Stern and Stiglitz: The chaotic world of 2 degrees warmingMay 31, 2022
Most of us will feel confident the Intergovernmental Panel on Climate Change’s clutch of recent reports has now delivered a globally dependable well researched path to carbon neutrality. After all its the product of thousands of the world’s scientific experts.
Actually, its most likely not the case. There are a number of prominent scientists who are saying that as we career past 1.5 towards 2 degrees warming the IPCC’s modelling is flawed and not fit for purpose. These scientists are anything but lightweight. Indeed, they are led by two of the world’s most well know economists – Sir Nicholas Stern (former World Bank Governor and author of the 2006 landmark Stern Review on the economics of climate change) and the Nobel laureate Joseph Stiglitz. Nevertheless, their findings are something of a well kept secret outside of academia, given they are only briefly referenced in the serval thousand pages of the IPCC’s recently released third report. Specifically, they warn the IPCC’s key integrated models (IAMs or integrated assessment models) on which policy prescriptions are based, fundamentally underestimate the urgency with which we have to act. They are therefore unlikely to provide reliable policy advice for economies which will be forced into increasingly radical and systemic change.
Stern and Stiglitz focus on the fact that we are now rapidly approaching the point of time when we will be unable to avoid shooting to a 2 degrees or more warming level. The problem is that once we arrive the IPCC’s current modelling becomes fundamentally unsuited to its task and is liable give us wrong projections on which to base our economic policies. They point to studies which warn that if we don’t stay below 2 degrees and still rely heavily on the sort of price mechanism which the current modelling is based “the risks rise so high as to be intolerable” and the cost “rise so high as to be, for all practical purposes infeasible”.
The problem with 2 degrees and beyond, they argue, is that the IPCC’s integrated modelling is not well suited to this world of deep uncertainty, extreme risk and in which a raft of new issues arise. Here, Stern and Stiglitz point out, the economic and social damage from climate change can be immense with large irreversibilities and complex feedback effects giving rise to tipping points
Stern and Stiglitz are not suggesting we throw out the current conventional modelling – which still, with a superhuman effort, could deliver a global temperature of below 1.5 degrees. However, if we reach a 2 degree plus world, relying on a carbon price to do the heavy lifting will be inadequate. In coming to this conclusion their reasoning involves at times some complex economics so this description is heavily simplified and does not cover the whole territory they traverse.
They argue a far wider range of policies will be needed to guide countries towards effective climate targets involving the prospect of radical structural change and therefore new forms of growth and development. In other words, our current trajectory towards a 2 degree plus increase means we will face an economically and socially daunting level of radical and profound structural adjustments to our economy. Here the economy is most unlikely to follow conventional economic theory in which, after an external shock, it returns to a pre-existing equilibrium.
All this generates a level of extreme social and economic disruption in which people’s preferences can fundamentally change and multiple simultaneous market failures are in prospect As well, as the timeframe extends and the extent of change becomes evident, major intergenerational equity issues arise. That is, the rising cost to and this distribution among the next generation becomes a major issue as is how we model it.
Stern and Stiglitz draw attention to a number of individual studies which explore the radical disruption of a 2 degree plus world. However, their concern is that these studies when integrated into composite models produce very high levels of variability from very small changes in the variables. As such they become unreliable policy guides for governments.
Feeding into Stern and Stiglitz’s concerns are the IPCC’s own risk assessments. Its most recent report doesn’t pull punches on where the globe is heading. It is, it states, ‘now almost inevitable’ that we will exceed 1.5 degrees based on current trends and in which case we will have to grapple with an era of irreversibility of effects. Indeed, the IPCC indicates we are currently on track to achieve a 1.5 degree increase in temperatures in the 2030s. To prevent going beyond into the unchartered waters of 2 degrees, GHG emissions must peak by 2025 and be almost halved within the decade.
There are distressingly few indications we are willing to do what is needed to achieve this. Current national commitments will not deliver a limit of 1.5 degrees. No surprise here given Australia and other major gas, oil and coal producing countries are busy further expanding production – a direct rejection of the International Energy Agency’s carefully researched conclusion that there is already adequate global carbon capacity.
Equally of concern is the IPCC’s modelling which gives such a major role to bio-sequestration and its reliance on withdrawing CO2 from the atmosphere. But this is precisely the area least policed and yet to be better researched. An EU study found that 85% of the UN sponsored carbon offset schemes did not actually reduce emissions in 2017. In Australia, studies indicate outright fraud in our carbon credit scheme which rely on bio-sequestration.
Stern and Stiglitz – two of the world’s most respected economists – are thus offering Australia an urgent warning about the extraordinary risks in our headlong rush to a gas led recovery and a 2 degrees plus warming world.