Note — Sep 15, 2019

The Deadly Hidden Risks Within the Most Prominent Economic Model of Climate Change

Seen in → No.94

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Many climate policies are based on “the most famous economic model of climate change,” created by Professor William Nordhaus of Yale. The article argues that the model is highly imperfect, and based on various choices of simplicity which just don’t reflect the complexity and graveness of possible outcomes. First, his “damage function” is based on projections, which are very unreliable, prompting even Nordhaus to add a 25 percent (!!) “fudge factor” because his source numbers ignore things like “losses from biodiversity, ocean acidification, political reactions,” extreme events and uncertainty. Second, he assumes that all climate mitigation is an economic drain, where they could actually act as boosts to stagnating economies and, you know, save lives. The third, “has to do with uncertainty, which throws his entire style of analysis into question” (see last quote). Ryan Cooper, the author, makes many important points, though my conclusion is simpler; it’s an irresponsible calculation focusing on nice linear conclusions based on neoclassical economic thinking focused only on not hurting the economy too much. Humans and other living creatures matter, and survival for the greater numbers should be at the center of calculations.

Following Nordhaus’ “optimal” path, carbon dioxide concentrations would approach 650 parts per million by the end of the century, or about 2.5 times the pre-industrial figure, and the average atmospheric temperature would be about 3.5 degrees Celsius higher. […]

As the late Harvard economist Martin Weitzman writes, “All damage functions are made up — especially for extreme situations.” […]

Some of the underlying studies do attempt to model various economic sectors from warming, but at bottom the estimates do not show any tipping points because the authors assumed there aren’t any. It’s a rather shaky foundation for a policy model that purports to show the optimal trajectory of climate emissions for all of human society. […]

Yet Nordhaus’ model finds that 12 degrees of warming — when more than half the population would regularly be risking death just by stepping outside — would only cut world GDP by about 34 percent. […]

[C]onsidering the future of climate change involves an “uncertainty explosion.” First, there is the unknown of how much humans will emit over the coming years, which feeds into uncertainty in how earth’s biosphere will deal with all the extra carbon, which feeds into uncertainty over how temperatures will respond to increased carbon dioxide concentration, which feeds into uncertainty over how particular regions will respond (the Arctic, for instance, is warming much faster than the rest of the planet).