IAP Stern Review Discussion Talking About Risk John E. Parsons

Transcription

1 IAP Stern Review Discussion Talking About Risk John E. Parsons Center for Energy and Environmental Policy Research

2 A Problem of Risk Management it it was was clear clear that that the the modelling framework used used by by this this Review had had to to be be built built around the the economics of of risk. risk. Averaging across across possibilities conceals risks. risks. The The risks risks of of outcomes much much worse worse than than expected are are very very real real and and they they could could be be catastrophic. Policy Policy on on climate change is is in in large large measure about about reducing these these risks. risks. They They cannot cannot be be fully fully eliminated, but but they they can can be be substantially reduced. 2 CEEPR

3 0 C Food Projected Impacts of Climate Change Global temperature change (relative to pre-industrial) 1 C 2 C 3 C 4 C 5 C Falling crop yields in many areas, particularly developing regions Possible rising yields in some high latitude regions Falling yields in many developed regions Water Ecosystems Small mountain glaciers disappear water supplies threatened in several areas Extensive Damage to Coral Reefs Extreme Weather Events Risk of Abrupt and Major Irreversible Changes Significant decreases in water availability in many areas, including Mediterranean and Southern Africa Rising number of species face extinction Sea level rise threatens major cities Rising intensity of storms, forest fires, droughts, flooding and heat waves Increasing risk of dangerous feedbacks and abrupt, large-scale shifts in the climate system

4 PART II: The Impacts of Climate Change on Growth and Development Figure 6.5 a. Baseline-climate scenario, with market impacts and the risk of catastrophe Figure 6.5b. High-climate scenario, with market impacts and the risk of catastrophe % loss in GDP per capita Baseline Climate, market impacts + risk of catastrophe 5-95% impacts range -5.3 % loss in GDP per capita High Climate, market impacts + risk of catastrophe 5-95% impacts range Figure 6.5c. High-climate scenario, with market impacts, the risk of catastrophe and non-market impacts Figure 6.5d. Combined scenarios % loss in GDP per capita High Climate, market impacts + risk of catastrophe + non-market impacts 5-95% impacts range % loss in GDP per capita Baseline Climate, market impacts + risk of catastrophe High Climate, market impacts + risk of catastrophe High Climate, market impacts + risk of catastrophe + non-market impacts Figure 6.5a-d traces losses in income per capita due to climate change over the next 200 years, according to three of our main scenarios of climate change and economic impacts. The mean loss is shown in a colour matching the scenarios of Figure 6.4. The range of estimates from the 5 th to the 95 th percentile is shaded grey. STERN REVIEW: The Economics of Climate Change

5 The Heroic Assumptions Detailed Climate Effects regional rainfall patterns storm intensity abrupt change Adaptation Rate of Technological Change Rate and Breadth of Economic Development Valuation of Non-Market Impacts 5 CEEPR

6 Alternative Strategies for Scientific Interventions Strategy #1. Produce a bottom line answer! Go all the way using the best estimates and modeling choices available, no matter how unreliable. Make the best ethical judgments possible, so long as you are explicit. Turn the crank and spit out a cost number and a benefit number. Strategy #2. Say what you know. Inform the discussion as far as science reliably can, but no farther. Unpack the key points that must be addressed. The public debate will assess and evaluate all of the imponderables and value judgments. 6 CEEPR

7 A Conscious Choice The The large large uncertainties in in this this type type of of modeling and and calculationshould not not be be ignored. The The model model we we use, use, although it it is is able able to to build build on and and go go beyond previous models, nonetheless shares shares most most of of their their limitations. In In particular, it it must must rely rely on on sparse sparse or or non-existent observational data data at at high high temperatures and and from from developing regions. The The possibilitiesof of very very high high temperatures and and abrupt abrupt and and large-scale changes in in the the climate system are are the the greatest risks risks we we face face in in terms terms of of their their potential impact, yet yet these these are are precisely the the areas areas we we know know least least about, about, both both scientifically and and economically 7 CEEPR

8 A Conscious Choice (cont.) In In interpreting these these results, economic models that that look look out out over over just just a few few years years are are insufficient. The The impact impact of of GHGs GHGs emitted today today will will still still be be felt felt well well over over a century from from now. now. Uncertainty about about both both scientific and and economic possibilities is is very very large large and and any any model model must must be be seen seen as as illustrative. Nevertheless, getting getting to to grips grips with with the the analysis in in a serious way way does does require us us to to look look forward explicitly. These These models should should be be seen seen as as one one contribution to to that that discussion. They They should should be be treated with with great great circumspection. There There is is a danger that, that, because they they are are quantitative, they they will will be be taken taken too too literally. They They should should not not be. be. They They are are only only one one part part of of an an argument. But But they they can, can, and and do do help help us us to to gain gain some some understanding of of the the size size of of the the risks risks involved, an an issue issue that that is is at at the the heart heart of of the the economics of of climate change. 8 CEEPR