Brattle principal Jürgen Weiss co-authored an article for the July 2015 issue of The Economists’ Voice that assesses the benefits and costs for utilities in waiting or hurrying when taking climate change mitigation measures.
The risks of global climate change are likely to lead to the de-carbonization of the electricity sector worldwide, bringing with it significant investments in infrastructure with new and emerging technologies in renewable energy. In their article, “Hurry or Wait – The Pros and Cons of Going Fast or Slow on Climate Change,” Dr. Weiss and Professor Eleanor Denny explain that there are both benefits and costs to mitigating climate change rapidly. Because technological progress will likely lower the future cost of renewable energy, there are benefits for utilities in waiting to invest until these costs fall. On the other hand, delaying mitigation results in higher cumulative greenhouse gas emissions (GHG), which in turn have two associated costs. First, higher cumulative GHG emissions lead to higher expected damages. Using a range of estimates for the social cost of carbon, the authors conclude that this first cost is of the same order of magnitude as potential savings from delaying deployment of renewable energy.
A second cost, however, results to the significant uncertainty concerning the relationship of cumulative emissions and resulting climate change. The authors argue that given a ten percent chance of carbon emissions on the current trajectory leading to a global temperature increase of seven degrees Centigrade or more, the insurance value of mitigating fast is likely significant and should tip the balance in favor of moving fast.
For more information, please visit The Economists’ Voice website.