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January 2019, Volume 25, Number 1

Climate Change

Almost 14,000 government delegates attended a UN climate conference in Katowice, Poland in December 2018 to develop rules to implement the Paris climate agreement of 2015, which called for global temperature increases to be kept below 1.5C or 2.7F. Some developing countries that are seeking funds to deal with climate change sent hundreds of delegates to Poland, including over 400 from Guinea and over 200 each from Congo and Ivory Coast.

The Katowice COP 24 conference ended with agreement on a uniform standard to measure carbon emissions and more transparency in providing aid to poorer countries coping with the effects of climate change.

The Intergovernmental Panel on Climate Change in October 2018 warned that the earth is warming so fast that there could be more wildfires, droughts, floods and a mass die-off of coral reefs as soon as 2040, when global temperatures could be 1.5C or 2.7F degrees warmer than in the pre-industrial times of 1850.

The IPCC called for high and rising taxes on carbon dioxide emissions to cut them in half by 2030 and to end additional emissions by 2050. The Obama administration proposed a $50 a ton tax on carbon emissions; the IPCC called for carbon emissions taxes of $150 to $5,000 a ton.

Over 40 governments, including the European Union and California, have put a price on carbon emissions via direct taxes on fossil fuels or cap-and-trade programs that allow emitters to bid for permits to emit carbon. Economists favor cap-and-trade programs as the most efficient way to reduce carbon emissions.

Governments have found it hard to set carbon prices high enough to reduce emissions significantly; the OECD reported that the average price for a permit to emit a ton of carbon was $8 in 2018 across 42 economies. Australia's effort to charge $23 per ton of carbon emitted under its 2012 cap-and-trade program was ended after a Liberal government replaced the Labor government in 2013.

Most reductions in carbon emissions have been driven by government regulation, including US fuel economy standards for autos. Many governments enact mandates that call for a certain share of energy generation to be from renewable sources or require a certain share of vehicles be electric, policies that are less efficient than carbon pricing.

China accounted for 27 percent of global carbon emissions in 2017, followed by the US with 15 percent, the EU with 10 percent, and India with seven percent. Carbon emissions are rising rapidly in China and India as both countries build new coal-burning power plants to produce more electricity.

The world's GDP in 2018 is about $85 trillion. The IPCC says that the cost of a 2.7F temperature increase could be $54 trillion, or almost two-thirds of current global GDP. A 3.6F warming could cost the world $69 trillion or over 80 percent of global GDP. The IPCC did not specify a time period for these costs.

To keep the temperature rise below 2.7F, the IPCC said that the use of coal to generate electricity would have to drop from 40 percent today to less than 10 percent by 2050. Renewables such as solar and wind would have to rise from 20 percent of electricity generation today to two-thirds by 2050.

Agriculture, the production of food and fiber, occupies a special place in the climate change debate. Agriculture uses about 40 percent of the world's land and accounts for a quarter of greenhouse gas emissions.

Higher temperatures are expected to lead to depopulation of tropical and coastal areas and may increase international migration. Projecting the number of "climate refugees" is difficult because it is not known exactly how higher temperatures will affect the resiliency of people and whether affected people will adapt or migrate. Estimates made using various methodologies between 2002 and 2007 projected 150 million to 300 million climate refugees by 2050.

New York's Attorney General sued Exxon Mobil under the state's 1921 Martin Act, alleging that Exxon Mobil misled investors about the value of its oil and gas assets by not considering the likely impact of new climate change regulations. Exxon Mobil told investors that there was little risk of climate change regulation to the value of its reserves; the New York AG disputes this conclusion. Critics of the Martin Act want Congress to limit the ability of states to sue corporations for securities fraud.

The US issued a 1,656-page National Climate Assessment prepared by 13 federal agencies November 23, 2018 that predicted the US economy could be 10 percent smaller due to climate change by 2100. The 2008-09 recession reduced US GDP by five percent.

The NCA, which is released every four years, predicted almost $120 billion in damages due to sea level rise and emphasized that climate change could disrupt supply chains that depend on components produced in US and foreign areas subject to climate events. Food output may be reduced by extreme heat, drought, and floods and fires.