Is the cost of preventing climate change 50 times higher than the cost of adapting to it?

Question

Political activist Topher has created the "50-to-1" project. In the explanatory video, he claims that:

It's 50 times more expensive to try to stop climate change than it is to adapt to climate change as and if it happens.

The reasoning and references behind the video are available here (pdf).

In order to avoid futile arguments about the existence of climate change, it is worth highlighting the claim I'm interested in testing. The issue is, assuming IPCC forecasts about future CO₂ levels and the resulting impact on temperature are correct, is it better to spend now to avoid warming or spend to mitigate its impact? The issue is economics, not climate change itself which the video does not challenge.

The specific claim is that mitigation is 50 time cheaper than avoidance, even on current, widely agreed assumptions. Are their sources correct? are the calculations reasonable?

A similar, but much vaguer question Is avoiding global warming by preventing CO₂ emissions far too expensive compared to geoengineering or adapting to a warmer world? has been asked before without attracting any answers. This question is much more specific and narrow in scope in the hope of generating some more focussed skeptical analysis.

Answer 1

"Is the cost of preventing climate change 50 times higher than the cost of adapting to it?"

It might be, but Topher's argument doesn't establish that, and one of his references directly contradicts it.

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He assumes that the cost of climate change is summed up solely in the damage that a 3°C increase in temperature would cause. He assumes that "climate change will cost us roughly 1.5% of global GDP if we simply adapt to it as required". For this figure, Topher cites (Stern, 2006, p. vi).

However, the report actually says on p. vi:

the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

That report also says on the same page:

In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.

The report that he uses to establish the 1.5% of GDP actually says 5-20% of GDP. It also argues that the cost of avoiding the worst impacts can be limited to under 1% of global GDP.

Topher picks the 1.5% figure from page ix, where the Stern report says (emphasis mine):

Most formal modelling in the past has used as a starting point a scenario of 2-3°C warming. In this temperature range, the cost of climate change could be equivalent to a permanent loss of around 0-3% [...]

However, those earlier models were too optimistic about warming. [And goes on to argue for their 5-10+% cost estimate.]

The Stern report doesn't support a 1.5% cost estimate. It establishes itself as counter to that position, yet Topher cites the report as supporting this estimate.

Topher has incorrectly interpreted the Stern report and cherry-picked from it.

If the Stern report is reliable, then Topher Field is incorrect.

If the Stern report is not reliable, Topher Field no longer has a basis for the "cost of adapting to climate change" portion of the ratio.

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The above should be sufficient to show Topher has cherry-picked the numbers he's using, but I'll give one more example.

He assumes the cost of preventing climate change can be estimated by looking at the cost of Australia's carbon tax system. (See minutes 0-5 of the video.)

Even if he is correct in his analysis of the effectiveness of Australia's carbon tax, there are many other methods of mitigating climate change, and he doesn't consider those.

Answer 2

Sancho's answer does a very good job of dealing with what the Stern Review actually says, which is that mitigation would cost the equivalent of around 1% of global GDP each and every year, whereas without mitigation, the cost would be 5-20% each and every year.

There is another half to the question, which is Topher's analysis of the Australian Carbon Tax. This makes a basic economic mistake: it assumes that the revenue from a tax is part of its cost to the world. This is a nonsense, as the revenue from a tax is an internal transfer within the world economy (unless someone thinks we're paying tax to martians).

The net cost of a tax can be calculated from its net detrimental effect on economic efficiency, plus the net cost of collection and enforcement over and above the costs of collecting the same tax revenue by other means. Neither Topher nor Monckton (on whose calculations Topher relies) make any effort to calculate the relative net cost of collection, and both ignore the overall effect of the tax on economic efficiency.

It is an economics truth established almost a century ago (Pigou, 1920) that a tax that prices in an uncosted exernality, increases economic efficiency, rather than decreasing it. That is, whereas other taxes have a "dead weight" effect, pricing in an externality by taxing it, actually corrects a market distortion.

It is very well established by an overwhelming body of scientific literature that anthropogenic emissions of greenhouse gases are an uncosted externality. The Australian carbon tax, by pricing in a small part of the damage (see recent publications by Chris Hope for estimates of the marginal cost of damage), correct part of that market distortion, thus increasing overall economic efficiency.

There are several other misrepresentations in the calculations too, e.g. about the climate sensitivity, and these stock falsehoods have been dealt with elsewhere on this site.

Answer 3

Most formal modeling in the past has used as a starting point a scenario of 2-3 ºC warming. In this temperature range, the cost of climate change could be equivalent to a permanent loss of around 0-3% in global world output compared with what could have been achieved in a world without climate change. Developing countries will suffer even higher costs.

Stern, 2006, p. ix (the relevant discussion of the effects of climate change begins on p. vi).

Topher's analysis shows the cost of mitigating all global warming over the decade-long intended lifetime of the Australian carbon tax to be >80% of GDP. Taking Stern's mid-range estimate of 1.5% of GDP, it would indeed be 80/1.5, or more than 50 times, costlier to mitigate today than to adapt the day after tomorrow.

Even at the 5-20% of GDP adaptation cost that Stern determines on the basis of his mid-range estimate 5-6 Cº of global warming, it would still be 4-16 times costlier to mitigate today than to adapt later.