"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Thursday, February 17, 2011

Uncertainty Writ Large

Pielke Jr 2011 "by 2100... climate change may increase the overall damage from extreme events by $84 billion or 0.015 percent of world GDP"

Romm 2009 "Scientists find “net present value of climate change impacts” of $1240 TRILLION on current emissions path."

We note with little surprise that it is not the other way around, that Pielke's number is not vastly greater than Romm's.

I think what this is is not a story of who is right and who is wrong.

Now on one hand, we are comparing a total vs an annual rate, so that accounts for two orders of magnitude there. But we are still comparing 1240 trillion to something like 8.4 trillion; consider that uncertainty by comparison to the uncertainty in climate sensitivity (between 2 C and 4 C by most accounts.)

My question is this: why are those carping about uncertainty and undeveloped science aiming their fire at climate science rather than economics? I've asked it before, but it's nice to put some numbers on it. Climate science is the best constrained part of the carbon policy question. The carbon policy arguments should be completely decoupled from arguments about physical climatology until the impacts and mitigation people get their act together.

A discrepancy like this on a matter of such importance is bad enough. That the wrong discipline is getting the blame is just ridiculous.


PDA said...

It also seems that any vestige of skepticism vanishes when it comes to estimates of the expense of taking any action whatsoever. Costs on a range from "trillions" to "the collapse of the industrialized world" are accepted without question.

David B. Benson said...

Maybe some should study The Foundations of Non-Equilibrium Economics: The principle of circular and cumulative causation

Andy S said...

The study cited by Pielke (the links at Peilke's site seem to be broken, so I haven't read the original World Bank report) seems to focus on the global impact of extreme events only: storms, floods and droughts, heat waves and cold snaps. There's no mention of sea-level rise, forest fires, beetle infestations, collapse of fisheries and so on. The study cited by Romm, on the other hand, seems to have focussed on a broader range of impacts, with most of the forecast expenditures (Table 2) being investment in infrastructure related to adaptation to climate change.

They may both be right. But if the World Bank study (which I haven't been able to read) is concerned only with damage resulting from a limited range of extreme weather events, not the costs of adaptation to expected changes in climate, then it only represents a fraction of the costs of coping with change.

Pielke is actually pretty careful in his wording in his blog post but it is easy for the casual reader to infer that the article to infer that these costs are the totality of future costs of climate change.

jstults said...

Climate science is the best constrained part of the carbon policy question.

Couldn't agree more; I started reading up on the DICE model, and it really is the "post hoc tunable to get the answer you want" sort of model that many folks accuse GCMs of being (without knowing anything about either sort of model of course). Biggest fudge factor being the discount rate, you can predict the discount rate an analyst will choose based on who's paying for the analysis.

Pangolin said...

Help me out here; why does the dollar cost of unrestrained climate change matter?

At a certain point after land has salted in the Egyptian delta or Bangladesh, Vietnam, Louisiana, or California the overall cost of climate change is moot. The resource is effectively gone forever.

Not all resources fit into the unrecoverable model but species extinction certainly does. Topsoil loss is effectively permanent. Damaged cities take decades to rebuild.

If the resource that supplies your culture's sustenance is lost due to a climate change event your economic loss is effectively everything. What's the point of putting a dollar value on that?

Michael Tobis said...

Pangolin, I share your skepticism.

However, we cannot make sensible decisions without some quantitative idea of utility.

I do not think actual real world dollars are a good measure over long periods of time, but I have no objection to calling the units of utility "dollars" if they are suitably defined.

David B. Benson said...

Pangolin --- Completely possible to reclaim land under salt water; the Dutch are quite good at it: Polder.