Dynamics and Economic Aspects of Climate Change

Abstract

Climate change is the alteration of climate directly or indirectly caused by human activities that modify the composition of the atmosphere. Greenhouse gases (GHG), particularly CO2, are accumulating in the atmosphere, with the consequent warming. Global mean temperature has risen since preindustrial times, with most of the warming occurring in the last three decades. The consequence are increasingly frequent extreme weather events. Though economists have often disagreed about economic aspects of global warming, views as those of the Stern Review—that purports global warming as a major economic problem implying risks of disaster and demanding the use of major resources—are increasingly common. The idea that with development and technological progress, total GHG emissions or at least emissions per capita would decrease has been discredited by evidence of a link between increased economic activity and greater emissions. In general, global emissions of CO2 have increased at rates correlated with the annual increase of world GDP (WGDP). Furthermore, the annual increase in atmospheric concentrations of CO2 is correlated with the growth of WGDP. Impacts of climate change and strategies to mitigate them have been often subjected to integrated assessment models (IAMs), which involve many controversial aspects. For global warming above 2 or 3 °C IAMs agree that there will be a reduction of long-term social well-being and a negative impact suffered mostly by low-income regions, but different IAMs strongly disagree on the level of human-induced damage, with estimates ranging from less than 1% to over 10% of WGDP. However, significant economic and technological potentials for mitigation and emissions reductions are now available. These would be larger if non-technical options (changes in consumption models and lifestyles) are also considered. Direct emissions of GHG related to agriculture are mainly emissions of CH4 and NO2. Indirect emissions of GHG from agriculture include large CO2 emissions from land use change, when natural ecosystems are transformed into cultivated land. The sum of direct and indirect emissions may represent annually ¼ of GHG global emissions, with about ¾ of GHG agricultural emissions coming from low-income countries. Global warming impacts on agriculture include decreased yields in warmer environments, increased yields in colder ones due to longer growing season and CO2 fertilization (that perhaps could be offset by ozone emissions), more insect outbreaks and risk of wildfires, crop damage, and land and water degradation. Mitigation measures focused in soil carbon sequestration by modifying practices of intensive agriculture and moving towards agroecology or low-carbon agriculture are needed. Permits trading and the implementation of a carbon tax are the major options in the public debate about policies to mitigate climate change by reducing emissions. The European Trading Scheme (ETS) implemented in 2005 has yielded very poor results, failing to reduce emissions and with the emissions market presently inactive, with a price of emissions at almost zero. A carbon tax would reduce emissions by discouraging consumption of “carbon-rich” commodities and therefore promoting recycling, reusing and innovation toward production and consumption of “carbon-poor” commodities, but there have been only some timid steps to implement such a tax in some countries, and there is strong opposition to it.