Uncertainty and climate change

by John Quiggin on September 25, 2009

I was at a conference on uncertainty and climate change in Berkeley last week, and gave the wrap-up panel discussion with Geoffrey Heal. We’d discussed a wide range of uncertainties and ambiguities, from future emissions scenarios to model uncertainty to perception and communication issues, and we were asked to comment on how, with so much uncertainty, economists can make useful recommendations.

Before I give the answer I came up with, a few side issues

First, as I mentioned briefly, while everyone at this workshop and many others were working on ways to reduce, manage and understand uncertainty, there is also a large and (at least until recently) very well-funded group working, to create and disseminate uncertainty, ignorance and confusion, with sufficient success that much of the political right in Australia and nearly all in the US have been (with their own complicity) deluded into thinking the problem is illusory.

Second, it’s a straightforward implication of standard economic analysis that the more uncertainty is the rate of climate change the stronger is the optimal policy response. That’s because, in the economic jargon, the damage function is convex. To explain this, think about the central IPCC projection of a 3.5 degrees increase in global mean temperature, which would imply significant but moderate economic damage (maybe a long-run loss of 5-10 per cent of GDP, depending on how you value ecosystem effects). In the most optimistic case, that might be totally wrong – there might be no warming and no damage. But precisely because this is a central projection it implies an equal probability that the warming will be 7 degrees, which would be utterly catastrophic. So, a calculation that takes account of uncertainty implies greater expected losses from inaction and therefore a stronger case for action. This is partly offset by the fact that we will learn more over time, so an optimal plan may involve an initial period where the reduction in emissions is slower, but there is an investment in capacity to reduce emissions quickly if the news is bad. This is why its important to get an emissions trading scheme in place, with details that can be adjusted later, rather than to argue too much about getting the short term parts of the policy exactly right.

A third point, raised by Michael Hanemann is that the global average conceals a lot of seasonal and regional variation. He suggested IIRC that on current estimates, a 3.5 degree global average increase corresponds to an 8 degree increase in winter temperatures in Southern California, with huge implications for water supplies derived from snowfall.

Anyway, back to my main point. The huge scientific uncertainty about the cost of inaction has obscured a surprisingly strong economic consensus about the economic cost of stabilising global CO2 concentrations at the levels currently being debated by national governments, that is, in the range 450-550 ppm. The typical estimate of costs is 2 per cent of global income, plus or minus 2 per cent. There are no credible estimates above 5 per cent, and I don’t think any serious economist believes in a value below zero (that is, a claim that we could eliminate most CO2 emissions using only ‘no regrets’ policies).

For anyone who, like me, is confident that the expected costs of doing nothing about emissions, relative to stabilisation, are well above 5 per cent of global income that makes the basic choice an easy one. Any agreement that comes out of Copenhagen or its successors will be better than no agreement.

A slightly trickier question is: what is the best target? I don’t have a good answer to this, but, given the politics of the process I don’t need one. The nature of such negotiations, with every country looking to shift as much of the cost as possible to others, ensures that there is almost no likelihood of getting an agreement that is too strong. In the present case, we can put some numbers on this. On the same kind of reasoning as I gave above, it seems clear enough that a 450 ppm target would be beneficial relative to a 550 ppm target. And, given the commitments and offers already on the table, the likelihood of anything stronger than 450 ppm is close to zero.

So, despite all the uncertainties, the policy position I would like to see Australia take to Copenhagen is clear enough. Aim for an agreement on a 450 ppm target, with emissions cuts on track for this until 2020 and with the capacity to revise later when we have more information. With all its imperfections, the currently proposed ETS (including a 25 per cent cut in emissions as part of a global agreement) is consistent with this position and therefore should be supported unless and until something better can be put in its place.

{ 25 comments }

1

david 09.25.09 at 12:30 pm

As a plan, OK. But if you want 450, you have to aim for 350 in negotiations and give in. We need more fear-mongering about uncertainty (which isn’t mongering at all, but there it is.)

2

Nick Barnes 09.25.09 at 1:32 pm

Please, please, please:
1. Specify degrees Fahrenheit or degrees Celsius; and
2. in fact, always explictly use degrees Celsius; and
3. Oh, to heck with it, just say Kelvin.

3

Nick Barnes 09.25.09 at 1:34 pm

Oh, and:
4. Always give a timescale for projections. “the central IPCC projection of a 3.5 degrees increase” is hopeless.

4

Marc 09.25.09 at 1:38 pm

450 ppm is extremely high, no? I assume that you mean 350; levels above 350 are not compatible with the long-term survival of ice sheets on the planet.

5

ed 09.25.09 at 1:55 pm

“”We need more fear-mongering about uncertainty (which isn’t mongering at all, but there it is.)”

Done and done:
http://crookedtimber.org/2009/09/25/what-global-warming-looks-like/

6

peter ramus 09.25.09 at 3:22 pm

The central IPCC projection is a bit on the pollyannaish side, according to today’s news on the subject.

7

Thomas Jørgensen 09.25.09 at 10:19 pm

The entire climate debate pisses me off to a really disturbing extent, because I can find very few people advocating the policies which would actually *help*
On the one hand we have a bunch of lizards who want to keep going as we are, which is catastropic, and on the other hand we have a bunch of activists arguing that renewables will save us.. and looking at the raw numbers, and the results achived so far, that just isnt going to bloody well actually work. Even the “lets price carbon and the magic of the market will fix everything” camp strikes me as delusionally optimistic.

What we need is a global, and massive, build of nuclear power + pumped storage for loadfollowing, coupled with the total phaseout of all combustion based electricity generation, and the electrification of every single aspect of our energy use where combustion can plausibly replaced by electrons + carbon neutral synthetic fuels for where electrons wont cut it. Yes, this means reactors by the thousands, and represents a massive dirigiste industrial policy, but I dont belive anything short of this will actually accomplish anything beyond postponing disaster a few years.

8

jre 09.25.09 at 11:05 pm

Well, at least one technically feasible plan without nuclear energy has been proposed.

But it would require the US Congress to pony up $420 billion to avert disaster, and we know that ain’t going to happen.

9

jre 09.25.09 at 11:16 pm

Oh, and as to David & Marc’s comments on CO2 targets: I was at a panel discussion two weeks ago where Bill McKibben (he of Peter Ramus’ link) said the same thing. He, Hansen and others decided to make 350 ppmv the policy target because no level much higher than that will preserve what we think of as a benign climate. And thus the doings on Oct. 24th were organized around that number.
OK; we are already downstream from where we want to be, and don’t know how to paddle upstream, but isn’t the important thing to know where we want to be? That, or understanding that we are really, really screwed?

10

Billikin 09.25.09 at 11:17 pm

My metaphor for what is happening with uncertainty is that we are in a bus going downhill at night. There is a fog that reduces our visibility, and yet some people are shouting, “Faster! Faster!”

11

BrendanH 09.26.09 at 12:32 am

In response to Thomas Jørgensen — the most interesting enumeration of what can be done that I have seen is David McKay’s book. He quantifies what can be done in terms of renewables, nuclear, pumped storage et al., as well as looking at how we actually use energy. A sort of highly educated back-of-envelope approach, well worth reading. There’s a big role for certain sorts of renewables, but he’s clear that the odd few hundred wind-turbines are not going to cut it.

One take-home point: we need to reduce our use of fossil fuels so substantially that it’s as near as dammit to eliminating them entirely.

12

Thomas Jørgensen 09.26.09 at 1:01 am

Arguing that we can power civilization with solar is quite simply wrong. – The per kwh price is utterly unreasonable, amd the nessesary storage capacity and overbuild needed to cover supply dips caused by weather and seasons is makes it wastly more so.
Three ways to build a carbonfree the grid, in order of economic cost and severity of market intervention needed;
1: “Plan cheapskate/free market”: Outright ban the construction of new fossile based generation capacity, and rework the nuclear regulatory comission so the planning process is sped up. (not more lenient. Just faster. Hire more people). Remove grandfather clauses exempting old plants from emmision standards. This will result in existing generation capacity being replaced with nukes as it ages naturally. Cost to the taxpayer/ratepayer: Likely this results in cheaper electricity as construction costs will drop with extensive building expirence, and capital costs for nuclear will drop very low in an enviorment where investors view the completion and operation of reactors as certain.
Downside to this is that it will take 30-40 years to switch the grid over in this manner.

2: Like one, but much faster (10 years). Pick a design, build several hundred reactors with government money and planning power, close down the coal/gas fired stations asap, regardless of how new they are.
Cost: this writes off the economic value of the existing generating plant. (note that *any* plan that cuts emmisions quickly will do this) which is somewhere in the region of a trillion dollars.
3: like one, but with renewables in place of nukes. Given the relative price of nuclear and renewable electricity + storage.. This will cost somewhere in between 5 and 10 times what plan two would. And, note, still take 30-40 years!

13

Omega Centauri 09.26.09 at 3:07 am

Thomas, is being too pessimistic about renewables, and too optimistic about nuclear. Now don’t get me wrong, I am a fan of making nuclear as large a part of the solution as possible. But, simply assuming the current cost per KWhr of renewables is fixed is wrong. Except in cases where scarce resources that won’t scale are needed (which includes most thin film photovoltaics -but not silicon based ones), economies of scale, and the technological learning curve to be climbed is still quite steep. As for nuclear, we have either a huge resource problem involving fuel and waste, or we have a huge learning curve involving the development of advanced fuel cycle reactors (essentially breeders with reprocessing and/or Thorium fueled reactors). The time scale for the development of these is likely too long.

Of course, we gotta go whole hog for efficiency. We will also have to transition to a paradigm which allows considerable load management (i.e. certain energy intensive industry can only operate when the sun shines or the wind blows).

Incidentally 450-550 was chosen, because it is concievable we could reach it, not because there is some known tipping point that that would magically avoid. Besides the target is for the maximum atmospheric concentration, not the long term average. Once emissions stop, the CO2 concentration should begin going down, as non-atmospheric reservoirs (such as the oceans) catch up with the atmospheric concentrations. If we add carbon sequestering geo-engineering, it will go down a bit faster.

14

Thomas Jørgensen 09.26.09 at 6:45 am

When I said “5-10x cost of plan two” that was assuming large advances in the state of the technology. There are three factors that would run the cost of renewables into the heavens in a very bad way as you try to scale them up to 100% of the grid.
Firstly: Current build is cherrypicking locations, IE, windmills are going up in windy locations, solar in sunny places, ect. This is very important for the economics, and gets very rapidly worse as you try to build as many turbines, ect as would actually be required.
Secondly: You dont need just enough power to replace current generation capacity. you also need enough power to displace gasoline for private transport, gas for heating, and as far as possible, coal for industry, ect. This means you cannot count on conservation to reduce the amount of capacity you need to build – Any low carbon future is also a very, very, high electricity future. And that just does not play nice with renewables, as we will simply run out of space to build them in.
Third, and absolutely fatal to this dream – the backup capacity. Currently renewable build is mainly backed up in the grid by gas turbines, which are very cheap to build, and not that expensive to operate, but if you want a carbon free grid, you cant do that, you have to back it up with storage instead. And building enough storage to not have the lights go out on a regular basis would involve engineering on a truely epic, and epically expensive scale. And demand management wont help, because its not going to bloody well happen. the politics of that are suicidal, and again, it runs very severely counter to the goal of displacing fossile use with electricity whereever possible. (people will not buy electric cars if they cant charge them when its cloudy!)

Uranium resources and waste are not serious problems because fuel is so very low a part of the total cost of nuclear, and waste storage is a solved problem – sticking it under mountains until people come to haul it back out for the eventual breeders is a perfectly acceptable solution, and infinitely less hazardous than the deaths we currently accept from coal.

15

BrendanH 09.26.09 at 10:22 am

Thomas and Omega are trading quantitative claims about what’s impossible, what’s inevitable. David McKay’s work has addressed all these, at least to a first approximation, and yes, not just in terms of electricity generation but of total energy consumption/production. His conclusion is not either/or but pretty much “all of the above”. See e.g. his chapter on Nuclear Power.

16

Nick Barnes 09.26.09 at 5:50 pm

We could be building gigawatt-scale solar thermal systems at the moment, with molten salt for 24-hour generation, all over the Maghreb. Anyone who hasn’t read David McKay’s book is probably blowing hot air.

17

Omega Centauri 09.26.09 at 10:48 pm

I will second the recomendations about reading MacKays (free) booklet. I’m not sure how readable those who didn’t take -and do passbly well in say undergraduate physics though, it seems to be written with about that level of math/science ability assumed for the reader.

Clearly onshore wind is taking the best sites first. This might be counterproductive, as there is an impediment to tearing down old low efficiency turbines hogging the best locations. I see this everyday on my commute over the Altamont pass. The highest ridges are littered with barely functioning first generation windmills, while the newer stuff, is located far down the hillside. But, for solar, there is no danger of using up the good sites, just about anywhere that the cloudiness is not high will do.

But, of course any rational plan would involve a lot of scaling back of our current wasteful usage. Things that come to mind, outdoor lighting, open frozen foods displays at grocery stores. Using high capacity heating and cooling systems in lieu of better insulation in our building. A decent medium term mix to shoot for:
(1) Perhaps a quarter nuclear, as a rock solid background level.
(2) Enough renewables that at least during good generating periods nuclear and renewables can cary the day.
(3) Natural gas turbines combined with storage capability for natural gas (which can be supplemented with bio-gas) for swing capacity.
(4) A healthy dose of demand management.
(5) Where available hydro, and hydro storage. But, don’t kid yourself, only a few regions will have enough
This doesn’t take us all the way to carbon neutral, as we will eventually need to get to, but it should take us at least 75 percent of the way. Certainly sufficient for the first twenty to twenty five years of transition.

As opportunities, and needs change with time, what is best to do after say 2035, can best be answered later on.

Some technical notes. Solar thermal is promising. I doubt it will be economical to use thermal storage to cover more than perhaps a single cloudy day. And winter/summer insolation varies substantially. So it is not ideal. But, when fossil fuels runs out (or are outlawed), we will have little choice but to live within the means of the power generating system we can afford.

Remember, MacKay is writing primarily about the UK, where solar is not likely to be very useful. There will be some regions without good renewable opportunities. Luckily the bulk of the world population doesn’t live in high latitude cloudy climates such as Northern Europe.

18

John Emerson 09.26.09 at 11:24 pm

But precisely because this is a central projection it implies an equal probability that the warming will be 7 degrees, which would be utterly catastrophic.

Almost no one ever underlines this point. Even people who accept the idea of global warning sometimes slip into thinking that the uncertainty, if any, will probably make things less bad instead of worse.

It’s because the present state is taken as the norm, and global warming is taken as a possible deviation from the norm, and the predicted answer is interpreted as “as much as x” rather than as “x or even greater”.

To put it differently, people subconsciously mislocate the uncertainty. Instead of thinking that “2, +/- 2” means 2 to 4 degrees higher, they slip into interpreting it as “+/- 2” simply, i.e. 2 higher or 2 lower.

I’m not sure that ill will or even stupidity is always involved, just the careless reading of statistics.

19

Omega Centauri 09.27.09 at 1:07 am

I’m not sure that ill will or even stupidity is always involved, just the careless reading of statistics.
John has a good point, that it may be the deficiencies of certain modes of thought, rather than conscious ill-will that causes much of the misunderstanding. We have to remember, that science is taught and conducted in a very rigorous mathematic manner, that very few members of the public have the stomach for. For the others, trying to argue/convince in this manner just won’t work, as they will either feel revulsion at the need for scary math, or their eyes will simply glaze over. So we have to find other ways of making the important arguments live within their thought systems. The best I can think of regarding statistical stuff is to draw a simple map of probability distribution. But, even here, you are relying on the audience having a reasonably intuitive feeling for graphs.

Communicating science results that are not intuitively obvious to the layman is clearly a very difficult thing. And I think we are only close to beginning of grappling with how to deal with this issue.

20

John Emerson 09.27.09 at 1:53 am

Of course, “2, +/-2” really translates to “0 to 4”, not what I wrote.

21

Watson Aname 09.27.09 at 3:13 am

We have to remember, that science is taught and conducted in a very rigorous mathematic manner

This just isn’t true. At an undergraduate level particularly, science is typically taught with a minimally acceptable degree of rigor, and as little mathematics as can possibly be managed for the subject. Which leaves us with a lot of practicing scientists
later running into limitations due to their own lack of statistics and mathematics, but that’s a different story (I’ve had many friends and colleagues lament this later in their careers).

You are quite right that this is a problem in popularization in particular, but it isn’t a problem of too much rigor, so much as a problem of any at all.

22

John A. Jauregui 09.27.09 at 5:47 am

Anti-science delusionism deleted. There are a number of sites where you can present your views as to why science has it all wrong and have them applauded (Climate Audit, Junkscience) or gently corrected (Real Climate). I’m not a scientist and don’t intend to debate science here. JQ

23

Tim Worstall 09.27.09 at 9:58 am

“But, of course any rational plan would involve a lot of scaling back of our current wasteful usage. Things that come to mind, outdoor lighting,”

Oh dear: just as some economists have recommended using the amount of light one can see from space as a method of judging economic development in a region.

http://www.nber.org/papers/w15199

“GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night. Our statistical framework uses light growth to supplement existing income growth measures.”

That’ll certainly put that measure into reverse.

24

John Quiggin 09.27.09 at 10:45 am

Indeed, I think any approach that uses energy use as a proxy for economic activity is going to prove highly problematic once relative prices change to reflect social costs.

And of course the nonsense economics found at sites like this one has this assumption deeply embedded in it, when it attempts anything more than snark.

25

Omega Centauri 09.28.09 at 4:20 am

“Oh dear: just as some economists have recommended using the amount of light one can see from space as a method of judging economic development in a region.

That’ll certainly put that measure into reverse.”

As an amateur astronomer, one measure of quality of life (or at least viewing), is how little artificial lighting a region has. I would consider turning off this stuff off as a huge improvement to my quality of life!

Watson: Maybe I got a different view, being a physics major. It was math math math, and then more math math math. Far more effort and attention expended to give the students the necessary math, than the actual science specific stuff anyway. Perhaps for students who aren’t on the graduate school track, that isn’t true? Or perhaps it has changed since the early seventies? It was certainly true that the science courses for non science majors track avoided math when possible.

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