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The true costs of saving the earth


Themes: Energy and environment

True costs of saving the earthAs the 2008 UN climate change talks struggle to a conclusion in Poland this week research undertaken at Cambridge Judge Business School shows exactly how vital it is that international leaders reach an agreement on cutting the world’s greenhouse gas emissions. Work by Dr Chris Hope, Reader in Policy Modelling at Cambridge Judge Business School, suggests that the mean net present impact on the world’s climate, economy and society of cutting down tropical rainforests is a staggering $12 trillion. It is the first time that researchers have put a figure on the present climate change impacts of deforestation.

However, there is good news as well as bad. If the heads of state and ministers currently meeting in Poland could reach agreement on mechanisms to curb deforestation – currently tropical forests covering an area the size of England are cut down every year – that figure could be cut by $5.3 trillion, almost half.

The costs of swiftly implementing a 50 per cent reduction in the destruction and degradation of the world’s tropical forests would be far outweighed by the benefits, says Dr Hope, and with international agreement could be put into place fairly easily. “Emissions from deforestation contribute significantly to levels of greenhouse gases, but there is potential for them to be cut considerably. No new technology is needed and cutbacks could be made relatively quickly.”

There is much uncertainty around climate change, and as a result any credible models have to include a range of estimates. The model used by Dr Hope is highly sophisticated and integrates both scientific and economic calculations. The $12 trillion climate change impact of cutting down rainforests is the mean value in a 5-95 per cent range of about $1.5 to $40 trillion, as are the other figures quoted here. Dr Hope nonetheless says that these numbers provide “strong motivation” for taking action to tackle deforestation.

“Our results indicate that introducing a 50 per cent reduction in 2010 in the emissions created through the destruction and degradation of rainforests would cost a mean $1.7 trillion – and would create a mean drop in impacts of $5.3 trillion bringing a mean net benefit of $3.7 trillion. This positive benefit indicates that taking such actions is viable and worthwhile.”

Dr Hope is a Reader in Policy Modelling, and his main research interest is policy analysis of the greenhouse effect. His work on valuing the climate change impacts of tropical deforestation and, with colleague J Castilla-Rubio, on producing the first cost/benefit analysis of action to reduce deforestation, was commissioned by the Office of Climate Chance for the Eliasch Review report on how to tackle climate change by financing the world’s forests.

He says that additional work on alternative policy measures “clearly indicates” that taking actions to curb rainforest destruction and thus cut the amount of emissions such destruction causes “brings higher benefits the earlier, and more aggressively, they are applied.”

“Trees are very efficient stores of carbon, and when they are cut down, all the carbon that they have stored inside them is released into the atmosphere as carbon dioxide,” he explains. “Even when the cleared land is subsequently used either for subsistence farming or industrialised agriculture, it is not as efficient as a carbon store. Whether the land is producing food crops or grass for animals to graze on, none of these plants store as much carbon as the trees in a rainforest.”

The release of this carbon dioxide when trees are felled contributes to global warming. And so Dr Hope’s calculations that value the benefit of curbing rainforest destruction take three kinds of potential benefit into account. One is economic benefit: what happens to countries’ gross domestic product if we stop cutting down rainforests? Agriculture can happen more efficiently and successfully, for example, if man’s actions do not cause so much climate change and farmers do not have to contend as a result with the effects of global warming. Avoiding global warming also means that we would avoid a rise in sea levels, and highly productive areas like cities and industrial zones would not be lost through being swamped by rising water levels.

There are also non-economic benefits to be derived from avoiding rising water levels, including being able to retain ecologically important areas like wetlands and wilderness areas. And the third benefit factored into the calculations is to do with reducing the chance that Planet Earth will suffer a real climate catastrophe.

Says Dr Hope: “At the moment, if we take no abatement measures to tackle climate change, there is a chance that we will see the Gulf Stream ‘turning off’ or global sea levels rising significantly.” (It is estimated that if all the ice on Greenland were to melt into the North Atlantic Ocean, global sea levels would rise by about 21.3 feet, or 6.5 metres.) And so the model used by Dr Hope includes estimates of how much benefit we derive, by taking some action, from reducing the chances of such a catastrophe taking place.

However, the mechanisms through which the international community can take action will be highly complex – hence the heated discussions taking place this year in Poland, and probably at next year’s negotiations in Copenhagen as well. Dr Hope says, “Everyone recognises that curbing rainforest destruction is a beneficial thing to do. And everyone is looking for ways to make it happen. However, no one has yet worked out in detail what the necessary scheme will be.” One first step is to measure how much deforestation is going on and research to this end is currently underway. But ‘carbon finance’ mechanisms still need to be devised by which we in richer countries would pay poorer countries not to cut down their rainforests, thus reversing the current deadly equation by which rainforests are more valuable dead than alive.

Dr Hope says: “We need to make the connection between the global problem – global impacts and the response in terms of limiting global emissions – and the local level where the costs and benefits are experienced and where solutions need to be carefully applied. What I can do with this research is to demonstrate that if the mean net present benefit of curbing rainforest destruction is $3.7 trillion, then it’s definitely worth making an effort to achieve this. Even if 10 per cent of that potential $3.7 trillion benefit has to go into designing a mechanism for curbing rainforest reduction, the 90 per cent that is left is still a very substantial prize.”

Further Reading

Hope, C. (2008) “Valuing the climate change impacts of tropical deforestation.” Judge Business School Working Papers, No.12/2008. Cambridge: University of Cambridge. Available online at: www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp0812.pdf

Hope, C. and Castilla-Rubio, J.C. (2008) “A first cost benefit analysis of action to reduce deforestation.” Judge Business School Working Papers, No.13/2008. Cambridge: University of Cambridge. Available online at: www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp0813.pdf