1. Climate Change: Economic and Policy Implications Robert B. Richardson, PhD Department of Community, Agriculture, Recreation and Resource Studies Michigan State University Climate Change in the Great Lakes Region April 10, 2008

2. Outline Introduction Introduction Economics and Climate Change Economics and Climate Change Student Presentations Student Presentations 1. Global Agreements – Implications for Michigan 2. Developing Alternative Sources of Energy Policy Discussion Policy Discussion

3. Economic Impacts of Climate Change Lower agricultural productivity Lower agricultural productivity Changes in growing seasons Changes in growing seasons Increased drought incidence Increased drought incidence Widespread coral reef mortality Widespread coral reef mortality Flooding, erosion, inundation, salinization Flooding, erosion, inundation, salinization Increased frequency and intensity of tropical cyclones Increased frequency and intensity of tropical cyclones Increased rates of infectious and tropical diseases Increased rates of infectious and tropical diseases

4. Economics and Climate Change Mitigation Mitigation Reduce emissions of greenhouse gases Reduce emissions of greenhouse gases Slow the rate of climate change Slow the rate of climate change Adaptation Adaptation Reduce risk Reduce risk Increase resilience Increase resilience Find opportunities Find opportunities

5. Economics of Climate Change The Stern Review (UK) The Stern Review (UK) Global cost estimates of losses from a “business as usual” scenario Global cost estimates of losses from a “business as usual” scenario “Costs of inaction” estimated at 5% of global GDP based on market impacts only “Costs of inaction” estimated at 5% of global GDP based on market impacts only Non-market impacts (health, environment): 11% Non-market impacts (health, environment): 11% Climate sensitivity uncertainty: 14% Climate sensitivity uncertainty: 14% Distributional effects (poor countries): 20% Distributional effects (poor countries): 20%

6. Criticisms of Stern Discount rate Discount rate Treatment of risk and uncertainty Treatment of risk and uncertainty Estimation of economic damages Estimation of economic damages Avoiding damages may be costly Avoiding damages may be costly  But waiting to address the impacts of climate change may cost MORE

7. Policy Implications Economics research highlights need for greater understanding of policy mechanisms that call for swift and deep cuts in emissions Economics research highlights need for greater understanding of policy mechanisms that call for swift and deep cuts in emissions Promote energy efficiency Promote energy efficiency Promote investment in clean technology Promote investment in clean technology Promote conservation Promote conservation