- ants are poorly understood as are the monetary benefits of the decreased levels of copollutants (the cobenefits). For instance, what reduction in conventional air pollutants can be expected in urban areas as a result of greenhouse gas regulations? Although some work has been done on this question (e.g., Wier et al., 2005), research is needed to better understand the interplay between co- pollutants and greenhouse gases from a regulatory perspective. Adaptation Economic analyses outside the climate arena consider adaptation primarily in the context of price changes. When the price of gasoline goes up by $1, people may adapt by driving a more fuel-efficient car, moving closer to work, or modifying their driving habits. One of the earliest papers on the economics of adaptation focused on investments in irrigation as a way of adapting to uncertainty over precipitation (McFadden, 1984). Such defensive expenditures can blunt the damage from climate change. The nature of the adaptation depends on the speed of the change.

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82 RESTRUCTURING FEDERAL CLIMATE RESEARCH People and businesses will similarly adapt to climate change (e.g., Reilly and Schimmelpfennig, 2000; Kelly et al., 2005; IPCC, 2007c; Mansur et al., 2008), although the magnitude and speed of that adaptation are not well understood. When farmers perceive a changed climate, they will change their agricultural practices; when individuals see their local climate become less hospitable, they may migrate to better climes. This aspect of adaptation is autonomous, since it will occur naturally without government in- tervention. In contrast, changing power lines, water systems, levees, and other public infrastructure to withstand climate change may require complex government action and thus governmental planning and decision making. This sort of adaptation can be called public adaptation and it will not occur automatically. Re- search is needed to better understand both the private and public adaptation processes so we can better estimate the costs and dam- age from climate change policies. Furthermore, the timing of public adaptation is important for public policy. WHERE DO WE GO FROM HERE? Climate change is having an impact on basic human require- ments, such as water, food, and health. These impacts will become larger in the coming decades. A research program that integrates across the many dimensions of this issue is needed (1) to guide the nation in the multiple choices it faces to reduce the costs and risks of these impacts, and (2) to provide early warning of changes that are abrupt and large enough to push climate and human systems past tipping points. The nation must prepare itself for the possibil- ity of warming in excess of 3°C by the end of the century, followed by the disappearance of most alpine glaciers, the rapid disintegration of the Greenland Ice Sheet, and a rise of sea level of up to several meters (cf., Figure 2.1). It must also prepare for in- tense severe weather and heat waves, which stress the nation’s ability to provide needed water supplies. Such stresses need to be considered in the context of other stresses almost certain to be oc- curring, such as economic changes, changes in the global market, and potential international conflicts. Preparations will require the integration of models and observations at a much more advanced

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RESTRUCTURING THE CLIMATE CHANGE SCIENCE PROGRAM 83 level than is possible now, as well as the knowledge that comes from linking research on the natural climate system with research on hu- man drivers and responses, and factoring in the needs of decision makers in the research agenda. This in turn requires maintaining a strong natural science research component while strengthening hu- man dimensions research and developing more fruitful interactions with decision makers. The societal issues discussed above provide a framework for human dimensions research. But given the historic emphasis of the program on the natural sciences, a focused effort on key aspects of the human dimensions is also needed to speed pro- gress and further develop the research priorities. The key elements of a research program aimed at understanding climate change and supporting climate-related decisions are discussed in Chapter 3.

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