Estimates of monetised damage
96. Economists have estimated the monetary impact
of global warming. These estimates are very uncertain, but uncertainty
cannot be an argument for ignoring the estimates, since the same
uncertainty exists for any other "metric" that might
be used to measure these damages. Moreover, if a money metric
is not used, it is possible only to conduct cost-effectiveness
analysis rather than cost-benefit analysis. In cost-effectiveness
analysis the measures of impact reduction arising from warming
control are expressed in diverse units or in units such as change
in population-at-risk. If the units of damage reduction (i.e.
benefit) are not the same as the units for cost, it is not possible
to say if a given level of expenditure on warming control is justified.
97. Table 10 summarises available estimates of
the money value of the damage done by global warming. Care has
to be taken to interpret the numbers. The Integrated Assessment
Models used to get these estimates use different assumptions about
the level of temperature change, so one has to be careful to compare
like with like. The models vary according to the level of adaptation
to warming that they assume. The estimates of Professor Mendelsohn,
for example, contain a lot of adaptation. The early IPCC estimates
(which date from 1995) assume hardly any adaptation. The figures
are "benchmark" estimates. If the science of warming
is correct, warming does not stop at the temperature increases
used in the models. So one would see damages carrying on rising.
The convention in the studies is that damages are expressed as
a percentage of current world GNP. So long as GNP keeps
growing, those same damages expressed as a percentage of future
GNP would be much lower. Only the Mendelsohn estimates relate
damage to future GNP. Damages can be expressed in different ways.
For example, to get a global figure, one might weight the damages
in each region by regional output or population. Similarly, damages
might be "equity weighted" as explained to us by Professor
Richard Tol of Hamburg University
Dr Chris Hope of Cambridge University.
Equity weighting attaches a higher weight to damages borne by
low income countries in order to reflect that these damages will
assume a bigger proportion of their incomes than will damages
to richer people.
98. So, if we take, say, the Nordhaus estimates,
these tell us that for a +2.5oC warming one might expect
to see global damage amounting to 1.5-1.9% of world GNP. However,
in Africa that impact might be closer to 4% and in India 5%. The
scale of the aggregate impacts reflects (a) the geographical incidence
of warming and associated weather events, (b) the variable vulnerability
of the economies of developing nations to these impacts, and (c)
the smaller GNP of the relevant countries. Finally, Table 10 shows
estimates for damages only. Controlling climate change will avoid
some (not all) of these damages, but it may also bring other benefits
known as "ancillary benefits". For example, if CO2
emissions are controlled through traffic restraint, then congestion
might ease and there will be benefits from the reduced congestion,
better local air quality, and so on. It is generally accepted,
though not by all economists, that these ancillary benefits can
be added to the reduced global warming damages when conducting
a cost-benefit analysis. Moreover, there will be some additional
costs too, due to the dynamic effects of diverting expenditures
towards climate control and away from other uses of resources.
99. Table 10 suggests that, in terms of percentages
of world GNP, damage is relatively low, even for +2.5oC.
The damages are not evenly spread. In general, developing countries
lose more than developed economies. Some models suggest no real
net damage to rich countries.
Damages as % of regional and world GNP