I. Introduction
The changing climate and increasing atmospheric greenhouse gas (GHG) concentrations are projected to accelerate multiple threats, including more severe storms, droughts, and heat waves, further sea level rise, more frequent and severe storm surge damage, and acidification of the oceans (USGCRP 2014). Beyond the sorts of gradual changes we have already experienced, global warming raises additional threats of large-scale changes, either changes to the global climate system, such as the disappearance of late-summer Arctic sea ice and the melting of large glacial ice sheets, or ecosystem impacts of climate change, such as critical endangerment or extinction of a large number of species.
Emissions of GHGs such as carbon dioxide (CO2) generate a cost that is borne by present and future generations, that is, by people other than those generating the emissions. These costs, or economic damages, include costs to health, costs from sea level rise, and damage from increasingly severe storms, droughts, and wildfires. These costs are not reflected in the price of those emissions. In economists’ jargon, emitting CO2 generates a negative externality and thus a market failure. Because the price of CO2 emissions does not reflect its true costs, market forces alone are not able to solve the problem of climate change. As a result, without policy action, there will be more emissions and less investment in emissions-reducing technology than there would be if the price of emissions reflected their true costs.
This report examines the cost of delaying policy actions to stem climate change, and reaches two main conclusions. First, delaying action is costly. If a policy delay leads to higher ultimate CO2 concentrations, then that delay produces persistent additional economic damages caused by higher temperatures, more acidic oceans, and other consequences of higher CO2 concentrations. Moreover, if delay means that the policy, when implemented, must be more stringent to meet a given target, then it will be more costly.
Second, uncertainty about the most severe, irreversible consequences of climate change adds urgency to implementing climate policies now that reduce GHG emissions. In fact, climate policy can be seen as climate insurance taken out against the most damaging potential consequences of climate change—consequences so severe that these events are sometimes referred to as climate catastrophes. The possibility of climate catastrophes leads to taking prudent steps now to sharply reduce the chances that they occur.
The costs of inaction underscore the importance of taking meaningful steps today towards reducing carbon emissions. An example of such a step is the Environmental Protection Agency’s (EPA) proposed rule (2014) to regulate carbon pollution from existing power plants. By adopting economically efficient mechanisms to reduce emissions over the coming years, this proposed rule would generate large positive net benefits, which EPA estimates to be in the range of $27 - 50 billion annually in 2020 and $49 - 84 billion in 2030. These benefits include benefits to health from reducing particulate emissions as well as benefits from reducing CO2 emissions.
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