Estimates of impacts costs under businessasusual BAU from the Stern Review

Using the PAGE 2002 Integrated Assessment Model (IAM),75 the Stern Review considers estimates of cost to the world's economies over the next two centuries if emissions of greenhouse gases continue on a 'business-as-usual' (BAU) path taking global average temperature increases possibly to 4 °C by 2100 (cf. Figure 6.4) and 8 °C by 2200. It is pointed out that modelling over many decades, regions and possible outcomes demands that distributional and ethical judgements are made systematically and explicitly, and that model results have to be treated with appropriate caution. Stern expresses the expected loss of future welfare due to climate change in terms of the future consumption that is forecast to occur with climate change compared with what would occur in the absence of climate change. It is explained that 'costs measured in this way are like a tax levied on consumption now and for ever, the proceeds of which are simply poured away'. Stern presents the results from his modelling work as follows.80

• Under a basic calculation, the total cost of BAU climate change is estimated to equate to an average reduction in global per capita consumption of 5%, at a minimum, now and for ever. However, this calculation omitted three important factors as follows.

• Firstly, when direct impacts on the environment and human health (non-market impacts) are included, increases in the total cost of BAU climate change rise from 5% to 11%, although valuations here raise difficult ethical and measurement issues. But this does not fully include 'socially contingent' impacts such as social and political instability, which are very difficult to measure in monetary terms.

• Secondly, if climate feedbacks are taken into account, the projected increases in global average temperature would tend to the higher end of the range (see Chapter 6, page 143-6) and the estimated costs for BAU climate change could increase from 5% to 7% or from 11% to 14% if non-market impacts are included.

• Thirdly, a disproportionate burden of climate change impacts falls on poor regions of the world. Giving this burden stronger relative weight could increase the cost of BAU climate change by more than one-quarter.

Putting all these factors together increases the total cost of BAU climate change to the equivalent of around a 20% reduction in current per capita consumption now and for ever. Distributional judgements, a concern with living standards beyond those elements reflected in GDP and modern approaches to uncertainty all suggest that the appropriate estimate of damages may well lie in the upper part of the range 5-20%. Much but not all of that loss could be avoided through a strong mitigation policy. It is argued in later chapters of the Stern Review that this can be achieved at lower cost.

100 million due to sea level rise and coastal flooding and about 50 million due to the dislocation of agricultural production mainly due to the incidence and location of areas of drought.78 The cost of resettling 3 million displaced persons per year (assuming that is possible) has been estimated at between $US1000 and $US5000 per person, giving a total of about $US10 000 million per year.79 What the estimated cost for resettlement does not include, however (as the authors of the study themselves emphasise), is the human cost associated with displacement. Nor does it include the social and political instabilities that ensue when substantial populations are seriously disrupted because their means of livelihood has disappeared. The effects of these could be very large.

The second factor not being taken into account in the above estimates of total cost is the influence of the longer term - they only concern climate change impacts up to about the middle of the twenty-first century under the possibility of a doubling of equivalent carbon dioxide concentration. Soon after the end of the twenty-first century, under the scenarios with higher carbon dioxide emissions (in other words, if strong action is not taken to curb emissions), a further doubling of the equivalent carbon dioxide concentration will have occurred and it will be continuing to rise. The impacts of the additional climate change that would occur with a second effective doubling of carbon dioxide will be substantially more severe than those of the first doubling.80 The Stern Review has considered these (see box) and estimated that the total cost of business-as-usual (BAU) climate change to be equivalent to around a 5-20% reduction in current global per capita consumption now and for ever, with a strong likelihood that it will be in the upper part of that range and with disproportionate losses tending to fall on poorer countries.

Impacts that may be a century away may not easily claim our attention. However, because of the long lifetime of some greenhouse gases, because of the long memory of the climate system, because some of the impacts may turn out to be irreversible and also because of the time taken for human activities and ecosystems to respond and change course, it is important to have an eye on the longer term. Looking at the longer term also raises for consideration the possibility of what are often called 'singular events' or irreversible events of large or unknown impact. Some of these have been mentioned earlier in this chapter or in previous chapters. Examples are given in Table 7.5. It is clearly difficult to provide quantitative estimates of the probability of such events. Nevertheless it is important that they are not ignored. One recent study81 has allocated a potential damage cost to these of about 1% of GWP for a warming of 2.5 °C and about 7% of GWP for a warming of 6 °C. Such calculations are necessarily based on highly speculative assumptions, but in that particular study these singular events represent the largest single contributor to the total overall cost.

Table 7.5 Examples of singular non-linear events and their impactsa


Causal process


Non-linear response of thermohaline circulation (THC)

Changes in thermal and freshwater forcing could result in complete shutdown of North Atlantic THC or regional shutdown in the Labrador and Greenland Seas. In the Southern Ocean, formation of Antarctic bottom water could shut down. Such events are simulated by models and also found in the palaeoclimatic record.

Consequences for marine ecosystems and fisheries could be severe. Complete shutdown would lead to a stagnant deep ocean, with reducing deepwater oxygen levels and carbon uptake, affecting marine ecosystems. It would also represent a major change in heat budget and climate of northwest Europe.

Disintegration of West Antarctic Ice Sheet (WAIS)

WAIS may be vulnerable to climate change because it is grounded below sea level. Its disintegration could raise global sea level by 4 to 6 m. Large sea level rise from this cause is unlikely during the twenty-first century.

Considerable and rapid sea level rise would widely exceed adaptive capacity for most coastal structures and ecosystems.

Positive feedbacks in the carbon cycle

Climate change could reduce the efficiency of current oceanic and biospheric carbon sinks. Under some conditions the biosphere could become a source.b

Gas hydrate reservoirs also may be destabilised, releasing large amounts of methane to the atmosphere.

Rapid, largely uncontrollable increases in atmospheric carbon concentrations and subsequent climate change would increase all impact levels and strongly limit adaptation possibilities.

Destabilisation of international order by environmental refugees and emergence of conflicts as a result of multiple climate change impacts

Climate change - alone or in combination with other environmental pressures - may exacerbate resource scarcities in developing countries. These effects are thought to be highly non-linear, with potential to exceed critical thresholds along each branch of the causal chain.

This could have severe social effects, which, in turn, may cause several types of conflict, including scarcity disputes between countries, clashes between ethnic groups and civil strife and insurgency, each with potentially serious repercussions for the security interests of the developed world.

a For recent comment see Frequently Asked Questions 10.2 in Solomon et al. (eds.) Climate Change 2007: the Physical Science Basis. pp. 818-19.

b See box on climate carbon/cycle feedbacks in Chapter 3, pages 48-9.

Table 7.6 Examples of impacts due to changes in extreme weather and climate eventsb

Phenomenon and direction of trend

Likelihood of future trends based on projections for twenty-first century using SRES scenarios

Examples of major projected impacts by sector

Agriculture, forestry and ecosystems

Over most land areas, warmer and fewer cold days and nights, warmer and more frequent hot days and nights

Virtually certain"

Increased yields in colder environments; decreased yields in warmer environments; increased insect outbreaks

Warm spells/heatwaves. Frequency increases over most land areas

Very likely

Reduced yields in warmer regions due to heat stress; increased danger of wildfire

Heavy precipitation events. Frequency increases over most areas

Very likely

Damage to crops; soil erosion, inability to cultivate land due to waterlogging of soils

Area affected by drought increases


Land degradation; lower yields/ crop damage and failure; increased livestock deaths; increased risk of wildfire

Intense tropical cyclone activity increases


Damage to crops; windthrow (uprooting) of trees; damage to coral reefs

Increased incidence of extreme high sea level (excludes tsunamis)11


Salinisation of irrigation water, estuaries and fresh-water systems

a See Note 1, Chapter 4 for further details regarding definitions. b These examples do not take into account developments in adaptive capacity.

Water resources

Human health

Industry, settlement and society

Effects on water resources relying on snow melt; effects on some water supplies

Reduced human mortality from decreased cold exposure

Reduced energy demand for heating; increased demand for cooling; declining air quality in cities; reduced disruption to transport due to snow, ice; effects on winter tourism

Increased water demand; water quality problems, e.g. algal blooms

Increased risk of heat-related mortality, especially for the elderly, chronically sick, very young and socially isolated

Reduction in quality of life for people in warm areas without appropriate housing; impacts on the elderly, very young and poor

Adverse effects on quality of surface and groundwater; contamination of water supply; water scarcity may be relieved

Increased risk of deaths, injuries and infectious, respiratory and skin diseases

Disruption of settlements, commerce, transport and societies due to flooding; pressures on urban and rural infrastructures; loss of property

Power outages causing disruption of public water supply

Increased risk of food and water shortage; increased risk of malnutrition; increased risk of water- and food borne diseases

Increased risk of deaths, injuries, water- and food- borne diseases; post-traumatic stress disorders

Water shortage for settlements, industry and societies; reduced hydropower generation potentials; potential for population migration

Disruption by flood and high winds; withdrawal of risk coverage in vulnerable areas by private insurers; potential for population migrations; loss of property

Decreased fresh-water availability due to salt water intrusion

Increased risk of deaths and injuries by drowning in floods; migration-related health effects

Costs of coastal protection versus costs of land-use relocation; potential for movement of populations and infrastructure; also see tropical cyclones above

c Extreme high sea level depends on average sea level and on regional weather systems. It is defined as the highest 1% of hourly values of observed sea level at a station for a given reference period.

d In all scenarios, the projected global average sea level at 2100 is higher than in the reference period. The effect of changes in regional weather systems on sea level extremes has not been assessed.

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