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How climate change mitigation makes economic sense

8th December 2015

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  • There are strong immediate and domestic incentives to undertake greater mitigation efforts to limit global warming to 2°C, or to 1.5°C as many governments are calling for.
  • Existing mitigation targets can be met and, in most cases, can be strengthened in a more cost-effective manner by properly accounting for the value of other economic and societal priorities  that come from cutting emissions, such as public health and energy security.
  • This report will focus on a single example of such “co-benefits” - reduced mortality risk from lower levels of harmful air pollution, which causes respiratory illnesses, cardiopulmonary disease and lung cancer.
  • Within this limited scope, we present three methods for assessing the cost-effectiveness of six major emitters’ Intended Nationally Determined Contributions (INDCs).
  • Our result show that the emissions gap in 2030 between governments’ INDCs and the 2°C temperature goal, currently around 17 GtCO2e,could be closed by 4.6 – 7.8 GtCO2e or 27-46%, without imposing additional economic burdens on those undertaking the additional effort.
  • For the 1.5°C temperature goal, the larger emissions gap in 2030 of around 23 GtCO2e could be closed by 20-34%.
  • The results of each method of the three methods we apply are shown below:

  • Governments can offset the cost of stronger climate policies by taking into account the savings associated with reduced mortality from harmful anthropological air pollutants such as particulate matter and ozone.
  • Reduced air pollution lowers the risk of mortality from air pollution-related illnesses, such as respiratory and cardiovascular diseases, that would otherwise impose significant economic impacts on national health care systems and economies.
  • To monetise the reduced mortality risk, we use a globally uniform conservative value of $2.8 million for the Value of Statistical Life – the Value of Statistical Life is equal in every country we assess – which includes an upwards adjustment of 56% in all countries to correct for developed country regions’ greater willingness to pay for reductions in mortality risk. We only consider the costs associated with mortality, not those associated with air pollution-related disease or disability.
  • Without incurring a net economic burden, most major emitters could strengthen their INDC targets:

  • The only exception is the USA, where the value of co-benefits from reduced air pollution already offsets its mitigation costs, according to each of the analysis approaches employed.
  • Nevertheless, for all emitters, there are additional co-benefits that could pay for the cost of even stronger mitigation efforts. These may include job creation, improved energy security, reduced impacts of air pollution on ecosystems, and increases in rural electrification. However we don’t quantify these additional co-benefits in this briefing.
  • We also exclude the actual costs – human, economic, environmental, and social - of climate change, such as those due to sea level rise, extreme weather events, reduced crop yields, and the need for adaptation. If they were taken into consideration, the cost-effectiveness of mitigation in many regions would likely become even more attractive.
  • This briefing looks at co-benefits at an economy-wide level, without undertaking new or detailed modelling of the impacts of specific domestic climate policies. The cost of specific climate policies (and by how much their costs could be offset by co-benefits) will vary, depending on their location, strength, and scope.
  • Co-benefits can have very significant non-monetary value in encouraging support at a domestic level, with empirical studies showing that people “are more likely to support climate action if they know about the many extra benefits of doing so”.
  • Since there is uncertainty about countries’ projected levels of emissions in 2030, we test the sensitivity of our findings to higher or lower projections to demonstrate the robustness of our conclusions.