Researchers say economic models are greatly understating potential impacts of climate change

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  • Researchers in the US and the UK are sounding the alarm over what they say are misleading conclusions reached by current models for estimating the future economic damages of global climate change.
  • In a recent paper, Thomas Stoerk of the Environmental Defense Fund, Gernot Wagner of Harvard University’s Center for the Environment, and Bob Ward of the ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science write that there is “mounting evidence that current economic models of the aggregate global impacts of climate change are inadequate in their treatment of uncertainty and grossly underestimate potential future risks.”
  • The authors sent a letter to Hans-Otto Pörtner and Debra Roberts, the co-chairs of the working group that is currently preparing the IPCC’s AR6, to make them aware of the paper and its recommendations for how to better account for “the uncertainties inherent in climate policy decisions.”

Researchers in the US and the UK are sounding the alarm over what they say are misleading conclusions reached by current models for estimating the future economic damages of global climate change.

In a paper published earlier this month in the journal Review of Environmental Economics and Policy, co-authors Thomas Stoerk of the Environmental Defense Fund, Gernot Wagner of Harvard University’s Center for the Environment, and Bob Ward of the ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science write that there is “mounting evidence that current economic models of the aggregate global impacts of climate change are inadequate in their treatment of uncertainty and grossly underestimate potential future risks.”

These models are relied on by policymakers who are charting a course for how the world can mitigate and adapt to the impacts of rising global temperatures, including the authors of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6), due out sometime between 2021 and 2022.

At issue is what Stoerk, Wagner, and Ward describe as “inconsistencies” between scientific estimates of the physical impacts of climate change and the economic impacts. They say that the IPCC’s Fifth Assessment Report (AR5), released in 2014, relied on a survey that appeared to show the economic impacts would constitute a small fraction of global GDP up to at least 2.5 degrees Celsius of warming.

At the same time, the authors of the relevant section of AR5 “also noted that published estimates of global economic impacts were ‘highly uncertain’ and ‘omit a number of factors,’” as Stoerk, Wagner, and Ward point out in their paper. That’s because those estimates were based on what are called “climate-economy integrated assessment models,” or IAMs for short. The IAMs used in climate-economic forecasting have been criticized for not taking into account the full range of potential impacts from global warming.

“There is now a growing awareness of the limitations of the existing generation of IAMs, including an understanding that they inadequately account for the potential damages from climate change, especially at moderate to high levels of warming (i.e., >2C),” the researchers write in the paper, adding: “These levels of warming have become increasingly likely.”

In particular, they say, previous estimates of the economic impacts of climate change ignore the possibility of “tipping points” — the point at which global warming becomes a self-reinforcing feedback loop and impacts not only accelerate but potentially become unstoppable and irreversible. As temperatures increase ever higher, especially in a runaway global warming scenario, the discrepancies between estimates of physical impacts and economic impacts produced by current IAMs become larger, according to Stoerk, Wagner, and Ward.

“These discrepancies between the physical and the economic impact estimates are large, and they matter,” they write. “However, physical impacts are often not translated into monetary terms and they have largely been ignored by climate economists.”

The authors sent a letter to Hans-Otto Pörtner and Debra Roberts, the co-chairs of the working group that is currently preparing the IPCC’s AR6, to make them aware of the paper and its recommendations for how to better account for “the uncertainties inherent in climate policy decisions.”

AR6 should explicitly recognize the uncertainty and spectrum of potential future risks implicit in the climate-economic connection — “from greenhouse gas emissions to concentrations, from concentrations to global average temperatures, from temperatures to climate damages, and from damages to how society can be expected to react” — the authors urge.

Specifically, they suggest that the IPCC focus more on how decision-making might be done in light of the “risk, uncertainty, and outright ambiguity” of future economic impacts due to climate change, and seek better estimates of how that unpredictability affects economic and financial estimates of the costs of global warming.

The authors write that “Our hope is that by adopting these recommendations, AR6 will be able to resolve some of the documented inconsistencies in estimates of the physical and economic impacts of climate change and more effectively fulfill the IPCC’s mission to provide policymakers with a robust and rigorous approach for assessing the potential future risks of climate change.”

Image licensed under CC0.

CITATION

• Stoerk, T., Wagner, G., & Ward, R. E. (2018). Recommendations for Improving the Treatment of Risk and Uncertainty in Economic Estimates of Climate Impacts in the Sixth Intergovernmental Panel on Climate Change Assessment Report. Review of Environmental Economics and Policy. doi:10.1093/reep/rey005

This story first appeared on Mongabay

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