Various extraordinary circumstances, some political others not, have led to an unprecedented skyrocketing in oil prices over the past couple of years. In The Economics Of Climate Change, Sir Nicholas Stern states that, in real terms, the price of oil has risen by some 240 per cent from its level in the period 1986-1997 to May 2006.
Some economic analysts have argued that the days of "cheap oil" were over and that nations now have to make do with some sort of "permanent oil shock".
Malta's economy, as yet entirely driven by fossil fuel imports, could not be spared. The Review Of The Fuel Surcharge Mechanism, prepared and submitted by Deloitte and Touche to the Malta Resources Authority in May 2006, reveals that Enemalta's fuel procurement budget estimates for 2005/2006 soared to Lm80.7 million, compared to an expenditure of Lm18.7 million for 1999.
Managing the global carbon economy entails impacts having an intergenerational dimension. It is as if there are two facets to humanity's use of fossil fuel - the immediate short-term benefits derived from utilising a source of high-energy quality now, in contrast to the losses future generations are expected to incur as a consequence of long-term climate change impacts.
Malta's carbon dioxide emissions for 2002 amounted to about three million tonnes. Global carbon dioxide emissions for 2000, according to Earthscan, were about 42,000 million tonnes. Sir Nicholas argues about a "social cost of carbon", that is, a comparison between the present marginal ("additional") abatement costs to reduce carbon dioxide emissions and the marginal costs due to climate change damages envisaged for the longer term. Any present investments in greenhouse gas abatement initiatives make economic sense as long as these costs are lower than the overall discounted benefits derived from climate change mitigation in the future. From a purely theoretical economic standpoint, at least, this argument may seem quite straightforward. Its workings and, more so, the practical implications deriving from it, are certainly not.
The Stern review bases its foundations on well-established notions in climate science.
Firstly, it is presumed that the earth's climate system may respond synergistically - rather than additively - to the impact of further additions to the present stock of atmospheric greenhouse gases. Consequently, the atmosphere's ability to retain heat may be enhanced to significantly higher levels than ever expected.
Secondly, since a considerable degree of uncertainty still prevails about how climate systems work, assessing the exact nature and extent of any envisaged climate change impacts remains a difficult task considerably dominated by ballpark figures.
In economic terms, climate change may be considered as an externality. This entails that those entities generating greenhouse gases do so without having to pay for the consequences of their actions. Sir Nicholas argues that a crude quantification of the monetary impacts of climate change may be possible through the application of so-called integrated assessment models (IAMs) such as PAGE2002 (Policy Analysis of the Greenhouse Effect 2002).
The review includes an analysis of the outcomes of two main PAGE2002 scenarios covering a 200-year period until the year 2200. Basing on economic models, Sir Nicholas concludes that a recurrent climate change mitigation expense in the region of circa one per cent of gross world product could prevent global economic losses to the order of between five and 20 per cent of gross world product over the next two centuries. The modelling assumes stabilisation of atmospheric carbon dioxide levels in the region of 450-550ppm CO2e by 2050, when present levels are estimated at around 381ppm or more.
The 2050 stabilisation threshold, which is close to double pre-industrial levels, does not imply that temperatures should not rise and, in fact, a projected global average temperature rise of 2 - 5 degrees is expected over the next 100 years. For this level of stabilisation to be achieved, the Stern review contends that global carbon dioxide emissions must be lowered to between 25 - 75 per cent than present levels by 2050.
This lowering may only be possible provided that general world energy-use patterns and trends change drastically within the next four or five decades.
Climate change impacts are a matter of concern for all humanity. Sir Nicholas has succeeded in the arduous task of bridging the gap between the science of climate change and the phenomenon potentially being the most spectacular market failure requiring urgent redress. A thorough economic assessment is available, at last.
Lay persons have their part to play. It is up to policymakers, however, to collectively ensure that the various national and international initiatives designed to safeguard the planet's climate system head towards successful outcomes. Sir Nicholas does not mince his words: "There is a high price to delay".
Mr Pulis teaches environmental science and chemistry at Giovanni Curmi Higher Secondary School, in Naxxar.