Economic
models significantly underestimate climate change risks
London School of
Economics
Policymakers are being
misinformed by the results of economic models that underestimate the future
risks of climate change impacts, according to a new journal paper by authors in
the United States and the United Kingdom, which is published today (4 June 2018).
The paper in the Review
of Environmental Economics and Policy calls for the Intergovernmental Panel
on Climate Change (IPCC) to improve how it analyses the results of economic
modeling as it prepares its Sixth Assessment Report, due to be published in
2021 and 2022.
The paper's authors,
Thomas Stoerk of the Environmental Defense Fund, Gernot Wagner of the Harvard
University 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, draw attention to "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."
They warn that the "integrated assessment models" used by economists "largely ignore the potential for 'tipping points' beyond which impacts accelerate, become unstoppable, or become irreversible." As a result "they inadequately account for the potential damages from climate change, especially at moderate to high levels of warming," due to rises in global mean temperature of more than 2 Celsius degrees.
The authors draw
attention to "a major discrepancy between scientific and economic
estimates of the impacts of unmanaged future climate change." They state:
"These discrepancies between the physical and the economic impact
estimates are large, and they matter. However, physical impacts are often not
translated into monetary terms and they have largely been ignored by climate
economists."
The paper states that
the IPCC Sixth Assessment Report should "strengthen its focus on decision
making under uncertainty" and "focus on estimating how the
uncertainty itself affects economic and financial cost estimates of climate
change."
The authors point out
that the preparation of the report "can act as a broad forum that brings
together scientists and economists with a goal of quantifying the impacts of
climate change."
They suggest that this
would allow the IPCC to "provide policymakers with a more robust and
rigorous way of assessing the potential future risks of economic damage from
climate change."
The authors have
written to Professor Hans-Otto Pörtner and Professor Debra Roberts, the
Co-Chairs of IPCC Working Group II, to draw attention to the new paper.
