What is the Correct Level of National Investment in Climate Science?

Abstract:

In the IPCC reports we consider the state of climate science as well as that of potential economic impacts, adaptation, and mitigation costs. Scientific uncertainty in climate sensitivity remains large (factor of 4 at 90% confidence) leading to roughly a factor of 10 or more uncertainty in economic impacts of climate change. Climate science represents a national investment in reducing uncertainty about future climate change impacts in order to allow more effective and efficient plans for mitigation and adaptation. To date, however, climate science has attacked this major challenge with only the resources typically assigned to Earth science pursued for general scientific interest and discovery. Challenges include the lack of an observing system designed for climate change. Instead we primarily use weather and research observations designed for other purposes. The world lacks an observing system designed and optimized for climate research. Would such a system be a wise investment? What is the right level of societal investment in climate science to narrow uncertainties in climate prediction and thereby improve future economic outcomes? The current paper presents one of the first efforts to ask this question in a quantitative way. The results are surprising.

The US interagency memo on the social cost of carbon (US-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 Earth Observing Systems. We follow the US-SCC, stipulating uncertainty only on climate sensitivity with a truncated Roe Baker (2007) distribution, stipulating discount rates of 2.5%, 3% and 5%, using one of the Integrated Assessment Models sanctioned in US-SCC (the 2009 Excel version of DICE, Nordhaus 2008).

The VOI of an advanced climate observing system in this decision context is the surfeit of NPV of averted damages, relative to the existing system. The VOI estimate is ~ 10 Trillion US dollars. The results conclude that the economic value of advanced climate observing systems is dramatically larger than their cost with a return on investment of roughly $50 for every $1 invested. The results also argue for the continual enhancement of the SCC assessment process. Policy changes could lead to better results.