Ocean Acidification and Warming: The Economic Toll

In a new study authored by Dr. John Talberth and Ernie Niemi of Natural Resource Economics, CSE reviewed the economic consequences of ocean acidification and warming – the two most prominent effects of climate change on our oceans – and estimated what increment to the existing social cost of carbon (SCC) needs to be made to account for these damages. Preliminary results suggest that proper accounting of an economic risk that could approach $20 trillion per year by 2100 would raise SCC 1.5 to 4.7 times higher than the current federal rate, to $60–$200 per metric ton CO2-e. The study has been published online by Elsevier as part of their Reference Module in Earth Systems and Environmental Sciences.

Climate change has the potential to disrupt ocean and coastal ecosystems on a scale that is difficult to grasp. There are two interrelated processes at work: ocean acidification and ocean warming (OAW). Oceans have absorbed roughly half of all anthropogenic emissions of carbon dioxide. Acidification occurs as the absorption of CO2 triggers a series of chemical reactions that increase the acidity and decrease the concentration of carbonate ions in the water. So far, absorption of CO2 has increased acidity of surface waters by about 30% and, if current trends in atmospheric CO2 continue, by 2100 these waters could be nearly 150 percent more acidic, resulting in a pH that the oceans haven’t experienced for more than 20 million years. Among the dire predictions associated with acidification include dramatic reductions in populations of some calcifying species, including oysters, clams, sea urchins, shallow water corals, deep sea corals, and calcareous plankton – the latter effect putting the entire marine food chain at risk. Some models suggest that ocean carbonate saturation levels could drop below those required to sustain coral reef accretion by 2050.

The second process is ocean warming. The mechanisms of ocean warming are complex, and include heat transfer from the atmosphere, downwelling infrared radiation, stratification, reductions in mixing, changes in ocean currents, and changes in cloud cover patterns. Already, the global average sea surface temperature (SST) has risen by over 2.0 °F since the post-industrial revolution low point in 1909. Sea level rise is one of the most conspicuous effects with potentially catastrophic consequences. Models that account for collapse of Antarctic ice sheets from processes driven by both atmospheric and ocean warming indicate sea level rise may top one meter by 2100 and put vast areas of coastal infrastructure at risk.

Obviously, all these physical effects have enormous economic consequences, yet relatively little research has been completed to date on their expected magnitude, timing, and distribution. Indeed, as late as 2012, several prominent climate researchers concluded that economic assessments of the effects of ocean acidification “are currently almost absent.” To help fill in this information gap, we combed through all published research on OAW economic consequences, updated figures where needed, and made some original calculations of our own to estimate some plausible worst-case scenarios. These scenarios appear in Table 4, below. Alarmingly, they suggest that OAW costs could near $20 trillion per year by 2100 in association with a variety of dramatic impacts, such as loss of all charismatic marine species.

Table 4: Plausible worst-case scenarios and values at risk from OAW

Resource or service at risk Scenario Values at risk

($2016 billions/yr)

Net primary productivity Ocean net primary productivity reduced by 16% $9,232.00
Coral reefs Loss of at least 50% of current coral reef area $5,661.70
Coastal infrastructure Additional SLR of 3 meters via WAIS collapse $3,561.69
Charismatic species 25% of charismatic marine species go extinct $1,104.08
Carbon sequestration 50% loss of ocean CO2 uptake $641.16
Mangroves Loss of at least 15% of current mangrove area $287.42
Fisheries 400 million at significantly increased risk of hunger $245.74
Coastal ecosystems Marine dead zones expand in area by 50% $126.82

The relative lack of understanding about economic consequences has, in turn, translated into a lack of policy mechanisms and research focused on OAW. One of the policy mechanisms where OAW costs are notably absent is the social cost of carbon (SCC) – an increasingly popular regulatory tool for assessing both the costs of greenhouse gas emissions and the benefits of actions to limit emissions. Ostensibly, the SCC includes all known market and non-market costs, yet there are many categories missing or incomplete. One of the bigger holes is OAW and one of the justifications for its absence is the relative dearth of methods or data to quantify economic consequences and the assumption that such impacts are minor enough that society will be able to adapt. In the paper, we argue that such barriers need not restrain the government agencies participating in the SCC’s development and application from incorporating estimates for OAW based on the best available information and inclusive of high-impact but low probability scenarios – two factors that are baked into the regulatory framework for the SCC.

We do so by demonstrating three basic approaches rooted in standard microeconomic models of externalities, capital investment, and risk aversion. The first is based on federal agencies’ current approach for quantifying externalities from GHG emissions using the Dynamic Integrated Climate-Economy (DICE) integrated assessment model and economic damage functions suggested by existing literature. The second is a replacement or adaptation cost approach, which views SCC as a current capital investment liability that can be amortized over the adaptation time horizon. The third is an averted-risk approach based on willingness to pay to eliminate the risk of catastrophic changes, an approach that seems most compatible with worst-case scenario requirements under existing law.

In the next phase of this work, the study will be presented to the Interagency Working Group on the Social Cost of Carbon and the National Academy of Sciences, who is conducting a review of SCC methods and accepting recommendations for changes in approaches and sources of information. If the SCC is to be an effective regulatory tool and send the right market signal to polluters it must be as complete as possible. By engaging with the IWG on how to best incorporate the enormous toll associated with ocean acidification and warming, we hope to help fill one of SCC’s most serious omissions.

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