The Economics of Climate Change: a Primer/Chapter 2

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The Economics of Climate Change: a Primer
the Congressional Budget Office
Chapter 2: The Scientific and Historical Context
2081977The Economics of Climate Change: a Primer — Chapter 2: The Scientific and Historical Contextthe Congressional Budget Office

The Scientific and Historical Context

Scientists have gradually realized that a variety of human activities are changing the composition of the atmosphere and may significantly affect the global climate.[1] During the past decade, scientific research has greatly improved the state of knowledge about climate change, but substantial uncertainty about critical aspects of climate science remains and will persist in spite of continued progress. That uncertainty contributes to differences of opinion within the scientific community about the potential for significant climate change and about its possible effects.

The Greenhouse Effect, the Carbon Cycle, and the Global Climate[edit]

As the Earth absorbs shortwave radiation from the Sun and sends it back into space as long-wave radiation, naturally occurring gases in the atmosphere absorb some of the outgoing energy and radiate it back toward the surface (see Figure 1). That phenomenon, which is called the “greenhouse” effect, currently warms the surface by an average of about 60º Fahrenheit (F), or 33º Celsius (C), creating the conditions for life as it exists on Earth. Water vapor is by far the most abundant greenhouse gas and accounts for most of the warming effect. However, several other trace gases also play a pivotal role in maintaining the current climate because they not only act as greenhouse gases themselves but also enhance the amount of water vapor in the atmosphere and thus amplify the effect. Those trace gases include carbon dioxide, methane (which also contains carbon), and nitrous oxide, as well as the man-made halocarbons, which contribute to the breakdown of stratospheric ozone and which, molecule for molecule, are very powerful greenhouse gases.[2]

The geologic record reveals dramatic fluctuations in greenhouse gas concentrations and in the Earth’s climate, on scales as long as millions of years and as short as just a few years. The record suggests a complicated relationship between greenhouse gas concentrations and the Earth’s climate. Warmer climates have usually been associated with higher atmospheric concentrations of greenhouse gases and cooler climates with lower concentrations. (Figure 2 illustrates how carbon dioxide concentrations and the antarctic climate have varied together over roughly the past half-million years.) However, the climate has occasionally been relatively warm while concentrations were relatively low and cool while they were high. Moreover, climate change has occurred without alterations in greenhouse gas concentrations. Nevertheless, significant changes in concentrations appear to be nearly always accompanied by changes in climate.[3]

The link between greenhouse gases and climate is greatly complicated by a variety of physical processes that obscure the direction of cause and effect. Variations in the Sun’s brightness and the Earth’s orbit affect the climate by changing the amount of radiation that reaches the Earth. Clouds, dust, sulfates, and other particles from natural and industrial sources affect the way radiation filters in and out of the atmosphere. Snow, ice, vegetation, and soils control the amount of solar radiation that is directly reflected from the Earth’s surface. And the Earth’s vast ocean currents, themselves partly driven by solar radiation, greatly influence climate dynamics. Moreover, the climate system exhibits so-called threshold behavior: just as a minor change in balance can flip a canoe, relatively small changes sometimes can abruptly trigger a shift from one stable global pattern to a noticeably different one (Alley and others, 2003).

Fluctuations in those physical processes affect the complex balance among the reservoirs of carbon dioxide and methane in the atmosphere and the larger reservoirs of carbon in the biosphere—which comprises soils, vegetation, and creatures—and in the oceans. Large quantities of carbon flow back and forth between those reservoirs, regulated by the seasons, winds, and ocean currents.[4] The flows maintain a rough equilibrium among the reservoirs, which all gradually adjust to other influences—and to influxes of carbon—over periods of decades to centuries. Other greenhouse gases, such as nitrous oxide, are part of similarly complex cycles.

In the absence of human activity, other, even larger reservoirs of carbon adjust only over thousands to millions of years. They include fossil deposits of coal, oil, and natural gas, which hold 10 to 20 times as much carbon as the atmosphere; deposits of methane hydrate in the ocean floors, which contain perhaps 12 times as much carbon; and rocks that contain much more carbon than all of the surface reservoirs, or “sinks,” combined (see Figure 3).

Over the past million and a half years, the Earth has experienced a period of “ice ages”—hundred-thousand-year cycles of cooling and warming that are governed mainly by variations in the Earth’s orbit around the Sun. That period, which is unusual in geologic history, has been accompanied by changes in greenhouse gas concentrations that interact with and magnify the effects of the orbital variations (Shackleton, 2000). Geologically speaking, the most recent ice age just ended: less than 20,000 years ago, large parts of North America and Eurasia were covered by huge glaciers. Atmospheric concentrations of carbon dioxide were only half of what they are today; average global temperatures were roughly 7ºF to 9ºF (4ºC to 5ºC) lower; and the global climate was apparently drier and much more variable (Broecker and Hemming, 2001; Crowley, 1996; and Ganopolski and Rahmstorf, 2001). In addition, the trees and soils of the biosphere held perhaps one-third less carbon than they do now; tropical forests were much less extensive; and sea level was hundreds of feet lower.

All of recorded human history, as well as the development of agriculture, has occurred during a temporary interglacial period that began about 12,000 years ago and that has been warmer and unusually stable by comparison with the preceding cold period. Even during that stable interval, however, minor climatic changes have had substantial effects on preindustrial economies throughout the world. (For an extensive description of the effects of climate change over history, see Lamb, 1995.)

Figure 1. The Atmospheric Energy Budget and the Greenhouse Effect[edit]

Without Greenhouse Effect

With Greenhouse Effect

Source: Congressional Budget Office adapted from J.T. Houghton and others, eds., Climate Change 2001: The Scientific Basis (Cambridge, U.K.: Cambridge University Press, 2001).

Note: Numbers represent watts per meter squared (W/m2). With an atmosphere, 492 W/m2 (instead of 318 W/m2) reach the Earth’s surface because the atmosphere absorbs radiation from the Earth and radiates it back. That process constitutes the greenhouse effect.

a. Includes thermals and evapotranspiration.

Figure 2. Carbon Dioxide and Temperature[edit]

Atmospheric Carbon Dioxide

Temperature over Antarcticaa

Source: Congressional Budget Office based on J. M. Barnola, C. Lorius Raynaud, and N.I. Barkov, “Historical CO2 Record from the Vostok Ice Core,” and J.R. Petit and others, “Historical Isotopic Temperature Record from the Vostok Ice Core,” in Department of Energy, Oak Ridge National Laboratory, Carbon Dioxide Information Analysis Center, Trends: A Compendium of Data on Global Change (2003), available at

a. Variations in antarctic temperatures are roughly double average global variations.

Figure 3. The Carbon Cycle[edit]

Source: Congressional Budget Office adapted from D. Schimel and others, "Radiative Forcing of Climate Change," Chapter 2 in J.T. Houghton and others, eds., Climate Change 1995: The Science of Climate Change (Cambridge, U.K.: Cambridge University Press, 1996). The figure draws on data from Mustafa Babiker and others, The MIT Emissions Prediction and Policy Analysis (EPPA) Model: Revisions, Sensitivities, and Comparisons of Results, Report no. 71 (Cambridge, Mass.: Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change, 2001); Department of Energy, Energy Information Administration, Annual Energy Review 2000, DOE/EIA-0384(2000) (November 2001); P. Falkowski and others, “The Global Carbon Cycle: A Test of Our Knowledge of Earth as a System,” Science, vol. 290, no. 5490 (October 13, 2000), pp. 291-296; J.T. Houghton and others, eds., Climate Change 2001: The Scientific Basis (Cambridge, U.K.: Cambridge University Press, 2001); R.A. Houghton and David L. Skole, “Carbon,” in B.L. Turner II and others, eds., The Earth as Transformed by Human Action: Global and Regional Changes in the Biosphere over the Past 300 Years (Cambridge, U.K.: Cambridge University Press, 1990), pp. 393-408; Keith A. Kvenvolden, “Potential Effects of Gas Hydrate on Human Welfare,” Proceedings of the National Academy of Sciences, vol. 96 (March 1999), pp. 3420-3426; Bert Metz and others, eds., Climate Change 2001: Mitigation (Cambridge, U.K.: Cambridge University Press, 2001); Edward D. Porter, Are We Running Out of Oil? Discussion Paper no. 81 (Washington, D.C.: American Petroleum Institute, December 1995); and World Energy Council, Survey of Energy Resources, 19th ed. (London: World Energy Council, 2001), available at

Note: Reservoirs of carbon are in billions of metric tons (shown in parentheses); flows of carbon (shown as arrows) are in billions of metric tons per year.

Historical Emissions and Climate Change[edit]

With the onset of the industrial revolution more than two centuries ago, people have begun to change the carbon cycle significantly, increasing the amount of carbon dioxide in the atmosphere by about a third, or from roughly 600 billion to 800 billion metric tons of carbon (mtc)—the highest amount in at least 400,000 years.[5] About 30 percent of the increase has come from cutting timber and clearing land for agriculture; the rest stems from extracting coal, oil, and natural gas from the fossil reservoir and burning them.[6] Atmospheric concentrations of methane and nitrous oxide have also risen over the past two centuries—by about 150 percent and 16 percent, respectively —as a result of various agricultural and industrial activities. More recently, halocarbons have begun to accumulate as well. The combined effect of these additions to the atmosphere has been to enhance the greenhouse effect slightly by raising the amount of radiation at the Earth’s surface by about 0.5 percent—with perhaps half of that impact offset by the effects of other human activities, such as the cooling influence of sulfate emissions.

Current evidence indicates that since the mid-19th century, the average surface temperature of the Earth has risen by between 0.7ºF and 1.4ºF (0.4ºC and 0.8ºC). The warming trend has been most pronounced during the past decade and in higher latitudes. Ocean temperatures are also rising, expanding the volume of water, and that expansion, combined with water from melting glaciers, has raised global sea level by about four to 10 inches (10 to 20 centimeters) over the past century.

Scientists generally agree that the observed warming is roughly consistent with the expected effects of changing concentrations of greenhouse gases and other emissions. However, other phenomena also appear to be influencing the Earth’s climate—for example, variations in the Sun’s brightness and magnetic field, and poorly understood fluctuations in the circulation of the oceans. As a result, although scientists have dramatically improved their understanding of the atmosphere, oceans, and climate in recent years, they are uncertain about how much of the observed warming is due to greenhouse gas emissions. They are even more uncertain about whether the warming that has occurred has caused more-extreme weather, such as more and bigger hurricanes, floods, and droughts. However, some evidence suggests that unusually warm conditions may have contributed to persistent droughts in North America, Europe, and Asia between 1998 and 2002 (Hoerling and Kumar, 2003).

Some researchers believe that if people immediately halted emissions of greenhouse gases, gradual warming of the oceans would ultimately contribute to an additional warming of the atmosphere of between 0.9ºF and 2.7ºF, or 0.5ºC and 1.5ºC (Mahlman, 2001, p. 8). Over the following centuries, the climate would return nearly to its pre-industrial state, as the oceans gradually absorbed most of the extra carbon dioxide from the atmosphere and other greenhouse gases broke down.

However, as the world’s population grows and the global economy continues to industrialize, the pace of emissions —particularly of carbon dioxide—is accelerating. The period since World War II has seen 80 percent of all carbon dioxide ever emitted from the burning of fossil fuels —and two-thirds of the entire increase in atmospheric concentrations (Marland, Boden, and Andres, 2002). During the 1990s, annual global emissions of greenhouse gases ran at about 10 billion metric tons of carbon equivalent (mtce; see footnote 2), and carbon dioxide concentrations grew by more than 4 percent. Fossil fuels accounted for about 6 billion mtc per year; of that total, oil claimed a share of 45 percent, natural gas, 20 percent; and coal, 35 percent.[7] Net deforestation contributed roughly 1 billion to 2 billion mtc annually (Watson and others, 2000, p. 32). About 2½ billion to 3 billion mtce per year of other greenhouse gases, mostly methane, came from a wide variety of sources, mainly agricultural activities but also fossil fuel production, diverse industrial processes, and landfills.

The international distribution of emissions from fossil fuels largely reflects the global pattern of economic development because fossil fuels have powered the dramatic increase in industrial output and material well-being that has taken place in many nations over the past two centuries. In the United States, for instance, fossil fuels provided nearly 90 percent of all energy used in the 20th century, and they account for about 85 percent of the energy used today. Developed, industrialized countries—the members of the Organisation for Economic Cooperation and Development (OECD) and of the former Soviet bloc—are responsible for nearly 80 percent of historical carbon emissions, even though they have only about 20 percent of the world’s population. Historically speaking, people in developed countries have emitted roughly 10 times more carbon per person than people in developing countries. Indeed, it is the technological access to energy from fossil fuels that has helped make them roughly 10 times wealthier.

Yet the relationship between the use of fossil energy and economic prosperity is not a strict one. Countries that have significant reserves of nonfossil energy, that rely on imports for much of their fuel supply, or that tax the consumption of fuel tend to have lower emissions levels. Some high-income countries have emissions levels per person that are quite low: for instance, Sweden maintains roughly the same standard of living as the United States does but emits only 30 percent as much carbon per person, largely by relying extensively on hydroelectric and nuclear power. In contrast, countries that have large reserves of fossil fuels or that subsidize their population’s consumption of fuel tend to have higher per capita emissions levels. Such nations include oil-exporting countries and members of the former Soviet bloc.

Nor is the relationship between economic growth and emissions a smooth one. Developing countries in the initial stages of industrialization tend to have fairly high levels of emissions per dollar of output, because a large share of their economic activity involves the energy-intensive manufacturing of metals, cement, and other basic commodities. In contrast, developed countries devote an increasing share of their resources to the production of less energy intensive outputs, including services. Economic development therefore tends to involve rising energy intensity in its initial stages and falling energy intensity as the efficiency of energy use and the service sector’s share of economic activity grow (Holtz-Eakin and Selden, 1995). In the United States, for example, per capita emissions of carbon dioxide from fossil fuels grew nearly seven-fold between 1870 and 1920 but have grown by less than one-third since then and are roughly the same now as they were 30 years ago.

On a per-person basis, OECD countries currently burn about 3 mtc of fossil fuels per year—three times the world average—with national figures ranging from over 5½ mtc per person for the United States to less than 1 mtc for Mexico and Turkey.[8] The former Soviet bloc countries had very high per capita emissions levels before their economic collapse but now average about 2 mtc per person—the figures range from nearly 3 mtc for Russia to less than a third of a ton for Armenia. Developing countries average only ½ mtc per capita annually—or one-sixth the OECD average and only one-tenth that of the United States. The poorest 2 billion people—one-third of the world’s population—average less than a fifth of a ton annually, or the equivalent of about 80 gallons of gasoline. (Figures 4 and 5 compare different regions’ populations, per capita economic activity, and per capita emissions, as well as ranges of uncertainty about those factors’ future growth.) Because of their greater reliance on subsistence farming and forestry, developing countries currently account for most of the world’s carbon dioxide and methane emissions from land use. Even so, on a per capita basis, people in developing countries are responsible for far fewer greenhouse gas emissions than are their counterparts in the industrialized countries, and their total emissions levels are lower as well.

Figure 4. Uncertainty in Projections of Regional Population and Economic Growth[edit]


Gross Domestic Product

GDP per Capita

Source: Congressional Budget Office based on Department of Energy, Energy Information Administration, International Energy Outlook 2002, DOE/EIA-0484 (2002).

Figure 5. Uncertainty in Projections of Regional Carbon Dioxide Emissions and Emissions Intensity[edit]

Total Emissions

Emissions per Capita

Emissions Intensity

Source: Congressional Budget Office based on Department of Energy, Energy Information Administration, International Energy Outlook 2002, DOE/EIA-0484 (2002).

Note: All emissions are from fossil fuels.

What the Future May Hold[edit]

Recent studies have estimated that the average global temperature is likely to rise by between 0.5ºF and 2.3ºF (0.3ºC and 1.3ºC) during the next 30 years (Zwiers, 2002). Most of the warming during that period will be due to emissions that have already occurred. Over the longer term, the degree and pace of warming will depend mainly on future emissions. Given current trends in population, economic growth, and energy use, global emissions are likely to increase substantially. The populations and economies of developing countries are growing rapidly, and their total greenhouse gas emissions could surpass those of developed countries over the next generation or so—although on a per-person basis, emissions from developing countries will continue at much lower levels than emissions from developed countries for a long time to come.

Even with substantial research, development, and adoption of alternative energy technologies, fossil fuels are likely to remain among the cheapest abundant energy resources for many years. There are roughly 1,500 billion to 1,700 billion mtc in proven coal, oil, and natural gas reserves that can be extracted using current technology, along with an estimated 7,000 billion to 16,000 billion mtc in resources that might ultimately be recovered using advanced technology—not including reservoirs of methane hydrate under the ocean.[9] Without some sort of intervention, increasing levels of emissions—mainly of carbon dioxide from the use of fossil fuels—will continue to raise atmospheric concentrations of greenhouse gases for the foreseeable future.

To illustrate how concentrations might change over the next century, a study for the Intergovernmental Panel on Climate Change presented a series of scenarios of greenhouse gas emissions, with cumulative carbon dioxide emissions from both developed and developing countries ranging from under 700 billion mtc to nearly 2,500 billion mtc (Nakićenović and Swart, 2000; see Figure 6). By 2100, under the scenario with the lowest levels of emissions, atmospheric concentrations of carbon dioxide would be about one-third more than today’s levels; under the high-emissions scenario, concentrations would be nearly triple today’s. Under the more likely scenarios in the middle of the range, carbon dioxide concentrations could roughly double during the next century, to levels not seen in over 20 million years (Pearson and Palmer, 2000). Concentrations of other greenhouse gases are also likely to grow by a considerable amount. Under the above range of emissions projections—to which the authors do not assign any probabilities—the average global temperature could rise over the next century by about 2ºF (1ºC) or by more than 9ºF (5ºC).[10]

Other researchers have explicitly addressed a variety of uncertainties in economic and climate forecasting; one recent study projected an increase in the average global temperature of 4.3ºF (2.4ºC) between 1990 and 2100, with a 95 percent chance that the change will be between 1.8ºF (1.0ºC) and 8.8ºF (4.9ºC) (Webster and others, 2002; see Figure 7). The economic and physical factors included in the study accounted for roughly similar shares of the uncertainty surrounding the human contribution to warming by 2100. Other factors, including variations in solar radiation and volcanic activity, could also influence the future climate in ways that are harder to quantify, but those factors were not included in the study. At the low end of the projected range, the effects of climate change would probably be relatively mild—although even modest warming might trigger an abrupt, larger-than-expected shift in weather patterns. At the high end of the range—an unlikely but possible prospect—the world could face an abrupt change in climate that would be roughly as large as the one at the end of the last ice age but much more rapid. In the more plausible middle of the range, the effects of climate change might still be quite significant. Moreover, even if emissions were eliminated before the end of the century, the oceans would continue to warm—and thus further warm the climate—for centuries thereafter. And, of course, continued emissions beyond the next hundred years would contribute to additional warming.

The potential effects of any particular amount or rate of climate change over the next few centuries are very uncertain. Research on the connection between the climate and economic well-being yields particularly ambiguous conclusions. Humans generally appear to have prospered during warmer (or warming) periods and suffered during colder (or cooling) ones. People did not—perhaps could not—begin farming until after the last ice age ended. Agriculture spread rapidly 6,000 to 8,000 years ago, when the Sahara was largely grassland instead of desert and average global temperatures were warmer than they are today by perhaps a degree Celsius. Conversely, numerous episodes of cooling seem to have disrupted cultures throughout history. Europe prospered during a warm period that occurred in the Middle Ages, but it suffered during the colder Little Ice Age of between 300 and 800 years ago.

Yet the past effects of climate change on preindustrial societies may not provide much information about its future effects on technologically advanced societies—especially the effects of significantly greater warming.[11] Researchers who study the sources of economic growth consistently find that at least during the past half-century, regions in temperate climates tended to prosper more than regions in tropical ones, even after differences in levels of income and education, rates of saving and investment, and other factors were taken into account. (For example, Masters and McMillan, 2000, and Sala-i-Martin, 1997, discuss the positive correlation between temperate climate and economic development.)

When considered as a whole, the historical and statistical evidence suggests that a warmer global climate—as well as the period during which warming occurred—could have both beneficial and harmful effects. One global effect would be generally harmful: sea levels would rise as glaciers melted and the oceans warmed and expanded. The gradual inundation of seashores would create problems for countries (particularly low-lying island nations), regions, and cities that were mostly near sea level. In the middle of the range of climate change described earlier, sea level would rise by up to 1½ feet (50 centimeters) over the next century. And even if emissions were eliminated after 2100, thermal expansion of the oceans could ultimately raise sea level by roughly 6 feet (2 meters) over a few centuries. Because climate is generally a regional phenomenon, however, the effects of climate change would vary by region—and be even more uncertain than the effects globally. If warming followed recent patterns, it would tend to be concentrated in colder areas and periods—near the poles, in the winter, and at night—but daylight temperatures in the tropics during the summer would also rise.[12] A somewhat warmer Earth would probably have more rainfall, and the resulting moderately warmer, wetter climate —combined with more carbon dioxide in the atmosphere —would probably improve global agricultural productivity overall. Nevertheless, dramatic warming could reduce the yields of important food crops in most of the world. Shifts in weather patterns would probably cause more heat waves and droughts in some regions, which would substantially reduce their crop yields and supplies of drinking water as well as exacerbate the effects of urban air pollution. Other areas would experience more flooding. Moreover, as Alley and others (2003) discuss, the climate’s response to rising concentrations of greenhouse gases could involve unexpectedly large and abrupt shifts, which would be much more disruptive and costly to adapt to than would gradual changes.

People in developing countries are probably more vulnerable to the damaging effects of climate change than are people in developed countries, in large part because they have fewer resources for coping with the impacts. In addition, a number of developing countries have large populations that are either concentrated in low-lying regions vulnerable to a rise in sea level or flooding or that subsist on marginal agricultural lands vulnerable to drought.

In contrast, industrial economies can draw on many more resources to ease the adaptation to changes in climate. Moreover, recent comprehensive study of the potential impacts of climate change suggests that for a 4.5/F (2.5/C) increase in average global temperature, some developed countries could actually experience economic benefits because warming would improve climates for agriculture (Nordhaus and Boyer, 2000). The United States could experience a loss of about half a percent of total income; the poorest developing countries could experience losses of more than 2.5 percent—and from much lower levels of income per person than those of developed countries. But point estimates like those conceal a great deal of uncertainty. As an example, estimates of the effects on the United States of a rise of 4.5/F (2.5/C) in average global temperature range from a loss of 1.5 percent of gross domestic product to a gain of 1.0 percent.[13] For particular temperate regions of the United States, the likely changes in temperature and rainfall and the possible intensity of extreme weather conditions are very poorly understood. For example, recent reviews of the potential regional effects of climate change in the United States (National Assessment Synthesis Team, 2000, and Department of State, 2002) found that rainfall and summer soil moisture might rise significantly in much of the Midwest, or it might fall significantly.

In addition, some researchers fear that climate change might occur so rapidly that some types of plants—most notably, in marginal ecosystems such as alpine meadows and barrier islands and in immobile ecosystems such as coral reefs—would not be able to adapt to the altered climate and would disappear. Migratory animals, birds, and insects could be similarly affected.[14] Moreover, warming would probably increase the natural range of insect-borne diseases that are now found mainly in warmer regions. Finally, among the most worrisome possible consequences of rising greenhouse gas concentrations is the potential disruption of deep ocean currents that strongly influence the global climate. Those currents are directed partly by thermohaline circulation; that is, the evaporation or freezing of seawater in various regions leaves the remaining water increasingly salty, and therefore dense, and it sinks into the deep. Warmer weather could slow or even stop the current pattern of thermohaline circulation by increasing rainfall and reducing the formation of sea ice in the North Atlantic.

Northern Europe appears to be particularly vulnerable to such a change because its relatively warm, rainy weather depends on the northerly flow of warm water from the Gulf Stream, which in turn is linked to thermohaline circulation in the North Atlantic. An abrupt halt of that circulation—such as the halt that occurred after the last ice age, as the climate warmed up—could seriously disrupt the flow of warm water into the North Atlantic, leading to much colder weather in parts of North America and Europe for decades or centuries coupled with greater warming elsewhere in the world. (Clark and others, 2001, discuss that scenario.) Most climate models project that the North Atlantic thermohaline circulation will weaken during the next century because of higher levels of rainfall in a warmer climate. However, they do not predict a complete shutdown over that period.

Figure 6. Range of Uncertainty in Economic and Carbon Dioxide Emissions Projections[edit]

GDP per Capita

Cumulative Emissions

Emissions per Capita

Source: Congressional Budget Office based on Nebojša Nakićenović and Rob Swart, eds., Emission Scenarios (Cambridge, U.K.: Cambridge University Press, 2000).

Note: All emissions are from fossil fuels.

Figure 7. Historical and Projected Climate Change[edit]

Source: Congressional Budget Office. Historical data are from the Hadley Centre for Climate Prediction and Research, available at and described primarily in C.K. Folland and others, “Global Temperature Change and Its Uncertainties Since 1861,” Geophysical Research Letters, vol. 28 (July 1, 2001), pp. 2621-2624. The projection is based on data provided by Mort Webster, University of North Carolina at Chapel Hill, in a personal communication, December 11, 2002; the results are discussed in Mort Webster and others, Uncertainty Analysis of Climate Change and Policy Response, Report no. 95 (Cambridge, Mass.: Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change, December 2002).

Note: The projection, which is interpolated from decadal averages beginning in 1995, shows the possible distribution of changes in average global temperature as a result of human influence, relative to the 1986-1995 average and given current understanding of the climate. Under the Webster study’s assumptions, the probability is 10 percent that the actual global temperature will fall in the darkest area and 90 percent that it will fall within the whole shaded area. However, actual temperatures could be affected by factors that were not addressed in the study (such as volcanic activity and the variability of solar radiation) and whose effects are not included in the figure.

Potential Responses[edit]

To control the long-run growth of greenhouse gas concentrations in the atmosphere, countries could either limit emissions or develop means of drawing greenhouse gases back out of the atmosphere after they were emitted. One significant remedy would be to control the long-run growth of fossil fuel use. There are many alternatives to current patterns of energy use, including technologies that could make that use more efficient and others that could exploit alternative energy sources—for example, solar energy, wind, biomass, and hydroelectric and nuclear power. However, expanding the reliance on any of those alternatives is relatively expensive compared with the market cost of using fossil fuels. Restrictions on such use would therefore impose economic costs—costs that would rise with the stringency of the restrictions and would climb particularly quickly if extensive controls were imposed in the short run. Over the longer term, control of fossil fuel use will depend on the development of relatively inexpensive alternative energy technologies (Edmonds, 2002).

Because plants absorb carbon dioxide from the atmosphere, countries could sequester carbon by planting and growing trees and partly offset emissions from the burning of fossil fuels. (Scholes and Noble, 2001, and McCarl and Schneider, 2001, discuss the role of sequestration in limiting carbon dioxide emissions.) In theory, the potential for sequestration in forests is very large: if people could replant all of the forest land around the world that has been cleared in the past two centuries and then leave the forests alone, the trees and soils could eventually trap much of the carbon that has accumulated in the atmosphere since the beginning of the industrial revolution. In practice, though, reforestation on that scale is infeasible: people need much of the land to grow crops and to live on. Furthermore, people would continue to use fossil fuels, and all of the carbon sequestered in trees over several decades would be replaced in the atmosphere by the continued emissions. So carbon sequestration in forests and agricultural soils can only partially offset past and future carbon emissions from fossil fuels.

But forests can offer a partial alternative to fossil fuels as a source of energy. Although burning wood releases carbon into the atmosphere (and is relatively dirty and expensive as well), the carbon is removed again as another tree grows in place of the one cut down, a cycle that could be repeated over and over. Thus, a wood lot capable of producing 1 mtc of renewable biomass fuel every 20 years or so could, over a century, replace 5 mtc from fossil fuels that would otherwise be emitted into the atmosphere. Engineers have developed technologies to remove carbon dioxide from the exhaust of a combustion process and to store it underground or in the ocean. Those carbon-capture technologies appear to be relatively straightforward for large emissions sources such as electric power generating plants, but they also significantly increase the cost of generating power (Department of Energy, 1997).[15] Geoengineering solutions, such as adding iron to oceans to fertilize the absorption of carbon by plankton, have also been advanced. Some research suggests that iron fertilization may help reduce atmospheric concentrations of carbon dioxide, although its effectiveness and cost are very uncertain, as are its potential side effects (Boyd and others, 2000). Other geoengineering technologies, such as removing greenhouse gases directly from the atmosphere, are extremely expensive.

Some relatively simple and inexpensive options are available for controlling some emissions of greenhouse gases other than carbon dioxide. However, controlling those gases in a cost-effective manner is considerably complicated by the fact that they come from so many different and widespread agricultural, industrial, and other activities (Reilly, Jacoby, and Prinn, 2003).

Types of Uncertainty[edit]

As the preceding discussion emphasized, scientists and economists are very uncertain about the potential economic threat posed by a changing climate. Some of the uncertainty is scientific. For a given amount of greenhouse gas emissions, what portion will accumulate in the atmosphere? How much will a given change in those concentrations affect the global climate? How will that global change be distributed throughout the world, and how rapidly will it occur? How much will regional climate change affect sea level, agriculture, forestry, fishing, water resources, disease risks, and natural ecosystems? Will rising greenhouse gas concentrations increase the probability of threshold effects, which could suddenly shift the climate into a significantly different global pattern?

Other sources of uncertainty are essentially economic. How rapidly will the world’s population and economies grow? How energy- and land-intensive will human activities be, and how much of the energy used for those activities will come from fossil fuels? How will policies to control emissions of greenhouse gases or to encourage technological developments affect the accumulation of gases in the atmosphere? And how much will those policies cost? At a deeper level, how will future generations value the effects of averting climate change? Future generations are likely to be wealthier, on average, than people are today and thus better able to adjust to changes in climate. But they might also have been willing to forgo some of their affluence to have their natural surroundings and climate preserved.

Researchers’ increased understanding of climate change has often uncovered areas of inquiry whose importance had previously gone unrecognized. In that respect, greater knowledge has sometimes served to expand the range of scientific and economic unknowns, even as it has resolved specific issues (see Kerr, 2001, pp. 192-194). Because of that tendency, policymakers for the foreseeable future will continue to face great uncertainty in determining the potential costs and effects of different policies to address the problem of climate change. Furthermore, policies that explicitly take into account that range of uncertainty are likely to be more effective than policies that do not.[16]

  1. The discussion in this chapter is drawn mainly from a series of reports prepared by the Intergovernmental Panel on Climate Change, which summarize the current state of scientific and technical knowledge in that area. The most recent set of reports, which are cited in detail in the reference list beginning on page 57, are Houghton and others (2001); McCarthy and others (2001); Metz and others (2001); and Watson and others (2001). Other sources are specifically noted. The Congressional Research Service (2001) provides another summary. For a short history of scientific research on climate change, see Weart (1997).
  2. Greenhouse gases differ in their ability to trap energy; they interact with each other, and they stay in the atmosphere for different and varying lengths of time. By convention, scientists apply a standard metric to the gases by comparing their 100-year global warming potentials, or GWPs (the amount of warming that an incremental quantity of a given gas would cause over the course of a century), with that of carbon dioxide. The convention is somewhat rough because the GWP of each gas is affected by the quantity of other gases, but it is used in international negotiations because of its simplicity. GWPs range from 1 for carbon dioxide to many thousands for halocarbons. Using 100-year GWPs, scientists convert quantities of other greenhouse gases to metric tons of carbon equivalent, or mtce.
  3. See Falkowski and others (2000); Veizer, Godderis, and François (2000); Crowley and Berner (2001); and Zachos and others (2001).
  4. Quantities of carbon in gases and elsewhere are measured in metric tons of carbon, or mtc. Mtc differs from mtce, which measures warming potential rather than quantities of carbon.
  5. Atmospheric concentrations of carbon dioxide are usually measured in parts per million (ppm). In those terms, atmospheric carbon dioxide has increased from about 280 ppm to about 370 ppm.
  6. Estimates of emissions and reabsorption of carbon from land use are based on data for 1850 to 1990 from R.A. Houghton of the Woods Hole Research Center and an extrapolation based on data from Houghton and Skole (1990). Estimates of emissions from fossil fuels are from Marland, Boden, and Andres (2002). Much of the available data on greenhouse gas emissions, changes in atmospheric concentrations, and changes in temperature is available from the Carbon Dioxide Information Analysis Center at For a discussion of recent research, see Schimel and others (2001).
  7. Coal contains about 80 percent more carbon per unit of energy than gas does, and oil contains about 40 percent more. For the typical U.S. household, a metric ton of carbon equals about 10,000 miles of driving at 25 miles per gallon of gasoline or about one year of home heating using a natural gas-fired furnace or about four months of electricity from coal-fired generation.
  8. The United States accounts for nearly as many emissions as the former Soviet bloc, the Middle East, Central and South America, and Africa combined. Use of fossil fuel in the United States is split roughly into three categories: commercial and residential buildings and appliances, industry, and transportation. More than a third of that fuel is used to generate electricity, two-thirds of which goes to buildings and one-third to industry (see Department of Energy, 2002a). Other developed countries have somewhat different consumption patterns for fossil fuel, depending on their income levels, climates, and other factors.
  9. Those estimates are derived from Babiker and others (2001), Department of Energy (2001), Metz and others (2001), Porter (1995), and World Energy Council (2001).
  10. The economic projections for developing countries that underly those scenarios were criticized in an article appearing in the February 15, 2003, issue of The Economist. The criticism appears to be valid but does not undermine the study’s main conclusions about the range of possible climate change.
  11. Moore (1998) describes the potentially beneficial effects of warm climates. Richerson and others (2001) discuss the relationship between warming and the development of farming. Lamb (1995) addresses the broader effects of climate over human history.
  12. Until recently, evidence from fossils indicated that tropical weather was relatively insensitive to global climate change. However, research by Kump (2001) suggests that tropical regions are, indeed, affected.
  13. Nordhaus (1994, 1998a,b), Nordhaus and Boyer (2000), Mendelsohn and Neumann (1999), and Moore (1998) discuss those cost estimates.
  14. That problem could be aggravated by the environmental stresses of population growth and industrialization. As Field (2001) discusses, under an intermediate definition of appropriation, human beings already appropriate an estimated 10 percent to 55 percent of the energy transferred from plants to other life on Earth, and that fraction is expected to grow in the future.
  15. An extensive discussion of technological options and the costs of capturing and sequestering carbon dioxide from power plants can be found at the Web site of the International Energy Agency’s Greenhouse Gas Research and Development Programme at
  16. See Heal and Kriström (2002) for a more extensive discussion of uncertainty and climate change.