Finance and Insurance Statistics
<"4">The Canadian Institute for Business and the Environment506 Victoria Ave., Montreal, Quebec H3Y 2R5
Ph. (514) 369-0230, Fax (514) 369-3282
Email cibe@web.net
Vol. 6, No. 27, November 2, 2002
COST OF INACTION ON GLOBAL WARMING TO THE UNITED STATES WILL RANGE BETWEEN $61.6 BILLION TO $335.7 BILLION A YEAR <"4">What is the cost if the United States invests little or nothing to reduce its greenhouse gas emissions (HG)? There will be the costs of damages from a scorched earth, melting polar ice caps and rising ocean waters. There will be costs to build dikes and protect coastal communities from ocean flood waters. There will be costs from extreme climate events that would not otherwise have happened, if humankind hadn't dumped millions of tons of greenhouse gases into the earth's atmosphere. These are the costs of inaction and at attempts to mitigate the damages from inaction. <"4">True, the costs will not affect the oil and coal companies who have succeeded in stopping GHG reduction efforts under Kyoto. As long as they can continue to convince the world to buy their product and burn it, they will not suffer job losses and corporate losses. Instead, the fossil fuel industries will hand the costs of the negative impacts of global warming to the cities and the governments that have to deal with the fall out from not reducing GHG emissions from oil, gas, and coal operations. <"4">In an old issue of the journal entitled, "International Environmental Affairs: A Journal for Research and Policy," published by the University Press of New England for Dartmouth University, Vol., 8, No. 3, Summer 1996, we found a research paper entitled, "Economic Implications and Decision-Making in the Face of Global Warming," written by Dr. Paul Ekins, who has a Ph.D. in economics from the University of London and is Head of the Environment Group at the Policy Studies Institute. He is also Professor of Sustainable Development in the School of Politics, International Relations and the Environment at Keele University; a Founder and Associate Director of the sustainable development charity Forum for the Future; Senior Consultant to Cambridge Econometrics; and a specialist adviser to the Environmental Audit Committee of the House of Commons. For more on Dr. Paul Ekins go to the website http://www.forumforthefuture.org.uk/contact/default.asp?pageid=256
<"4">
In this economic study, Akins analyzed the detailed research work of two distinguished economists, Dr. Samuel Fankhauser and Dr. William R. Cline. Samuel Fankhauser wrote, "Valuing Climate Change: The Economics of the Greenhouse Effect," published by Earthscan Ltd., London, U.K., 1995. Cline wrote, "The Economics of Global Warming," published by the Institute for International Economics, Washington, D.C., 1992. These two studies provide the raw numbers in Dr. Ekins report. Their numbers are based on the effects of doubling the level of GHG's in the atmosphere. <"4">Here they are. Fankhauser predicted it will cost the U.S. about $69.3 billion a year in 1990 dollars. Cline had two estimates, one at $61.6 billion per year for conservative measurable costs, and another for a whopping $335.7 billion a year for a number of additional real, but hard-to-measure cost factors. Generally, all are the costs of inaction and the cost of mitigation related to unabated growth in greenhouse gas emissions. For more economic factors see the website http://www.sfbg.com/News/35/22/22world.html
<"4">OVER 10 YEARS THE ACCUMULATIVE COST OF UNABATED GLOBAL
WARMING TO THE US ECONOMY WILL RANGE FROM $616 BILLION TO
$3.357 TRILLION <"4">The total cost to the US in 1990 dollars over a ten year period could range from a total of $616 billion to $3.357 trillion. Both Fankhauser and Cline use varying estimates to calculate costs. For example, Cline estimates a 60% forest loss in the US, and Frankhauser estimates a 16% loss. Cline estimates 9,800 heat-related increased deaths. Frankhauser estimates 6,642 additional deaths per year resulting from global warming. Cline values a lost life to the community at $600,000 per person. Frankhauser estimated twice that amount at $1.5 million. The economists take these numbers from other economists who've tried to estimate the value to the economy of a death. Her are the estimates of annual damage and adaptation costs to the United States from global warming incurred by the US economy in 1990 dollars
>>chart <"4">Also see the report "On Climate Change and Economic Growth," by Samuel Fankhausera and Richard S.J. Tolb, for the European Bank for Reconstruction and Development, Hamburg, Vrije and Carnegie Mellon Universities, 5 June 2002, at the website
http://www.uni-hamburg.de/Wiss/FB/15/Sustainability/growth.pdf
<"4">QUESTION: DO SOMETHING, OR DO NOTHING ABOUT REDUCING GHG'S? <"4">Dr. Paul Ekins reports that faced with these economic costs and the related uncertainties of human-induced global warming, there are three possible choices of political decision. One approach is inaction which involves acceptance of the climate change damages. The second is adaptation, which involves acceptance of global warming but action to reduce the damage that it inflicts (e.g., by building dikes against sea-level rise, increasing air-conditioning to reduce heat stress, or changing agricultural practices in response to different climatic conditions throughout the US). The third, is mitigation which involves action to reduce the amount of global warming that takes place, by reducing the emission of greenhouse gases, increasing global sinks of such gases, or deflecting solar radiation from the earth, or a combination of these actions. Ekins reports that it is likely that decision-making strategies will contain elements of all three kinds of approaches. Visit Dr. Paul Ekin's website at http://www.keele.ac.uk/depts/spire/Staff/Pages/ekins/ekins.htm Also see
http://www.psi.org.uk/Researchers/paulekins/paulekins.htm
<"4">THE USE OF COST BENEFIT ANALYSIS FOR IMPACTS OF CLIMATE CHANGE <"4">Ekins reports that a standard economic response to global warming entails the application of a Cost-Benefit Analysis (CBA). As its name suggests, this is a technique which seeks to compute the costs and benefits of a phenomenon or activity, either to arrive at an overall benefit/cost ratio where we will find either a net benefit or a net cost to the economy. Akins stated that, "the costs and benefits involved in global warming, and responses to it, are of major importance for any approach to decision-making on the issue and will need to be carefully considered. He warns that in some cases that may be very difficult because of impacts that are not easily broken down into terms of money. Or impacts that can be monetarized, but not well defined as directly related to human-induced increases to climate change, such as extreme weather events. Which costly weather event (i.e., hurricanes, ice storms, massive floods, long-term droughts, etc.) can be attributed to human activity? <"4">For example, one cost noted by, but left out, by the two economists, Cline and Fankhauser, was the cost of conflict over migration and diminishing resources caused by global warming. What happens when displaced farmers fight over remaining arable farmland, or fight over water? What happens when people have to leave their flooded or drought lands to move to other regions where they are not wanted? Fankhauser stated that, "to these costs would have to be added the costs of hardship and stress suffered by migrants." Cline states that, "peoples have often fought wars to avoid being forced to leave their homelands against their will." Frankhauser accepts that, "it is therefore quite likely that these costs exceed the pure economic losses. Unfortunately it seems almost impossible to assess them properly." So these costs were omitted from the above calculations altogether.
<"4">137,727 LIVES LOST ANNUAL WORLDWIDE FROM GLOBAL WARMING <"4">Fankhauser estimated that 137,727 lives might be lost worldwide each year due to the doubling of the GHG's in the atmosphere. Of theses 22,923 would die in the OECD countries, 7,722 in the former USSR and the rest of the developing world. Economic literature regarding the cost to society form a life cut short ranges from $200,000 to $16 million. The amount is based on work productivity, family value, leading to the "worth of lives concerned".
<"4">MITIGATION: THE COST OF REDUCING GHG IS NOT THAT COSTLY, SAYS
REPORT
<"4">Dr. Paul Ekins reported that Stanford University used its software "Energy Modeling Forum" (EMF to bring together 14 modeling teams to explore 13 standardized scenarios reflecting a range of carbon emission control levels. Their conclusions represent probably the best indication currently available. The study found that, "the costs of achieving a 20 per cent reduction in CO2 emissions in the US relative to today's level range from 0.9 per cent to 1.7 per cent of US Gross Domestic Product (GDP) in 2010. Although 1.7 per cent of US GDP in 2010 amounts to about $130 billion in 1990 dollars, the implied reduction in the GDP growth rate between 1990 and 2010 would only from about 2.3 per cent per year to 2.25 per cent per year. Thus, it is possible to reduce emissions significantly from their non-controlled level without significantly reducing the growth of the economy." Source, "Economic Implications and Decision-Making in the Face of Global Warming," written by Dr. Paul Ekins, Professor of Sustainable Development in the School of Politics, International Relations and the Environment at Keele University, UK, published by the "International Environmental Affairs: A Journal for Research and Policy," University Press of New England for Dartmouth University, Vol., 8, No. 3, Summer 1996.
<"4">LOUISIANA'S ECONOMIC DILEMMA: TO FIGHT GLOBAL WARMING OR TO
EXTRACT OIL? <"4">Louisiana is low-laying country and may be heavily economically impacted by the rising ocean waters brought on by melting ice caps. Louisiana is loaded with oil and could be heavily impacted by actions to reduce the use of fossils. So which way should it jump - on or off the Kyoto Protocol? Over the past 40 years, the water level in Louisiana has risen by a few inches, thanks to a combination of natural forces and man-made changes. The result: more than 1,000 square miles of local land have been wiped out. By some estimates, global warming could raise the sea level another 6 to 37 inches by the year 2100 as a warmer ocean expands and glacial melting increases a lot of Louisiana will be flooded forever. At the high end of that estimate, the city of New Orleans could be flooded. An obvious solution seems to be to wage an all-out war against global warming. But that's a double-edged sword. If, for instance, the United States joins other governments in agreeing to reduce the use of oil and gas, Louisiana's oil-based economy would be pounded. Jobs would be lost. Businesses would vanish. Louisiana's dilemma illustrates the many difficult political, environmental and economic tradeoffs that industrialized nations will face. Source, "Calculating the Costs," CNN, Altanta, Georgia, November 27, 1997.
<"4">GLOBAL WARMING AND EXTREME WEATHER EVENTS WORLDWIDE COULD
COST US $150 BILLION ANNUALLY IN INSURANCE PAY OUTS <"4">A report written on behalf of the UN Environment Programme's (UNEP) finance initiative, found that more frequent and more devastating storms caused by climate change could cost $150 billion in insurance pay outs a year within the next ten years, possibly bankrupting financial services firms. "The increasing frequency of severe climatic events...has the potential to stress insurers, reinsurers and banks to the point of impaired viability or even insolvency," the report said. The report said a political framework for action on climate stability is essential, but said the Kyoto Protocol, under which many industrial nations except the United States committed to curb greenhouse gas emissions by 2012 does not go far enough. The report said financial institutions could deliver market solutions to climate change, through carbon emissions trading and lower insurance premiums for cleaner companies. "A pro-active stance by financial institutions will help to reduce the threats they face from climate change while also providing opportunities," the report said. Worldwide economic losses from natural disasters appear to be doubling every ten years, the report said, and called for action to decrease the emission of greenhouse gases, particularly carbon. <"4">Although they are directly at risk, the reaction of financial services firms to the problem of climate change has so far been patchy, the report said, while governments have shown little commitment to tackling the problem. The report said that while climate change is widely recognized as being a threat by insurers and reinsurers, their strategies towards it have been mixed. Very few insurers, for example, factor in climate change-related risks into their insurance premiums, the report said. In the commercial banking industry it said there appeared to be little awareness of the issue among senior executives, though some companies have seized the opportunity to take the lead in greenhouse gas credit trading and energy efficient loans. The report called on financial services companies to raise awareness of the problem of climate change and to lead by example in corporate environmental management. The report was written by Innovest Strategic Value Advisors, a U.S.-based investment research firm specializing in environmental and social issues, on behalf of the UN Environment Programme's Finance Initiatives' Climate Change Working Group. Source, "Climate Damages of $150 Billion Per Year Foreseen Within Decade," by Simon Challis, European Insurance Correspondent, Reuters News Service, London, UK, www.planetark.org, Oct. 8, 2002
<"4">CANADA CAN MEET AND EXCEED KYOTO AND SAVE $200 BILLION IN THE
PROCESS: TORRIE SMITH <"4">A new report entitled, "Kyoto and Beyond: The Low-Emission Path to Innovation and Efficiency," Ottawa, October 2002 was prepared for the David Suzuki Foundation and the Canadian Climate Action Network Canada by Ralph Torrie, Richard Parfett and Paul Steenhof of Torrie Smith Associates, based in Ottawa. It showed that Canadians will pocket $200 billion in energy savings by 2030 if Canada meets and exceeds the Kyoto Protocol's greenhouse gas emission reduction targets. The report is in stark contrast to claims from powerful business interests that the Kyoto targets are unrealistic and too expensive. Kyoto and Beyond sets out how Canada can dramatically cut its greenhouse gas emissions by 50 per cent by 2030, while creating jobs and cutting energy costs at the same time. "It's a straightforward approach that is based on existing technologies and practical, proven energy efficiency techniques," said Ralph Torrie, the report's author and one of Canada's leading sustainable energy experts. "It includes retrofitting buildings, using alternative forms of energy and improving public transportation. Taking these steps would move Canada beyond the modest Kyoto target of reducing emission six per cent below 1990 levels. In fact, it puts us on a path to cutting our emissions in half." <"4">Mr. Torrie's analysis found that new energy efficiencies have resulted in the creation of better homes, better appliances and better office machines for Canadians, with consumer savings totaling more than $50 billion since 1975. Torrie reported that in 1998, BP, one of the largest petroleum companies in the world, pledged to reduce its greenhouse gas emissions to a level 10 per cent below that of 1990 by 2010. In March, the company announced it had already reached its target and was setting more ambitious ones. The emission reduction saved the company $650-million (US) by using energy more efficiently. For more information contact Sarah Marchildon, Communications Specialist, David Suzuki Foundation, pH 604-732-4228. "Kyoto and Beyond" is available at www.davidsuzuki.org, www.climatenetwork.org, and www.torriesmith.com .
<"4">C$200 BILLION SAVINGS TO CANADA FROM AGGRESSIVELY CUTTING
GREENHOUSE GAS EMISSIONS: TORRIE SMITH ASSOCIATES <"4">A new report has just been completed entitled, "Kyoto and Beyond: The Low-Emission Path to Innovation and Efficiency," Ottawa, October 2002 was prepared for the David Suzuki Foundation and the Canadian Climate Action Network Canada by Ralph Torrie, Richard Parfett and Paul Steenhof of Torrie Smith Associates, based in Ottawa. Canadians will pocket Cdn. $200 billion in energy savings by 2030 if Ottawa meets and exceeds the Kyoto Protocol's greenhouse gas emission
reduction targets, says the study. Source, Suzuki Foundation website http://www.davidsuzuki.org/campaigns_and_programs/climate_change/
news_releases/newsclimatechange10020202.asp
The report presents a detailed, end-use oriented analysis of the Canadian energy economy, using 2004 as a base year extending out to 2030. By considering each sector of the economy (residential, commercial, transportation, industry, electric power, non-energy sources), the report identified options for reducing emissions by adopting new, efficient technologies or switching to low- or zero emission fuels. The objective was to find the best ways economically to cut Canadian emissions by half. Here are some of the key policy principles that shaped the report's conclusions:
- <"4">In a rational economy, energy is developed and used in response to the demand for goods and services, not for its own sake
- <"4">Emission reduction strategies should be based on existing technologies that have been shown to be effective and economic
- <"4">In the future, Canadians will continue to expect economic growth and social mobility. The report's low-carbon scenario anticipates a 50 per cent per capita increase in GDP
- <"4">The implementation plan should not rely on punitive energy taxes. However, it should reflect the full cost of each energy option, including the subsidies that currently flow to petroleum and nuclear production as well as health and environmental costs
- <"4">Energy from local, small-scale sources will encourage greater self-reliance and insulate consumers from geopolitical crises and large-scale system failures
- <"4">a doubling of the thermal efficiency of residential and commercial buildings
- <"4">a doubling of the fuel efficiency of the truck fleet, and a tripling of the efficiency of the passenger car fleet
- <"4">a doubling of the average efficiency of electrical devices, including lighting, motors and appliances
- <"4">a one per cent per year improvement in the energy efficiency of industrial output
- <"4">a phasing out of coal- and nuclear-powered electrical generating plants as demand for electricity subsides and new co-generation and renewable opportunities arise.
info@torriesmith.com See the full report at the Torrie Smith website http://www.torriesmith.com
<"4">CANADA HAS ALREADY SAVED $50 BILLION IN ENERGY PAYMENTS
FROM CURRENT CONSERVATION EFFORTS SINCE 1970 <"4">The Torrie Smith study, "Kyoto and Beyond: The Low-Emission Path to Innovation and Efficiency," reports that cost savings for Canadian consumers totalled more than $50 billion from 1970 to 1998. Many times this amount in capital investment would have been required to generate equivalent amounts of energy from new oil, gas, coal, hydro and nuclear sources. The additional burning of oil and coal would have dumped 200 megatonnes of CO2 per year into the atmosphere, increasing current emissions output by a quarter, and would have increased urban smog by 20-25 per cent at a health cost in the billions of dollars. Total emissions of greenhouse gases in Canada are currently about 700 megatonnes per year, up from 606 megatonnes in 1990.5 Seventy-eight per cent of this total is CO2, mostly from fossil fuel production and consumption. Fossil fuel use also produces methane and nitrous oxide (N2O), accounting for 7 per cent of emissions; industrial processes, agriculture and waste dumping also generate various greenhouse gas emissions. The report's scenario for 2030 assumes that growth rates for the Canadian population, GDP and other activity drivers will fall within the conventional range of "business as usual" outlooks. 2030 was chosen as a target as it allows sufficient time for the natural replacement or retirement of most energy using equipment and power plants, as well as for renovation of the building stock. New energy technologies are a part of today's more attractive and efficient buildings and homes, improved appliances and cleaner industrial processes. For more information contact Ralph Torrie, Torrie Smith Associates Inc., Unit 108, 95 Beech Street, Ottawa, Ontario K1S 3J7, pH (613) 238-3045, fax (613) 238-8776, email info@torriesmith.com See the full report at the Torrie Smith website
http://www.torriesmith.com .
<"4">CANADA'S PASSENGER TRANSPORTATION GHG EMISSIONS TO GROW 24% <"4">from 1990 to 2004, Canada's greenhouse gas emissions from passenger transportation (including private vehicles, transit, rail and air) are forecast to increase by about 24 per cent, to almost 119 megaton's, reports the "Kyoto and Beyond: The Low-Emission Path to Innovation and Efficiency," study. This is due primarily to the increased personal use of light trucks, vans and SUVs (up 130 per
cent from 1990 to 2004), and also to increased air travel (up 79 per cent). Canadian industry, not including electric power plants and fossil fuel production, emits about 147 megaton's of greenhouse gases each year from energy-related activity. CO2 emissions have been fairly constant since 1990, despite rising output. Firms are producing more value per unit of energy used, partly due to more energy efficient technologies and advanced production design and controls. in 2004, the natural gas, crude oil, refined petroleum products, and coal production sectors of the fossil fuel industry are projected to emit 126 megaton's of CO2, roughly 17 per cent of Canada's national emissions. About 45 per cent of these emissions are the result of the production of oil and gas for Canadian consumers; the rest is associated with the production of oil and gas for export Emissions occur through the lifecycle of production: in drilling, well servicing, processing, pipelines, and distribution to end users. The emission intensity of crude oil production is currently forecast to increase by about 15 per cent up to 2030, largely because of the switch to heavier oils. In our scenario, the emissions intensity of petroleum production is held at its current level, largely due to the lower demand for oil brought about by improved energy
<"4">COSTS FROM CLIMATE CHANGE EXTREME WEATHER EVENTS JUMP TO US
$70 BILLION THIS YEAR <"4">The final bill for the year's 2002 extreme weather event natural disasters could be over US$70 billion, according to financial experts at Munich Re, one of the world's largest re-insurance firms. Their analysis found that natural catastrophes, most of which have been weather related, have cost countries and communities an estimated $56 billion during the period January to September 2002. Insured losses are running at an estimated $9 billion over the same period a year ago. A large proportion of these losses are due to the August floods in Europe, the worst in 150 years. Torrential rains flooded buildings, swept away cars, damaged railway, power and communications lines and killed more than 100 people. Insured losses are to date estimated at between $2 and $5 billion. The reinsurance company, a member of the United Nations Environment Programme's (UNEP) Finance Initiative, has since the 1960s been compiling annual records on natural catastrophes and their costs. <"4">Thomas Loster, a member of the Munich Re team, said, "There have been over 500 major natural disasters already this year, killing thousands of people, making hundreds of thousands homeless and affecting millions. Many of the atmospheric events we have recorded were extreme." "We have, once more, strong indications that global warming is increasing and will thus have serious affects on societies and economies alike," Loster said. "Rain intensities reached unique values, marking all time records in the statistics of the meteorologists and climate scientists," he said. <"4">The Munich Re report was presented to delegates at the 8th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC). More than 3,000 people from169 countries are meeting to determine future climate policies, particularly the entry into force of the Kyoto Protocol, which limits the greenhouse gas emissions of industrialized countries. The Munich Re report says there have been an estimated 526 significant natural disasters in the first nine months of 2002 with the highest in Asia, 195; followed by the Americas, 149; Europe, 99; Australasia, 45 and Africa, 38. Over 9,400 people have been killed as a result, with the vast majority, over 8,000, in Asia. Economic losses are estimated at $56.4 billion with Europe suffering the most. Europe's economic losses for the first nine months of the year from natural disasters are so far estimated to be almost $33 billion followed by Asia, $14.8 billion and North America, $7.7 billion. Dr. Gerhard Berz, head of Munich Re's Geoscience Research group said that, "There is reason to fear that climatic change will lead to natural catastrophes of hitherto unknown force and frequency." In late August and early September, Typhoon Rusa hit South Korea. The storm downed 24,000 power lines, destroyed 645 ships, resulted in the deaths of 300,000 livestock and cost $ 6.6 billion, the report says. Source, "Rising Emissions Push Skyrocketing Climate Costs, " New Delhi, Indian, October 30, 2002. Environment News Service (ENS). See the full story at http://ens-news.com/ens/oct2002/2002-10-30-02.asp
<"5">A CLIMATE CHANGED WORLD.(US Climate Change Costs)<"4">
<"4">
Econ. Dr. Frankhauser (Earthscan Ltd) predicted climate change related costs in US of $69.3 bil/yr;
<"4">Econ. Dr. Cline (Institute for International Economics, Washington, D.C) est. between $61.6 bil/yr. & $335.7 bil/yr in direct CC losses in US;
<"4">In 10 years the accumulative cost of unabated
global warming to the US economy will range from $616 billion
to $3.357 trillion;
<"5">A CLIMATE CHANGED WORLD.(US & Canada CC Costs)<"4">
<"4">
Canadian Institute for Business and the Environment: Cost of inaction on global warming to the US between $61.6 and $335.7 bil/Yr. Canada will experience similar per capita losses.
<"4">
Maritime regions i.e., Atlantic Canada, US eastern seaboard, Carib.
and S.Pacific Island economies, & drought & flood prone
regions in developing world are particularly vulnerable to sea
level rise, storm surges, hurricanes & crop damage.
