The Cost of Using Global Warming Potentials: Analysing the Trade off Between CO2, CH4 and N2O

Abstract

Abstract. The metric governing the trade-off between different greenhouse gases in the Kyoto Protocol, the Global Warming Potentials (GWPs), has received ample critique from both scientific and economic points of view. Here we use an integrated climate-economic optimization model to estimate the cost-effective trade-off between CO 2 , CH 4 and N 2 O when meeting a temperature stabilization target. We then estimate the increased cost from using GWPs when meeting the same temperature target. Although the efficient valuation of the gases differs significantly from their respective GWPs, the potential economic benefit of valuing them in a more correct way amounts to 3.8 percent of the overall costs of meeting the temperature stabilization target in the base case. In absolute value, this corresponds to an additional net present value cost of US$ 2000 100 billion. To corroborate our findings we perform a Monte Carlo-analysis where several key parameters are randomly varied simultaneously. The result from this exercise shows that our main result is robust to a wide range of changes in the key parameter values, giving a median economic loss from using GWPs of 4.2 percent.

The global warming potential—the need for an interdisciplinary retrial

“…2 Imperfect though it might be, it still achieves an important role in allowing the implementation of the Kyoto Protocol and there would undoubtedly be a cost to changing the method of calculating CO 2 -equivalence; importantly, if there was to be a change, it would need to be done with good cause, it would require widespread consensus, it would need to be suited to the climate policy that it is meant to serve and it would have to have some degree of permanence. Further, as shown by Johansson et al (2006) (see also O'Neill 2003), integrated climate-economic models indicate a large economic benefit in adopting a multi-gas approach rather than a CO 2 -only approach in meeting some specified temperature stabilization approach; however, they also show that there is relatively little economic penalty in adopting the GWP to calculate CO 2 -equivalence, rather than using their optimised approach (at least on a global level-this may not be true for individual nations).…”

Broader perspectives for comparing different greenhouse gases

“…Some analyses have suggested that the GWP concept does not lead to economically optimal greenhouse-gas mitigation strategies [12], and the basis for comparisons between gases has also been dealt with more directly in terms of the economic implications of managing future emissions [13].…”

Temperature stabilization, ocean heat uptake and radiative forcing overshoot profiles

“…Emissions of carbon dioxide, methane and nitrous oxide are determined endogenously in the model so as to minimize the net present value abatement cost of stabilizing the global average surface temperature at 2 K above the pre-industrial level. The trade-offs among the different greenhouse gases are not constrained by their Global Warming Potentials (GWPs); the abatement of the emissions of each gas is determined to achieve the lowest cost of temperature stabilization; see Manne and Richels (2001) and Johansson et al (2006).…”

“…The numerical model is an updated version of the MiMiC model presented and used in Johansson et al (2006Johansson et al ( , 2008. The main differences between the model used here and the versions in Johansson et al (2006Johansson et al ( , 2008 are that the energy balance model has been improved (by the use of a three-box energy balance model that is calibrated to an upwelling-diffusion energy balance model), the carbon cycle representation has been recalibrated, climate-feedbacks in the carbon cycle are taken into account, and updated data have been used to initialize and fit the model to the historical global average radiative forcing and surface temperature levels.…”

“…The main differences between the model used here and the versions in Johansson et al (2006Johansson et al ( , 2008 are that the energy balance model has been improved (by the use of a three-box energy balance model that is calibrated to an upwelling-diffusion energy balance model), the carbon cycle representation has been recalibrated, climate-feedbacks in the carbon cycle are taken into account, and updated data have been used to initialize and fit the model to the historical global average radiative forcing and surface temperature levels. In this paper we discuss the major changes in the model that have been made for the specific purpose of the study and refer to Johansson et al (2006) for a general presentation.…”