Influence of Economic Factors on Future Global Emissions

Abstract

The climate change debate is really about economics, and reducing greenhouse gas (GHG) emissions and climate change potential at a reasonable and acceptable cost for everyone.

In this paper, we examine the major economic factors behind defining climate change policies that relate to reducing GHG emissions, and the value to be placed on CO₂. We examine the impacts and the "cost of carbon" based on the studies of GHG reduction strategies in the US and the European Union (EU). We show that a series of self-defeating assumptions have been used in the latest analyses regarding relative future energy and power costs, and hence future GHG emissions. We estimate:

1. the "natural value" of GHG emissions based on world economic factors,

2. the value of electricity and energy based on world data,

3. the cost advantage of using a given new technology, and

4. the value of avoided GHG emissions in future global and national climate change projections.

The use of electricity is shown to be key in aiding economic growth for the entire world. Using the latest Intergovernmental Panel on Climate Change (IPCC) 2000 climate change projections as a base, we reflect the impacts of differing energy prices on future global climate conditions and GHG reductions. We conduct a similar analysis for Canada using the latest "Energy in Canada 2000" projections.

We show how the use of advanced technology for the traditional production of electricity, and for hydrogen-based transportation fuels, can stabilize global emissions and assist in managing adverse climate change conditions without causing economic penalties. The method we develop is sufficiently general that it can be used for valuing the economic impact of the emission reductions for any technology. We estimate the embedded value and potential economic benefit of nuclear technology and electric contribution for both the world economy to 2100, and for the latest projections for Canada to 2020.