IAN DUNLOP. Fatal Calculations: How Economics has Underestimated Climate Damage and Encouraged Inaction

A rational response from Australia’s leaders to the unprecedented and disastrous 2019-20 megafires would have recognised, first, that they are another warning— and the strongest yet — that the catastrophic impacts of human-induced climate change are here now as lives are lost and livelihoods destroyed. Second, it would accept the need for emergency action.

But no. The moment the rains came and extinguished the fires, rationality sank back into the political swamp. The government’s commitment to massive fossil fuel expansion immediately resurfaced. Apparently nothing could be contemplated which might interfere with maximising short-term economic growth, or achieving a budget surplus — until the coronavirus hit hard. And disinformation exploded, as denialists attempted to fob off bushfires as just another example of Dorothea Mckellar’s “Land of drought and flooding rains”. Nothing unusual here, they said, move on.

Even those more inclined to now accept the reality of climate change do not, or prefer not to, understand the real risks. The Australian Labour Party, the Business Council of Australia and others commit to a net-zero emission reduction target by 2050 and simultaneously support the expansion of the coal and gas industries.

This is a pathway with two fatal flaws. First, a net-zero emission by 2050 target is wholly inadequate to prevent extremely dangerous climate change; it would probably result in irreversible runaway warming as tipping points are triggered. Far faster implementation is essential, ideally by 2030, but as soon as possible. Second, any further fossil fuel expansion is incompatible with net-zero by 2050, let alone 2030, as there is no further carbon budget today for a realistic chance of staying below 2oC, let alone 1.5oC.

The scientific rationale for these views is set out in Breakthrough reports, including Disaster Alley, What Lies Beneath and Climate Reality Check. Why is it so hard for leaders to accept scientific reality?

In part, it has been due to the scientific reticence, highlighted in these reports, to articulate the full risks of climate change. Of particular concern are the major tipping-point threats to the climate system, uncertainties which so far cannot be quantified but which we know are increasingly likely to occur as atmospheric carbon concentrations and warming both rise.

This has allowed political and corporate leaders to insist on waiting for further information before acting. Whilst such predatory delay allows the opportunistic maximisation of returns from fossil fuels, it increases the risks even further.

Equally important, and little understood, is that the economic analysis on which most policy is based — supposedly derived from the science — has quite deliberately ignored these major climate uncertainties, and even downplayed the risks the science has been able to quantify. Hence the irresponsible, and extremely dangerous political obsession with minimising “the costs of action”, whilst at the same time ignoring the far greater damage of inaction.

The most egregious example is the 2018 award of the Nobel Prize for Economics to Professor William Nordhaus, whose Integrated Assessment Model tells us that the optimal level of warming, using cost/benefit analysis, would be 4oC. This is a world which national security experts consider would see the collapse of civilisation as we know it.

What cost should be put on civilisation? Apparently very little from the economist’s perspective, for despite the escalating climate disasters globally, not least our bushfires, this preoccupation with the cost of action — and a blind eye turned to overwhelming future damage — remains the dominant thinking within politics, business and finance.

The latest Breakthrough report explains why such thinking must change, fast, if we are to have a realistic chance of avoiding escalating climate catastrophes. The economics profession must reassess its approach to existential threats of this kind, giving far greater weight to precautionary policies to prevent such outcomes, whatever the cost. Our survival should be paramount, not economic numbers.

The coronavirus pandemic is a major threat to human security, but human-induced climate change is even more so, with the potential to destroy civilisation as we know it. The global response to coronavirus demonstrates the importance of immediate precautionary action in the face of major uncertainties.

Sensible economic analysis would urge exactly the same emergency-action principles be applied to climate disruption without delay.

Ian Dunlop was formerly an international oil, gas and coal industry executive, chair of the Australian Coal Association and CEO of the Australian Institute of Company Directors. He is co-author of “What Lies Beneath: the understatement of existential climate risk”, and of the Club of Rome’s “Climate Emergency Plan”. He was a co-convenor of the first Australian National Climate Emergency Summit recently held in Melbourne.

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Ian Dunlop was formerly an international oil, gas and coal industry executive, chair of the Australian Coal Association and CEO of the Australian Institute of Company Directors. He is co-author of “What Lies Beneath: the understatement of existential climate risk”, and of the Club of Rome’s “Climate Emergency Plan”. He was a co-convenor of the first Australian National Climate Emergency Summit recently held in Melbourne.

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