Updated on 2023-08-11 by Adam Hardy
Why are we in a climate emergency? One reason is because the numbers don’t add up. These are the Doomsday numbers: the economic impact of both damage and abatement with a 4°C increase in global temperature would produce only 3.6% less growth by 2100. These numbers are taken from the Nobel Lecture in Economics from 2018 by the award winner William Nordhaus[1]Nobel lecture in economic sciences 2018 by William Nordhaus. Climate change: The ultimate challenge for economics. https://www.nobelprize.org/uploads/2018/10/nordhaus-slides.pdf.
Why are they Doomsday numbers though? According to this, there won’t even be a recession, just a bit less growth – a far cry from Doomsday. The problem is, it seems they’re not right. In fact, they are probably badly wrong.
These numbers matter because they are the numbers that politicians look at and that governments base their long term plans on. Is it worth diverting huge amounts of government investments and subsidies, altering long term policies and disrupting industry with accelerated decarbonisation, moving away from the dominant laissez-faire global free market strategies, all on the basis of these projections? No, according to these numbers.
The United Nations IPCC has brought together an immense body of climatology research from thousands of dedicated, gifted climate scientists over the last 30 years, the culmination of which appeared this year as the IPCC Assessment Review 6, the Physical Science.[2]Download the original report from the UN IPCC website https://www.ipcc.ch/report/sixth-assessment-report-working-group-i/ This led directly to the United Nations Secretary General calling Code Red for the planet. The impacts of not acting to reduce CO2 emissions are clear: huge risk of massive social, environmental, and financial damage and the diminishing and loss of life.
But crucially, the IPCC economists have not published their Assessment Review 6. This is due in 2022. The last publication from the IPCC with economic forecasts of climate impacts was the IPCC 5th Assessment Review in 2014.[3]UN IPCC download: https://www.ipcc.ch/report/ar5/wg2/ Again this contains the fatal Doomsday numbers which predict only a trivial effect on economic growth: global GDP in 2100 will be reduced by a mere 4-7%, compared to what it would otherwise be without any climate change.
New research shows that this economic research and the cost-benefit analyses are seriously flawed.[4]Prof Steve Keen, UCL Distinguished Research Fellow in 2019 firstly “‘4°C of global warming is optimal’ – even Nobel Prize winners are getting things catastrophically wrong”, … Continue reading Yet still mainstream economists are putting out more research showing that the economic impact of climate change is not going to halt the economic juggernaut of global commerce and industry.
The Real Doomsday Numbers
Prof Steve Keen suggests that these Doomsday numbers are out by an order of magnitude. Researchers in the insurance industry using actuarial methods predict damages from a 3.2°C rise reaching 18% of global GDP by 2050[5]Swiss Re, the world’s largest insurance company: “World economy set to lose up to 18% GDP from climate change if no action taken, reveals stress-test analysis” … Continue reading, which are more in line with Keen’s findings.
How can this be? After reading the IPCC AR6 report, there is an obvious dissonance between the forecasts of physical impacts and the forecasts of economic impacts. That was already the case in 2014 when the IPCC produced the AR5 reports. Keen explains:
But the main weaknesses with the IPCC’s methodology are firstly that, in economics, it exclusively selects Neoclassical economists (free market proponents), and secondly, because there is no built-in review of one discipline’s findings by another, the conclusions of these Neoclassical economists about the dangers of climate change are reviewed only by other Neoclassical economists.
Economic failures of the IPCC process, Prof Steve Keen on Medium
So the IPCC climate scientists don’t get to flag up the huge inconsistency in the predictions from their economist colleagues, and they don’t get to question the assumptions the economists are making. World leaders don’t actually get to see the real Doomsday numbers, and climate negotiations drag on. While the IPCC climate science has evolved over the last 30 years with predictions becoming more and more focused and risk-laden, its economic predictions have remained more or less the same.
The IPCC AR6 Climate Change Report 2022 – Impacts, Adaptation and Vulnerability will either close the gap between the two dissonant disciplines – or not! (Edit 2023-08-10: unfortunately it hasn’t)
Related Material
Edit: as of 2023, Prof Keen has summarised the problems in a major report for Carbon Tracker on pension funds in the financial world. The overview from Climate Home News is particularly clear.
A policy for treating the climate crisis as an emergency:
References