Global warming's trillion dollar debate

UN scientists say climate change is happening faster than thought as politicians head to Bali to hammer out Kyoto's successor.

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By Steve Hargreaves, CNNMoney.com staff writer

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Global warming's trillion-dollar debate heats up next month in Bali.

NEW YORK (CNNMoney.com) -- Kyoto, the far-reaching agreement reached in 1997 intended to reduce global carbon emissions, is nothing compared to what could be coming next as the world's governments confront the ecological damage from global warming and debate what needs to be done to fix it.

The fourth and final UN report on climate change, due Saturday, is expected to emphasize that the warming of the planet is "unequivocal" and that humans are the main cause. That report will act as a blueprint for the next crucial round of climate talks starting next month in Bali, Indonesia.

The Bali talks will set the groundwork for the successor to the Kyoto treaty, which expires in 2012. They will also guide global climate policy for at least the next decade, and dictate the types of long-term investment decisions made by big industries and utilities.

Scientists say up to an 85 percent cut in carbon dioxide emissions is needed to head off potential catastrophic changes that could lead to more floods and famine. How to best achieve those cuts is where the fight begins.

Backed by the strong language in the new United Nation's report, some will argue for mandatory caps on carbon dioxide emissions, which could be expensive for big carbon emitters, such as utilities, and seen by some as barriers to development.

Proponents for mandatory caps say they are the best way to avoid the catastrophic changes that would cost trillions of dollars and put hundreds of millions of lives at risk.

Opponents to the caps will say voluntary restrictions are a better bet, and suggest postponing mandatory caps for a few decades down the road when a richer world is better able to pay for it, and cleaner energy technologies are more developed.

The Bush administration has so far resisted mandatory caps, and all eyes will be watching to see if White House negotiators hold up the Bali talks.

"We seek a 'Bali Roadmap' that will advance negotiations," Paula Dobriansky, Under Secretary for Democracy and Global Affairs and an expected lead negotiator in Bali, told a Senate committee earlier this week. But she added that "a future framework must be flexible and accommodate a diverse range of national circumstances."

The battle will likely be pitched and the stakes high as each side of the global warming debate says the other's plan will cost the global economy trillions of dollars. And public attention in the U.S. - which never signed the first Kyoto agreement - has arguably never been greater.

High prices for gasoline and coal-generated electricity - the main culprits behind human-induced carbon dioxide emissions - have helped bring global warming back into the spotlight. Al Gore has also done his part, with his 2006 Oscar-winning documentary "An inconvenient Truth." And rightly or wrongly, large parts of the public sees Hurricane Katrina and the devastation of New Orleans as a harbinger of things to come.

But the UN's climate report provides perhaps the strongest reason for focusing attention on the problem.

Previous versions of the report, written in the 1990s, said global warming was likely happening and likely caused by humans but acknowledged that the science was not yet certain. The latest report, released in three parts over the course of this year, took away practically all that uncertainty.

Written by over 2,500 top government-appointed scientists from around the world, the fourth report is a user-friendly version that will be used by politicians and bureaucrats as a blueprint during negotiations next month in Bali and beyond.

It won't recommend specific policy - such as whether to enact mandatory carbon caps or not - but it will convey the urgency of the problem and attempt to quantify some of the costs.

"The pace of change seems to be accelerating, not slowing," said Gary Yohe, a professor of economics at Wesleyan and an author of the report. "We're going to get there pretty quick."

By "there" he means the amount of degrees the earth can warm by without seeing too many of the real catastrophic effects that have been predicted - severe droughts in the world's food producing regions of Africa, North and South America and Asia, and massive flooding of coastal cities.

Under current policy, it was generally thought the world would warm by about 5 to 7 degrees Fahrenheit by 2050, enough to trigger those severe effects.

"But 2050 isn't really a great guess anymore," said Yohe.

So many scientists and policymakers want to limit the world's warming to about 3 or 4 degrees Fahrenheit, which the U.N. report says will require a 50 to 85 percent reduction in carbon dioxide levels by 2050.

Otherwise, say some, the costs could be severe.

"It's a huge, huge human disaster in the making," said Pete Altman, who studies global warming issues at the National Environmental Trust.

In addition to the human toll, Altman said global warming could cost the work economy up to 1 to 5 percent of its total economic output per year, or $500 billion to $3 trillion, using 2006 figures.

"We shouldn't be daunted by the ambition it will take to limit these outcomes," he said.

But others aren't so sure the outcomes will be as dire as Altman says.

"There's a wide range of uncertainty over how much impact" this will have, said Anne Smith, vice president of CRA International, an economics consulting firm.

Smith said it would be far cheaper for the economy overall to rely on gradual reductions in the near term, not the abrupt kind a mandatory carbon cap would likely bring.

Over time, she said new technologies for dealing with carbon and producing cleaner energy will become available - and they could be adopted with far fewer costs further down the road.

She also said a framework needs to be developed to bring developing countries with big emissions - like China and India - on board. She said it's highly unlikely most developing nations would ever agree to mandatory carbon caps.

By going ahead without a more global framework, "We would just be harming our own economy without doing a thing for the environment," she said.  To top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.