Elsevier

Energy Policy

Volume 109, October 2017, Pages 414-417
Energy Policy

Correspondence
Investments in and macroeconomic costs of climate mitigation in the Working Group III contribution to the Fifth Assessment Report of the IPCC

https://doi.org/10.1016/j.enpol.2017.07.020Get rights and content

Abstract

Trainer (2017) criticizes cost estimates of climate change mitigation presented in the Working Group III Report to the IPCC and is concerned by lack of transparency and dubious practices in summarizing the literature. This commentary shows that this critique is based on several mistakes. Trainer (2017) mixes evidence on investment changes and evidence on macroeconomic costs, which are discussed in two different parts of the report because they are different indicators of the economic impact of climate mitigation policy. This commentary also argues that when the report was prepared evidence on investments in mitigation technologies was limited but methodologically sound and transparently reported, contrary to what suggested by Trainer (2017).

Introduction

Trainer (2017) suggests that the Working Group III contribution to the Fifth Assessment Report of the IPCC (IPCC, 2014a) greatly underestimates the cost of mitigating climate change using few studies not transparently reviewed in Chapter 16 of the Report:

“The IPCC Working Group 3 Report (IPCC, 2014) arrives at the important general conclusion that a desirable greenhouse gas emission target can be achieved at an affordable cost. […] However, even a superficial scanning of the Report reveals that the grounds for the above conclusions are far from satisfactory. Among the points to be considered below are the absence of derivations and transparent cases enabling assessment of the validity of conclusions arrived at, the lack of clear target contributions from the nuclear, CCS, renewable and conservation sectors, the failure to deal with analyses questioning the potential of renewable energy, and the failure to show how cost conclusions are arrived at or that they are plausible. However by far the most important problem is that despite the impressive numbers of contributors referred to above suggesting findings based on massive amounts of scientific research, the crucial conclusions on the cost of adequate mitigation action are based on only one to five papers, all of which are open to major criticism.” (Trainer, 2017 p. 214)

A review of the Working Group III report to the IPCC reveals that these comments are unjustified. In particular, cost estimates are supported by a transparent and thorough review of a large literature. It seems that the author mixes evidence on estimated changes in investments and evidence on macroeconomic costs, which are discussed in two different parts of the Report. Trainer cites costs of climate change mitigation that are summarized at the beginning of Chapter 6 (Clarke et al., 2014) but he searches for supporting evidence in Chapter 16 (Gupta et al., 2014), the chapter that deals with investments in climate change mitigation. The supporting evidence on macroeconomic costs is available in Chapter 6.

In this commentary we briefly explain the difference between investments and macroeconomic costs and why they should not be confused. We also show that the estimates of investments (mistaken for costs by Trainer) were transparently derived from the literature available at the time of publishing the Report. We do not discuss instead whether the estimated macroeconomic cost of mitigation is affordable or not because an assessment of costs ultimately depends on personal preferences. In fact, the Report never mentions whether mitigation costs are affordable or not. We also do not discuss other parts of Trainer (2017) in which the author provides an assessment of future energy investment needs and of other technological and policy issues.

Section snippets

Investment in climate mitigation

Investments and macroeconomic costs are two different ways to measure the economic impact of mitigation policy. We cite from Chapter 16 of the Report:

“From an economic perspective, macroeconomic incremental costs can be defined as the lost gross domestic product (GDP). This measure provides an aggregate cost of the mitigation actions (estimates provided in Chapter 6), but it does not provide information on the specific micro-economic investments that must be made and costs incurred to meet the

The macroeconomic cost of climate mitigation

The literature presents estimates of the loss of consumption (or of GDP) due to climate mitigation policy to provide information on aggregate macroeconomic costs. Consumption or GDP losses occur when investments are shifted from high- to low-productivity sectors or projects. The ensuing loss of productivity generates a loss of resources at aggregate level.

Most mitigation scenarios surveyed in Chapter 6 of the Working Group III Report indicate that climate mitigation policy is costly from a

Is the literature on investments accurately reviewed in Chapter 16?

Trainer (2017) incorrectly concludes that evidence supporting costs estimates is limited because he mixes data on investments and data on costs. But was the literature on investments correctly reviewed in Chapter 16? Trainer (2017) suggests that the limited literature is also not accurately surveyed:

“The six studies referred to as sources for cost figures represented in Fig. 16.3 are IEA, 2011, Riahi, 2012, UNFCCC, 2008; Carraro and Massetti (2012); McCollum et al. (2013); and McKinsey and

Acknowledgement

The authors have been Coordinating Lead Authors (Gupta and Harnish), Lead Authors (Kopp and Massetti) and Review Editor (Carraro) of Chapter 16 of the Working Group III Report to the IPCC Fifth Assessment on Climate Change Mitigation. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. The authors have no financial conflict that could inappropriately influence, or be perceived to influence, their work.

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