Managing the Transition to Climate Stabilization

Posted: 26 Jul 2007

See all articles by Richard G. Richels

Richard G. Richels

Electric Power Research Institute, U.S.A.

Thomas F. Rutherford

Centre for Energy Policy and Economics

Geoffrey Blanford

Stanford University

Leon Clarke

Government of the United States of America - Pacific Northwest National Laboratory

Date Written: January 2007


This paper builds upon recent work by the US Climate Change Science Program (CCSP). Among its products, the CCSP developed new emission projections for the major man-made greenhouse gases, explored the effects of emission limits on the energy system, and calculated the costs of various stabilization constraints to the economy. This paper applies one of the models used for that analysis to explore the sensitivity of the results to three potentially critical factors: the stabilization level, the policy design, and the availability and costs of low- to zero-emitting technologies.

The major determinant of costs is likely to be something over which we have little control - Mother Nature. The choice of stabilization level will reflect our understanding of the science of global climate change. We have little control over many of the key bio-geophysical processes which, to a major extent, will determine what constitutes dangerous anthropogenic interference with the climate system.

We consider two limits on radiative forcing, corresponding to stabilizing CO2 concentrations at approximately 450 ppmv and 550 ppmv. These levels have been chosen because of the fundamentally different nature of the challenge posed by each. In the case of the lower concentration limit, emission reductions will be required virtually immediately and annual GDP losses to the US could approach 5%. With the higher concentration limit, the pressure for a sharp reduction in near-term emissions is not as great. This offers some potential to reduce GDP losses.

Indeed, we find that depending upon the concentration limit, implementing market mechanisms which take advantage of where and when flexibility can markedly reduce GDP losses, perhaps by as much as an order of magnitude. However, for a variety of reasons, our ability to realize such savings may be compromised. One possible impediment relates to the proximity to the target. If the limit is imminent, flexibility will be greatly reduced. The nature of the coalition and our willingness to permit borrowing emission rights from the future will also affect the magnitude of the potential savings. As a result, the reduction in GDP losses from where and when flexibility may turn out to be only a small fraction of what has been previously estimated.

Fortunately, the biggest opportunity for managing costs may come from something over which we do have considerable control. We find that investments in climate friendly technologies can reduce GDP losses to the US by a factor of two or more. At present, we have insufficient economically competitive substitutes for high carbon emitting technologies. The development of low- to zero-emitting alternatives will require both a sustained commitment on the part of the public sector upstream in the R&D chain and incentives for the private sector to bring the necessary technologies to the marketplace. Aside from helping to assure that environmental goals are met in an economically efficient manner, climate policy can also serve as an enabler of new technologies. By recognizing the acute shortage of low-cost substitutes, the long lead times required for development and deployment, and the market failures that impede technological progress, climate policy can play an important role in reducing the long-term costs of the transition.

Keywords: emission, costs, concentration limit

JEL Classification: H00

Suggested Citation

Richels, Richard and Rutherford, Thomas F. and Blanford, Geoffrey and Clarke, Leon, Managing the Transition to Climate Stabilization (January 2007). AEI-Brookings Joint Center Working Paper No. 07-01, Available at SSRN: or

Richard Richels (Contact Author)

Electric Power Research Institute, U.S.A. ( email )

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Thomas F. Rutherford

Centre for Energy Policy and Economics ( email )

Zurich, CH-8092
United States
+41 (0)44/632 6359 (Phone)
+41 (0)44/632 1622 (Fax)


Geoffrey Blanford

Stanford University ( email )

Stanford, CA 94305
United States

Leon Clarke

Government of the United States of America - Pacific Northwest National Laboratory ( email )

901 D Street
370 L'Enfant Promenade, S.W.
Washington, DC 20024-2115
United States

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