Economic Value of an Advanced Climate Observing System
Abstract
Scientific missions increasingly need to show the monetary value of knowledge advances in budget-constrained environments. For example, suppose a climate science mission promises to yield decisive information on the rate of human caused global warming within a shortened time frame. How much should society be willing to pay for this knowledge today? The US interagency memo on the social cost of carbon (SCC) creates a standard yardstick for valuing damages from carbon emissions. We illustrate how value of information (VOI) calculations can be used to monetize the relative value of different climate observations. We follow the SCC, setting uncertainty in climate sensitivity to a truncated Roe and Baker (2007) distribution, setting discount rates of 2.5%, 3% and 5%, and using one of the Integrated Assessment Models sanctioned in SCC (DICE, Nordhaus 2008). We consider three mitigation scenarios: Business as Usual (BAU), a moderate mitigation response DICE Optimal, and a strong response scenario (Stern). To illustrate results, suppose that we are on the BAU emissions scenario, and that we would switch to the Stern emissions path if we learn with 90% confidence that the decadal rate of temperature change reaches or exceeds 0.2 C/decade. Under the SCC assumptions, the year in which this happens, if it happens, depends on the uncertain climate sensitivity and on the emissions path. The year in which we become 90% certain that it happens depends, in addition, on our Earth observations, their accuracy, and their completeness. The basic concept is that more accurate observations can shorten the time for societal decisions. The economic value of the resulting averted damages depends on the discount rate, and the years in which the damages occur. A new climate observation would be economically justified if the net present value (NPV) of the difference in averted damages, relative to the existing systems, exceeds the NPV of the system costs. Our results (Cooke et al. 2013) compared the proposed CLARREO advance in satellite absolute calibration for climate change records to an existing system for detecting decadal temperature change using infrared spectra from weather satellites. New results extend this to observational detection of cloud feedback which is the largest uncertainty in determining climate sensitivity and therefore the uncertainty in economic impacts. New results also include the use of multiple societal decision triggers. While CLARREO is used as an example, the value should be considered as relevant to a complete high accuracy climate observing system, as societal decisions are unlikely to be based on one or a few observations. The VOI is found to depend on the required confidence level, the trigger value at which we would abandon the BAU emissions path, the path to which we switch, and the date at which the new system is launched. The VOI of advanced climate observations in this decision context is the surfeit of NPV of averted damages, relative to the existing system. Over all it is in the order of tens of trillions of US dollars in Net Present Value. The results conclude that the economic value of advanced climate observing systems is dramatically larger than their cost, and argues for the continual enhancement of the SCC assessment process.
- Publication:
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AGU Fall Meeting Abstracts
- Pub Date:
- December 2013
- Bibcode:
- 2013AGUFMPA43A2033W
- Keywords:
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- 1630 GLOBAL CHANGE Impacts of global change;
- 1616 GLOBAL CHANGE Climate variability;
- 1694 GLOBAL CHANGE Instruments and techniques