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Think of it as Insurance
Jamais Cascio, 23 Oct 04

While there is a global consensus of climate scientists on the reality of human-induced climate disruption, the details remain a bit fuzzy. Questions remain about how the process is unfolding, and the recent news that atmospheric CO2 concentrations are growing faster than models had predicted is disturbing (to say the least). There's still some uncertainty about the speed with which climate change is unfolding (although "slowly" may no longer be a credible scenario), and the scale of the disruption ("bad", "very bad", or "call Roland Emmerich").

But what does a reasonable person do when faced with the uncertain scale of quite likely disaster? Buy insurance.

Dr. Michael Schlesinger and Dr. Natalia Andronova at the University of Illinois at Urbana-Champaign, in the October 15 edition of Science, argue that an "insurance policy" approach is the best way to handle the likely need for mitigation of climate disruption and the uncertainty about its unfolding effects. They examined a number of possible scenarios, from "do nothing now" to "do everything now" against different scales of atmospheric sensitivity to greenhouse gases in order to determine the optimal approach. What they found is that the best combination of effectiveness and flexibility is to implement a gradually-rising carbon tax, starting at $10 per ton, climbing to $33 per ton in 30 years. $10/ton would amount to 5 cents per gallon of gasoline.

“It’s really a cost-minimization problem, given that we will eventually have to set a policy target sometime in the future,” Schlesinger said.

“The idea is to search for the tax that provides the least cost over the whole period. If the tax is too low, you do too little in the beginning, then after 30 years you have to do a lot. On the other hand, if the tax is too high, you spend too much now, and you may have to do only a little later.”

The least cost, the researchers found, is to implement a carbon tax that starts out at $10 per ton of carbon (about five cents per gallon of gasoline) and then gradually climbs to $33 per ton in 30 years. Such hedging effectively “buys insurance” against future adjustment costs and is extremely robust, especially when compared with a wait-and-see strategy.

“It would be much less expensive to buy low-cost, climate-change insurance now, than it would be to wait and act later,” Schlesinger said. People voluntarily purchase insurance as protection from extreme events when the risks are private, he said, but societies can require insurance when potential losses are distributed across a population. In the past, risk has influenced policies where voluntary action could prove insufficient.

The article is available at the Science website for subscribers, but the supporting material -- including many pages of the calculations that went into the scenarios -- can be downloaded for free (PDF).

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Comments

Insure ourselves with eachother's trust...

This election is one of the most important in our country's history. November second holds for every American great struggle and great emotion. We owe it to each other as one united body of people not to lock this emotion behind our front doors. Let the television into the public space, into the streets, the civic centers, out our front doors and mingle. Celebrate this day and make our voice heard. Let our music fill the air, and our dance move our bodies in our front yards and our streets. If Kerry wins, we dance in the streets, and if Bush wins, we dance in the streets. Never forget, We are United. Our expression is free. Together, may we provide the truth


Posted by: Tim on 24 Oct 04

Bruce Sterling has extensively discussed insurers as the people holding the bag for climate change: they're going to get soaked, hard, in the areas where they offer reasonably priced coverage against weather damage.

In response, he suggests that prices will rise, or areas like, oh, say, well.... the entire state of Florida, for example, will become uninsurable.

It's an interesting scenario, where Big Insurance becomes a force lobbying for climate stabilization.


Posted by: Vinay on 24 Oct 04

This is the novel solution? Incur a tax that will be spent on everything BUT the problem. Sounds like a Socialist Democratic solution to me.


Posted by: Kcaj on 24 Oct 04



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