Global Climate Change:
Causes, Impact and Policy
Responses
Runa Sarkar
Professor, Economics
IIM Calcutta
[email protected] The Greatest Challenge
Arctic sea ice drops to its
lowest level since
modern recording began
Scientists call event “tipping point" in
global warming.
-National Sea Ice and Data Center (09/16/12)
PressTV 2010
Planetary Boundaries
Scientific Foundations – Planetary Cycles
Nitrogen
Carbon (CO2)
Water
What all scientists agree upon
Open system with
respect to energy Closed system with respect to
matter
1) Nothing disappears
« Photosynthesis
2) Everything disperses
pays the bill »
Sustainability is about the ability of
our own human society to continue
indefinitely within these natural
cycles
Slow geological cycles (sedimentation
Slow geological cycles and mineralization)
(volcano eruptions and
weathering)
How we Influence the System
Physically inhibit nature’s
ability to run cycles
Barriers to people
meeting their basic
needs worldwide
Introduce persistent
compounds foreign to nature
Relatively large flows of
materials from the Earth’s
crust
Climate change: Impact and Policy Responses
Within the next 5 years all
investors will measure a
UN SDGs are driving a global The recently concluded Conference of company's impact on
commitment to sustainability Parties with energy transition roadmaps for
each country society, government, and
the environment to
determine its worth
”
Financial Institutions make Climate change is driving
their commitents corporate strategy
Policy Response to Climate Change
• Mitigation: preventive measures - actions designed to reduce the extent of climate change by reducing
projected emissions of greenhouse gases
• Reducing emissions of greenhouse gases by meeting energy demands from sources with lower or zero
greenhouse gas emissions
• Reducing overall energy demand by increasing energy efficiency
• Enhancing natural carbon sinks. Carbon sinks are areas where carbon may be stored; natural sinks include
soils and forests
• Artificial carbon capture and storage (CCS)
• Adaptation: actions designed to reduce the magnitude or risk of damages from global climate change
• Construction of dikes and seawalls to protect against rising seas and extreme weather events such as floods
and hurricanes
• Shifting cultivation patterns in agriculture to adapt to changing weather conditions
• Creating institutions that can mobilize the needed human, material, and financial resources to respond to
climate-related disasters
• Loss and Damage
• (Role of Insurance)
Mitigation: Economic Policy Options
Carbon taxes:
• a per-unit tax on the pollutant, to raise the price of carbon-based energy sources and so give consumers incentives
to conserve energy overall, as well as shifting their demand to alternative sources of energy that produce lower
carbon emissions
• should be based on the social cost of carbon—an estimate of the financial impact on society of carbon emissions -
between $11 and $212 (U.S. EPA, 2016)
• alternative: carbon tax with rebate - carbon dividend
• The EU’s CBAM – to prevent ‘carbon leakage’
Carbon markets (Tradable Permits)
• System of marketable permits, allocated among firms, specifying the maximum level of emissions that can be
generated (permits)
• Transferable, one firm can sell it to another
• Total emissions limited by the number of permits the government issues
• Can achieve any given reduction in total emissions at the lowest possible abatement cost
• Competitive market for permits may emerge
• Each firm will generate pollution up to : MCA marginal cost of abatement = permit price
Others: Standards, R&D, Technology transfer
• R&D expenditures promoting the commercialization of alternative technologies
• Technology transfer mechanisms
• Infrastructure investment in energy efficiency, renewable energy, zero-emission vehicles
• grid modernization, high-speed rail, public transit, and worker education and retraining
Adaptation: Policy Options
Adaptation: Policy Options
Climate change impact in India
India is ranked the fifth most vulnerable nation to the effects of climate change
9x
Annual Investment required to Farmer’s Income
meet NDC target Will reduce by 15%- 18% due
to climate change
~ 3% GDP Risk a 3% GDP reduction, impacting
50% of country’s population by 2050
Reduction
Climate Finance and Green finance can play a crucial role in making India’s
economy resilient to climate change impacts
Climate-related Financial Risk
Physical and Transitional risk impair asset values and credit quality of loans
and investments from banks, financial institutions, and capital markets.
01 02
Physical Risk Transitional Risk
Cause direct harm to assets or Arise from shift to low carbon
disrupt Industry / company economy through changes in
value chains policy, technology etc.
Reputational Risk…
Transition vs. Physical Risk
For most sectors,
transition risk will rise
Extreme weather
if we want to reduce
events will never stop
the impact of human
until transition occurs
activity on
environment
Both the above statements For example – if coal is
hold true and thus rises the not perceived to be Transition risks to the economy If no further measures are
circularity between bad then need for could result from higher introduced 3 °C or more of
transition risk and its transition to emissions costs and changes in warming could occur by 2100.
drivers – policy, technology, renewable energy business and consumer This would likely result in higher
regulatory and market would not arise preferences. physical risks from disruption to
Physical risks would be ecosystems, health,
minimised. infrastructure and supply chains.
Understanding Energy Transition
Energy
Transi-
tion
Reversing the sins of our past…
Outcomes
• Fossil fuel phase-out: Countries to contribute towards “transitioning away” from fossil fuels, “so as to
achieve net zero by 2050”. There were no time schedules and no targets. Tripling of global installed
capacity of renewable energy, and doubling of annual improvements in energy efficiency by 2030
• Phase-down of coal: coal received a separate mention in the agreement, but other proposals shut down.
• Methane emission cuts: “accelerating and substantially reducing non-carbon-dioxide emissions globally,
including in particular methane emissions by 2030”. The agreement does not mention any targets for
methane emission cuts for the year 2030, although a group of about 100 countries had made a voluntary
commitment, in Glasgow in 2021, to reduce their methane emissions by 30% by 2030
• Focus on CCUS
• Loss and Damage Fund created but committed amount only US$ 800 million. The money is meant to
provide financial help to countries trying to recover from climate-induced disasters.
• Global Goal on Adaptation framework adopted, but indicators to measure progress on each of the global
goals, and financial provisions missing
Thank You!
