Andrew Dessler had an article in Rolling Stone suggesting that [t]he first step to saving the planet is ignoring the economists. Stoat has already written about it and, as you might imagine, doesn’t seem to like it. Even if suggesting that we ignore economists is a bit hyperbolic, I think Andrew makes some good points. Or, maybe, points I happen to agree with.
Andrew’s specific focus is economists who assess climate policy on the basis of cost-benefit analyses. The problem with this in the climate context is that we have the potential to substantially change the climate and to do so on geologically fast timescales. It’s extremely difficult to estimate the impact of such changes, and hence cost-benefit analyses are going to be extremely uncertain. They’re also quite simple calculations that don’t even come close, as far as I’m aware, to self-consistently modelling the evolution of the world’s economy in the presence of climate change. They also require many judgements that are clearly not value free.
Also, some of these analyses produce rather strange results. For example, suggesting that the damage will be relatively modest even for very large amounts of global warming, or suggesting that the optimal pathway would be one that leads to about 3.5oC of warming. This is another issue with some of these analyses. A lot of recent work has suggested that we’re currently heading along a pathway that will probably lead to between 2oC and 3oC of warming. How can a recent CBA suggest that the optimal pathway is one that would probably lead to about 3.5oC of warming, when we’re already probably heading for less than 3oC of warming*? The answer is probably that they haven’t properly assessed their no-policy baseline, but it still illustrates a potential issue with these analyses.
So, what could we do instead of a cost-benefit analysis? Well, we could determine what it would it take to achieve a normatively determined warming target. Not only does this also have deep economic roots, it’s essentially what the world’s governments have already agreed to try and do. So, it’s not as if this alternative to a simple cost-benefit approach is somehow an outrageously extreme suggestion, or one that would somehow be wildly at odds with the fundamentals of mainstream economics.
Of course, there also isn’t an objectively correct way to assess the ideal target. However, it seems clear that the more we warm, the greater the impact, and that the changes will probably be irreversible on human timescales. Rather than trying to work out some optimal pathway, why not do our best to limit how much we will eventually warm, with some goal of at least trying to meet some warming target, such as < 2oC? We might not meet the target, but just missing it will probably be a lot better than heading along some kind of optimal pathway and then discovering that the impact is far greater than estimated by these rather simple cost-benefit analyses.
Footnote:
* I realise that there are uncertainties that mean that even though our current trajectory is probably taking us towards somewhere between 2oC and 3oC, we can’t really rule out that it might end up being well above 3oC. However, the same uncertainty applies to the cost-benefit optimal pathway.
Links:
The first step towards saving the planet is ignoring the economists – Rolling Stone article by Andrew Dessler.
The flower of poor thinking is to lack influence – Stoat’s post.
The impact of climate change, and the cost of climate policies – one of my earlier posts.
Economics and Values – another of my posts.
Moving beyond benefit-cost analysis of climate change – paper by Jonathan Koomey.
...and Then There's Physics 
I have not yet read Andrew’s commentary, nor William’s commentary on Andrew’s commentary, but surely the synposis sentece is correct:
“…we don’t know how expensive the climate crisis will be, which means cost-benefit analyses weighing how to combat it are pointless.”
“…we don’t know how expensive the climate crisis will be, which means cost-benefit analyses weighing how to combat it are pointless.”
Not pointless. Even knowing if it is a positive or negative will tell us something useful. Knowing that it will be expensive but without knowing how expensive is useful. Knowing how uncertain or where worst as well as best case scenarios might lead is useful.
When alarmist economic fear that the solutions will be worse than the harms is widely used to prevent strong action – and that appears based on discounting the extent and cost of those harms – there are practical benefits to even coarse analyses.
I don’t see how the likely real world climate impacts of +3.5C can support a conclusion that reduced and limited ambition on emissions CAN lead to greater enduring prosperity; I think treating it like it can is politically incompatible with the very policies that can limit emissions to those levels.
Eric,
Yes, I agree that we can’t reliably make these estimates. I’m sure I’ve seen a figure (that I can’t now find) showing the range of these estimates, and it’s enormous. I agree with mrkenfabian that knowing if it’s positive, or negative, is useful. However, one might argue that this is pretty obvious.
I think cost-benefit analyses are always uncertain. It is about the future and the future is very difficult to predict. It is a lot easier to “predict” the past. But somehow it never seems to work this well for the future. Things always have the tendency to go in a different direction then predicted. In the long run everything is in a flux, nothing stays the same and in the end it doesn’t really seems to matter.
Raymond,
Except, a factor here is that the changes will probably be irreversible. Hence, if we use a simple cost-benefit analysis to determine some optimal pathway that we then follow and it turns out that the impact is much more severe than expected (which seems probable to me) then we don’t get a second chance. Hence, a target-based approach where we try to follow a pathway that somehow minimises future global warming seems like a viable alternative to a CBA.
Of course, we don’t want to follow a pathway in which many people suffer because of the action that is taken, so there will be an element of cost-benefit analysis, but the underlying motivation will be target-based, rather than some kind of long-term balance of estmated costs and benefits (which are probably not possible to estimate with accuracy anyway).
You seem to be adopting the usual approach of confusing economics and politics; for example “t’s essentially what the world’s governments have already agreed to try and do. So, it’s not as if this alternative to a simple cost-benefit approach is somehow an outrageously extreme suggestion, or one that would somehow be wildly at odds with the fundamentals of mainstream economics.” What the world has agreed to do is pol, not econ.
> How can a recent CBA suggest that the optimal pathway is one that would probably lead to about 3.5oC of warming, when we’re already probably heading for less than 3oC of warming*?
Umm, why is there an inherent contradiction here? It is entirely possible that we are already doing too much to reduce GW. I’m not saying it is, mind, but why do you think it is theoretically impossible?
> They also require many judgements that are clearly not value free.
Why is this a criticism you make only of CBA? It is true of any approach.
WMC,
Indeed, but my point wasn’t that governments deciding to do this is economics. My point was simply that the idea of a target-based approach isn’t some outrageous idea that is well outside the realms of mainstream thinking. Also, if you follow the link before the bit you quote it is to an article suggesting that target-based approaches are also a reasonable economic approach.
True, but are there any indications that we’ve had to make an enormous number of sacrifices to end up on this other pathway? My impression is “not really”. It seems, to me at least, that we’ve ended up on this other pathway without really trying all that hard. It seems to be a combination of the cost of alternatives coming down faster than expected, and some regions actively trying to implement alternatives. It’s possible, I guess, that if we’d used more fossil fuels than we have done the global economy might be stronger than it is today, but this isn’t obvious.
This may not remain true and we may well discover that trying to limit emissions is much more challenging than some are currently suggesting. However, there are at least indications that we’re already doing better than what some CBAs suggest would be optimal (especially given that these CBAs would seem to suggest that doing so would have required a much higher carbon tax than has been implemented).
Of course. What you quote me saying wasn’t so much a criticism as a statement. My post isn’t claiming that a target-based approach is objectively better than a CBA. My post is me expressing the view that I think a target-based approach is better. In some sense I think any view about what we should do is going to be value laden, and we should all be willing (IMO) to acknowledge this.
I agree that target-based isn’t outside pol mainstream; indeed that’s trivially true. I disagree that it doesn’t involve CBA, even if it renders it somewhat less visible.
> are there any indications that we’ve had to make an enormous number of sacrifices
No; but opportunity costs. What else could have been done with all that has been spent? But I’m still missing your point here, if you’re still trying to justify your “How can a recent CBA suggest that the optimal pathway is one that would probably lead to about 3.5oC of warming, when we’re already probably heading for less than 3oC of warming*?”. I just don’t see the logic in that sentence.
WMC,
Yes, I agree that there will probably be some form of CBA, but there is – in my view – a difference between a century-long CBA, and one focussed on the near term. The context here is IAM-based CBAs intended to inform climate policy, not just CBAs.
I’m not sure what’s so difficult to understand. As I understand the results of these CBA analyses suggest that we’d need to have implemented a substantial carbon tax in order to follow the pathway we appear to be following, or to suffer subtantial costs. As far as I can see, we’ve neither implemented the required carbon tax, nor paid the costs (or, maybe, nothing like the costs suggested by these CBAs). This just suggests, to me at least, that there is potentially some fundamental issue with these analyses. As I mentioned in the post, I suspect the problem here is their choice of baseline against which to assess the costs and benefits. As I understand it, many regard the baselines that are being used in these analyses as no longer being suitable baselines. So, if you continue to use them in these CBA analyses, then it’s maybe not surprising that one would conclude that the cost of following our current pathway exceeds the benefits, but this may not be correct if the baseline against which this is assessed is actually not a reasonable no further policy baseline.
“How can a recent CBA suggest that the optimal pathway is one that would probably lead to about 3.5oC of warming…” That premise alone strikes me as delusional.
> As I understand the results of these CBA analyses suggest that we’d need to have implemented a substantial carbon tax in order to follow the pathway we appear to be following
Ah, that was the unstated reasoning. I think I’m dubious that it is correct. Do you have any refs?
> That premise alone strikes me as
Argument from personal incredulity is invalid.
WMC,
You’ve left something out of your quote. It was “or suffer substantial costs.” As I understand the IAM-based CBA, it’s that you assess costs and benefits against some baseline scenario. The assumption is that we can shift away from that baseline through implementing a carbon tax, or by paying in some other way (which would probably end up being in the form of tax anyway, but let’s just call it a cost). You can then try to determine some optimal pathway along which costs and benefits balance. If we end up on a pathway that leads to substantially less warming than this optimal pathway, then that would suggest that the cost is much greater than the benefit.
My premise is that we seem to be on such a pathway, but it’s not clear that we’ve had to do much to get there. Unless I’ve missed something, we don’t seem to have implemented much in the way of a global carbon tax. It’s also not clear what other costs we might be paying to be on this pathway. It’s probably true that it’s hard to know since we can only really follow one pathway in reality, so we’d be comparing against a counteractual world that doesn’t actually exist.
If you want a reference, you could check Table 1 in Nordhaus’s paper. The Social Cost of Carbon (which the paper also calls the optimal carbon tax) is substantially higher in the maximum 2.5C scenario than in the optimal scenario.
On the other hand, if it doesn’t cost much more to shift onto a pathway that would lead to much less warming than the CBA optimal pathway, why wouldn’t we do it? If there is very little difference between a pathway that would lead to less than 3C of warming, compared to one that would lead to more than 3C of warming, why wouldn’t we aim for the former, rather than the latter? Also, if the former doesn’t actually lead to the costs being substantially greater than the benefits, what’s the point of IAM-based CBAs that suggest otherwise?
Economic models don’t have a good track record. Fossil fuels are turning out to be much less competitive than projected and the winning technologies are different than those selected by economic models. The technologies needed for net zero are going to proceed along a learning curve. My hunch is that we are going to want them sooner rather than later.
“…we don’t know how expensive the climate crisis will be, which means cost-benefit analyses weighing how to combat it are pointless.”
I think it’s worse than that. Even if we knew perfectly the costs and benefits, there is a time factor involved, current benefit vs future cost and a locality factor, first world benefit vs third world cost being disproportionate.
With a sufficiently high discount rate planetary extinction in exchange for current benefit is “optimum”. Which is to say there are inevitably subjective moral questions in play for any CBA.
I guess it would be a bit excessive to completely ignore the economists, and probably it would make more sense to just see CBA as one tool among many to inform our choices, take a broad range of other approaches, and listen to people who aren’t economists more.
i.e. the problem is not that cost-benefit analysis is objectively worse than other approaches, just that it, and the economists who push it, have been given undue influence compared to other methods, other fields of social science and ways of informing policy (like asking people what they think).
Just because economics looks like a highly quantitative mathematical discipline, and the Nordhaus et al got awarded a Nobel-adjacent prize, doesn’t necessarily mean that this approach should take precedence; the field lacks empirical validation, and it is far from clear that climate CBAs are even fit for purpose.
Mostly we don’t use CBA to make momentous societal decisions, anyway, so unclear why it has such prominence in climate policy. At least the target-based approach, the money changing hands is largely people buying tangible pieces of equipment to reduce emissions, which is meaningful, rather than taking about how we value a vibrant and living planet, which economics is fundamentally ill-suited for discussing. If value is even the right concept to apply…
Valuing is a process, and the very act of engaging with a problem and coming to a response changes our values; e.g. the narrative constructed around the UK leaving the EU, the discourse itself, and the ensuing political process is causing a continuous process of reassessment and revaluing of identities and relationships. Some countries and their people we think little of until they are threatened. I can’t help but feel that the same thing is happening and will continue to happen with the environment.
The act of becoming aware of something, and turning to protect it, is an internalisation of that thing. The placing of value is inherently a political, ideological, and narrative process. The finance world is being turned upside down by non-fungible tokens, and we are supposed to think that value is a fixed innate property that can be dispassionately assessed?
Ben,
In some sense we can’t completely ignore economists. Even if there is agreement that century-long CBAs aren’t really a suitable, we’d still need people to help provide information as to how we might achieve a different goal. These people would probably still mostly be economists, or other policy experts.
> Of course, we don’t want to follow a pathway in which many people suffer because of the action that is taken,
This is inherently a tricky mathematical calculation, as the extent of the suffering will be a function of the will of the wealthy to alleviate that suffering – not just a function of aggregated metrics like GDP. A cost/benefit analysis similarly needs context to be of value. Cost to whom? Benefit to whom?
One problem with “think of the poors” type of economic analysis is that it generally ignores the sensitivity to parameterization. What if Bezos, Gates, et al. decade to mitigate the “costs” mitigation? If rich countries take on the sustainability of inequality? And of course, there’s always the hidden parameterization of externalities – something you’d think would merit heightened consideration as fossil girl energy costs spike in ways they wouldn’t if renewable energy were more prevalent.
Pretty much the mother of opportunity costs if you ask me.
… and fossil FUEL energy as well…
ATTP: I agree that indeed the people doing that job would probably be from economics or related fields, although most of the good stuff I see in the climate policy area is just extremely thorough and workmanlike accounting and handling of large hairy datasets (i.e. the kind of stuff Hannah Ritchie excels at).
Really this is data science, that some economists still manage to do well, in spite of spending undergraduate era studying a lot of material that is only useful in internecine wars with other economists.
Around here 1 C of global average warming has delivered above 1.4 C of local warming – Eastern Australia.
Whilst I doubt it is as simple as a direct relationship the potential the prospect of a GAT rise of 3.5 C to deliver 5 C locally does seem properly terrifying. A severe drought with an extra 5 C? An extreme heatwave? Bushfire? Even the cool winter conditions that allow safe burning off for bushfire fuel reduction to reduce hot season risks, will be lost.
It seems to me we are permanently losing forms of underlying “economic” capital that cannot be replaced – but that is to be substituted for by economic growth, that to me looks likely to be transitory and impermanent. How far out do they look? The climate impacts will last centuries to millennia but we seem prepared to bet on short term economic growth to perpetually outpace increasing climate harms and catastrophes – and around here right now with 1 in 100 year floods ten years ago, followed by most severe rainfall deficits recorded (drought), followed by most severe bushfires (with exceptional fire behavior), followed by a 1 in 100 year flood (or 1 in 1000 year flood according to some) I am not seeing this economic growth. Selling more coal and gas to keep up the growth is (seriously) the most likely response from the current Australian government.
Economic studies that show improving global average economic prosperity to 3.5 C seem… naive.
Obviously any course of action must weigh costs and benefits somehow. The question is whether economists have any idea how to do it formally in this case. I agree with Andrew that they don’t.
@mrkenfabian “Economic studies that show improving global average economic prosperity to 3.5 C seem… naive.”
I think it’s entirely possible that the METRICS that economists use to judge prosperity could rise in such a world. That’s not the same as saying people would prosper.
That said, I’m also very much unconvinced that “economic studies” on that time scale have any skill worth mentioning whatsoever.
MT,
Nice to see you back. I think there economists who are looking at this in other ways and it’s hard to see how we can address this issue with effectively without the input of economists. My issue is with the idea that we can properly assess costs and benefits across many decades. I think that if you properly presented the range of outcomes, and did some kind of sensitivity tests on the IAMs used to do these cost-benefit analyses, you’d find that the range was so wide as to be virtually useless. I’d be willing to be convinced otherwise, of course.
It seems that the recent special military operation in the Ukraine has prompted the EU to look at reducing its dependence on fossil fuels at a much greater rate than previously contemplated. Much Russian oil and gas may be stranded assets unless they can sell to China in increased amount rather sooner than envisioned because of climate change. Economics takes a back seat to politics.
Of course in the US while they are stopping buying Russian oil and gas some of the usual suspects see this as an opportunity to ‘drill baby drill’.
Economic models are like climate models. They produce useful and non-useful information. Below is a section from Nordhaus’ Noble Prize lecture. Can’t argue with these findings:
“Here are some of the major findings from virtually all IAMs.
• One major finding of integrated assessment models is that policies
to slow emissions should be introduced as soon as possible.
• A second finding is uniformity of price – that the most effective poli-
cies are ones that equalize the incremental or marginal costs of
reducing emissions. Equivalently, in a market context, that means
that the carbon prices should be equalized in every sector and in
every country.
• Effective policies should have the highest possible participation; that
is, the maximum number of countries and sectors should be on
board as soon as possible. Free-riding should be discouraged.
• Finally, an effective policy is one that ramps up over time—both to
give people time to adapt to a high-carbon-price world and to
tighten the screws increasingly on carbon emissions.”
Click to access nordhaus-lecture.pdf
Chubbs,
Yes, I agree that those are all quite reasonable inferences from this type of work.
In practice the idea that marginal carbon prices need to be equal is very wrong, though: what has been highly successful is mostly driving transformative change in certain key sectors and countries, with implied huge carbon prices in terms of early subsidies for PV, electric cars and wind turbines.
Free-riding on places like Germany (PV) and the US/UK that put in the early effort is in fact crucial to the transition working at all, with clean tech now cheaper in certain sectors.
What the carbon price has done mostly is promote switching between different kinds of fossil fuels, which is only useful in addition to more transformative change that broad-brush economics models doesn’t really capture.
The Nordhaus optimal 3.5C result is kind of a red herring, caused by faulty carbon cycle and climate modeling rather than CBA. Looking just at cumulative emissions it is firmly a RCP4.5 level scenario. The underlying median socio-economics in Nordhaus’ model are also quite different than implicitly or explicitly assumed by other analyses – higher population growth and seemingly higher economic growth – meaning we would always expect this model setup to result in greater warming than those other analyses. Adjusted to be a like-for-like comparison the Nordhaus optimal result is ~ 2.5C warming.
As I understand the results of these CBA analyses suggest that we’d need to have implemented a substantial carbon tax in order to follow the pathway we appear to be following, or to suffer subtantial costs.
I don’t think that’s really true. The Nordhaus optimal path calls for a much more substantial carbon tax by 2020 than actually happened, but in the model this results in a 7% decline in CO2 emissions between 2015 and 2020 without requiring a global pandemic. Without covid our emissions would have instead gone up by 4-5%. And the <2.5C scenario has emissions declining by 50% from 2015 to 2020. A long way from the path we're following.
If you look at the SRES scenarios made at the turn of the century, which are all no-policy baselines, the median 2000-2020 FF CO2 emissions growth is slightly lower than that in GCP data (using a representative figure for 2020). Meaning that, by comparison with SRES, the pathway we're following required no carbon tax or climate policy at all. It depends on what is used for the prior baseline.
Regarding suffering of costs I guess the issue is: what would that actually look like? Even before covid the past decade has seen a much lower rate of global GDP growth than was previously anticipated, with many major developing and middle income countries suffering per capita stagnation or even decline. I don't think there's any suggestion that climate policies were a cause, but then again is that what it would look like?
The controversial thing about Nordhaus 2016 is that the “optimal” mitigation is so weak (about 0.5C), despite the grim baseline scenario (which should imply huge damages), and that is all economics, not carbon cycle/climate modelling.
At least that is an improvement over almost-zero-mitigation from Nordhaus 1992 though.
Paul,
Yes, that’s a fair point. However, the temperature pathway is what is often highlighted, and would seem to largely determine the benefit. So, surely the whole cost/benefit balance is essentially wrong if the carbon cycle model is wrong?
Indeed, but that’s sort of what I was getting at. An IAM-like CBA requires an assumption about a baseline against which the costs and benefits can be assessed. If the baseline isn’t a reasonable representation of some kind of no-policy baseline, then the whole CBA would seem to be largely meaningless. Unless I’m missing something, of course.
Indeed, I agree and I think I did say something like this in an earlier comment. We can only follow one pathway in reality and there will be lots of factors that influence that pathway. Trying to determine how much richer, or poorer, we might have been if we had, or hadn’t, done some specific things is pretty tricky.
So, it is possible that the world would be richer now if we’d used more fossil fuels that we have done, but this isn’t obvious, or it isn’t obvious that the underlying problem is simply a reduced use of fossil fuels.
Ben,
Yes, I was trying to think about the implications of this myself. If the carbon cycle model is wrong (as Paul suggests and I think Figure 2 of the paper seems to confirm this) then the cost along the optimal pathway is actually sufficient to take us from something like RCP7.0 to RCP4.5, but the benefit is only equivalent to taking us from something like RCP7.0 to RCP6.0 (these numbers are not meant to be exact). Unless I have this the wrong way around, this seems to be under-estimating the benefit, so would seem to suggest that if the carbon cycle model was more reasonable, the optimal pathway would lead to something below even RCP4.5 (at least, I think this is right, but I might have it the wrong way around).
DICE and the Carbon Budget for Ambitious Climate Targets
https://doi.org/10.1029/2021EF002041
Explains how to calibrate DICE to the proper carbon cycle/climate models, and makes a big difference to the numbers as Paul said.
Doesn’t deal with the damage function issue though (or the more general problems of this approach).
Ben,
Thanks, that is interesting. I note that the paper concludes that
So, I guess I was wrong that it was simply a baseline issue, but it does seem that it is likely to be easier to meet some of our targets that the 2016 DICE model suggests.
Interesting discussion. Restricting to the mitigation side. Hard to envision a model which knows which technologies are going to succeed in the future or the best policies to bring them forward cheaply. As Ben mentioned above, it was cheaper/faster to develop solar with more targeted policy than used in economic models. Modeled mitigation cost and timing are almost guaranteed to be too pessimistic.
The controversial thing about Nordhaus 2016 is that the “optimal” mitigation is so weak (about 0.5C), despite the grim baseline scenario (which should imply huge damages), and that is all economics, not carbon cycle/climate modelling.
The weak 3.5C damages remain but fixing the other part of the equation means it’s not as costly to achieve a lower temperature compared with the original model setup, which would lower the optimal result. Perhaps more important than the carbon cycle modeling is how they incorporate non-CO2 forcing: basically just copying in from RCP8.5 with no adjustment for mitigation.
In the maximum abatement <2.5C scenario it warms by 1.3C from 2020 to 2100 even though CO2 concentration peaks around current levels and slightly declines from 2040. Probably about half of that temperature increase is due to a doubling of methane, including strat. h2o and Ozone effects, even though it doesn't make sense for methane to be going up much while fossil fuel consumption declines to zero. Basically there's about 1C warming from today baked into the model regardless of how much money gets thrown at it. The carbon price could be infinite from 2020 and it still wouldn't get under 2C, absent carbon sequestration.
paulskio: there is definitely a reasonable case to be made that Nordhaus’ climate modelling is worse than his economic modelling. The baked-in non-CO2 warming thing makes this useless for questions about how to meet temperature targets… although doesn’t everyone know that this is just a toy model?
I think the baked-in warming is inherited from Nordhaus 92, where the model doesn’t want to mitigate CO2 at all anyway, so keeping everything else at RCP8.5 makes sense.
DICE is a bit of an easy target though, there are much less ridiculous optimal-pathway type CBA models.
Did any economic model envision the elimination of Russian oil and gas from Western economies and the concomitant speeding up of its replacement with ‘sustainable’ sources ?
Will the effects of this change in the price rise in oil and gas, plus the initial government support for the transition to greener sources of energy get incorporated into any future modelling ?
PaulS – Thanks, trying to grasp the implications. The headline 3.5C# appears to be completely misleading. We will never know; but, the “optimum” number using economic metrics could be much lower – may be already out of reach.
Izen notes that:
“while they are stopping buying Russian oil and gas some of the usual suspects see this as an opportunity to ‘drill baby drill’.”
The usual Russian suspects have just rediscoverd that acquiring energy infrastructure by invasion runs the risk of ‘burn baby burn’:
https://vvattsupwiththat.blogspot.com/2022/03/a-carbon-footprint-from-hell.html
Who knew economics dealt with values? Everyone!
I actually think that we are on a 3.5C+ pathway since we are doing almost nothing now economically speaking wrt climate change. Perhaps a fraction of a percent of global GDP.
Meanwhile back at the hmm, err, ranch …
The problem of how to do long-term economics forecasting on energy transitions is deep, and differences in opinion seem worryingly correlated with who is doing the prediction:
The economics are guaranteed to be wrong, but maybe there is a way to organise a transition that is robust to radically uncertain cost and damages assumptions. More like a defense-in-depth strategy, allowing for multiple points of failure and unknown-unknowns, than a perfect one-true path approach.
“The problem of how to do long-term economics forecasting on energy transitions is deep, and differences in opinion seem worryingly correlated with who is doing the prediction:”
Alas too true of model intercomparisons:
https://vvattsupwiththat.blogspot.com/2022/03/despite-its-apparent-complexity-this-is.html
off topic, but… methane? https://www.cnn.com/2022/03/14/world/arctic-seafloor-holes-permafrost-scn/index.html?utm_term=164734072661072203a44ffd9&utm_source=cnn_Five+Things+for+Tuesday%2C+March+15%2C+2022&utm_medium=email&bt_ee=AyqLJtHwfAXCuirEj3MFhOU2XnISuLo2jJa0tEpUnMr3qdM7EmhHBSm%2FU1q0NV5M&bt_ts=1647340726612
not sure how relevant this might be, and will have to come back and look closely at what’s above, but couldn’t resist, for obvious reasons:
https://www.santafe.edu/news-center/news/sfnm-arthur-complexity-economics
I am disappointed Kate Raworth’s Doughnut Economics didn’t get more traction. It appears to me to describe the problem with traditional economics well but entrenched systems of thought, particularly in academe, are hard to dislodge.
It is impressive the number of companies, and indeed countries, who’ve added net zero targets in the course of the last couple of years. We’re now in a position where 90 percent of the global economy in terms of GDP is covered by a net zero target (have a look at zerotracker.net). If everybody now delivers on their net zero promises we should be able to stay below two degrees of warming.
A lot of these promises look like just that at the moment, just promises because they’re not backed up by a detailed plan, a reporting mechanism or a clear and structured approach.
If we “ignore the economists” I’m afraid these planned commitments will never come to fruition.
In fairness, we seldom listen to economists, except perhaps:
https://mattstoller.substack.com/p/economists-to-cattle-ranchers-stop
Something Bart said leaked through my ongoing Twitter abstinence:
—
Economics is useful to “analyse the cost effectiveness of achieving a normatively defined warming target”, but less so in determining what the optimal target should be, since that’s a deeply normative decision (hidden in the discount rate).
—
I would like to agree and extend the claim. This formulation helps me clarify my position. My claim is that “economics is useful in steering and useless in destination setting”.
MT,
I think the paper Bart highlighted in his tweet was included in the post 🙂
I agree also agree with the point. There’s not necessarily anything wrong with doing cost-benefit analyses, but given that the assumptions are strongly value laden there’s no obvious reason why these should then be used to define the target/destination. It seems perfectly reasonable for policy makers to determine some normatively defined target and then to use economics to help determine how we might get there. It’s possible that this analysis might indicate that trying to meet the target will do a lot of economic damage and that we might want to consider a different target, but it would still be policy makers setting the targets, rather than simply following cost-benefit analyses.
I still think you’re using special pleading for your preferred policy choice (a temperature target). But that’s too narrow. We have (broadly; waves hands) at least two broad policy choices: a temperature target, and a carbon tax rate. Economics can help choose between those policy options-aka-policy-targets.
Howdy, William!
So. My preferred policy is a concentration target; I believe that having a temperature target is causing a great deal of public confusion. But a temperature target at least could get us roughly where we want to go.
On the other hand a tax simply based on social cost of carbon argument is wrong. This is because the marginal social cost of carbon is not the actual social cost of carbon, which increases with total emissions.
Now that’s not obviously the same as my argument that “economics is for steering, not navigation”. I reconcile that as follows: a simple carbon tax as you imply is based on at least two very dubious assumptions 1) that the objective of governance is to maximize economic throughput (the destination is known) and 2) short term optimization is identical to long term optimization (the landscape is flat and paved).
If in fact these were correct then… well… a simple Pigouvian tax absent other policy would still be problematic – it amounts to a regressive wealth transfer and also a wealth transfer from rural to urban areas in most countries, so it might be politically unachievable and ethically dubious. But if it were achievable, and we wanted to optimize for economic activity, and the situation were properly described by simple linear superposition, then you’d have a case.
That economics (as the term is commonly construed) assumes these problems away is the problem we’re talking about. Some other mode of reasoning is necessary.
Se we differ about who is doing the special pleading. It seems to me like you’re holding a hammer and claiming that everything is a nail.
Dr.Tobis, it’s really good to see (and no snark intended at all) that you have broadened your understanding of economics over the past decade. You make good sense here.
Economics is a tool. It is a useful servant and a terrible master. But if we keep both those truths in mind, it is a very, very useful tool.
Saying a (revenue neutral, sigh, must always include that qualifier for our more conservative friends) carbon tax is the total solution to anthropogenic contributions to climate change is overly facile. If successful, the revenues generated would wither away. If unsuccessful, it would delay the implementation of other tactics.
A carbon tax is a useful first step, perhaps a necessary one. But it should be supplemented by what have been labeled Fast Mitigation tactics simultaneously. Reduce black carbon, especially in the Arctic. Plant trees and reform agricultural practices. Re-establish mangrove stands on tropical islands. Establish X prizes for energy production, storage and distribution improvements. Speed the conversion of the world’s air fleet to modern, energy-efficient engines. Hasten the usage of carbon efficient cement and steel.
So… much… more… we can do today, instead of waiting for the Godot of dramatic decreases in greenhouse gases that we all know will not happen in the developing world. We can buy time until the development of large emitters like India and China permits them to learn from our mistakes and successes and reduce their environmental impacts on their own accord.
Policy responses to climate change are often seen, in a broad sense, as pushing a policy lever (carbon tax/emissions cap) lever to a certain position. However, I wonder if that is rather misleading: we have lots of levers, and we don’t know exactly how they work, and it will take a couple of decades to find out.
i.e. this is more like a game where it is worth paying early on to get access to the broadest possible set of responses and just to know what the landscape looks like. Somewhat similar to dealing with a military attack or a fight against an infectious disease.
Unlike in problems that markets are good at, where marginal prices point you in the right direction, and just pushing a price lever works well, we are looking at problems of disruptive change across a gnarled and poorly mapped out optimisation landscape, so it isn’t clear that the techniques of economists are generally going to be particularly useful. (which is pretty much what mt just said)
My modest proposal:
Why not listen to the pros?
A carbon pricing scheme that works would, by it’s nature, designed to be avoidable and revenues generated by it should decline when it works. Being a cost that is avoidable by shifting to clean energy is the point – essential even. Maintaining revenues is not the point so care is needed not to induce reliance on them.
I see carbon pricing aimed at inducing longer term infrastructure investments – by energy producers and industrial users, not one aimed at retail consumer choices – and would like to see mechanisms that shield the poorer consumers from such direct price rises. Using the revenues for that makes a kind of sense, although I am not a big fan of tying such revenues to specific purposes; it isn’t necessary and seems more about political palatability.
But as those infrastructure investments flow through the tax/levy component of retail prices should fall in line with the desired carbon tax “avoidance”.
Whether energy costs ultimately rise or fall is going to depend on whether the investment choices are cost effective. There is good reason to have some optimism that clean energy will ultimately prove less costly and more economically productive than the fossil fuels they replace, even without consideration of Social Cost of Carbon (ie with fossil fuels supported by enduring institutional cheating), not more – I think we can expect far superior energy efficiencies with electrification for most energy uses.
On the shortcomings of quantitative economic models:
“…what matters for policy is the possibility of a catastrophic climate outcome. How probable is such an outcome (or set of outcomes), and how bad would they be? And by how much would emissions have to be reduced to avoid these outcomes? I have argued that the best we can do at this point is come up with plausible answers to these questions, perhaps relying at least in part on consensus numbers supplied by climate scientists and environmental economists. This kind of analysis would be simple, transparent, and easy-to-understand. It might not inspire the kind of awe and sense of scientific legitimacy conveyed by a large-scale IAM, but that is exactly the point. It would draw back the curtain and clarify our beliefs about climate change and its impact.”
https://dspace.mit.edu/handle/1721.1/120585
I’m not sure what Mr Fuller is congratulating me for. My position is mostly unchanged. I have long been and remain convinced that using economics to *achieve* goals is necessary and reasonable while attempting to use economic arguments to *set* goals is a terrible error.
I also remain convinced that the discipline of economics as it currently exists in the real world has neither skill nor application on century time scales. In my opinion, the awarding of prestigious prizes to developers of models in the vein of DICE is ill-advised in the extreme. I also think dollar-denominated or (worse) GDP or dollar-per-year denominated metrics applied to cost benefit calculations over multiple decades are meaningless. We must indeed ignore such efforts.
I don’t deserve any credit for further study into the matter, study which I would consider pointless.
My own view is that the economic models paint an overly rosy view of fossil fuels under a no carbon policy future. There is no physics or geology in these models, only extrapolation from the past. But, the fossil fuels of the future will not be the fossil fuels of the past. Those resources are largely depleted. We will be chasing poorer quality resources, often in areas with bad governance.
Oil and gas have always been boom/bust commodities, but the growing marginal production from fracking has magnified the swings. The current spike a good example. Large fracking investments are needed to maintain production in the face of rapid well depletion. When investment drops, for what-ever reason, production plummets and holders of existing resources take advantage. Good luck maintaining 3% growth as far as the eye can see; using a declining energy resource, much of which is controlled by dictators.
Chubbs,
My understanding is that some – or maybe, most – of the energy system IAMs (by which I mean those that try to actually model the future energy systems rather than do cost-benefit analyses) also tend to underestimate how quickly some of the alternatives will become, or have already become, cost competitive. It does seem that there are indications that some of these models over-estimate the likely cost of deploying alternatives to fossil fuels.
As per Paul’s comment it seems that a key issue with Nordhaus’s model is that the carbon cycle model is wrong (i.e., the model that links between emissions, concentrations, and then warming is wrong). However, it still seems that it might be over-estimating the cost of shifting away from the baseline scenario, or is essentially using the wrong baseline scenario (or some combination of the two).
One might argue that it’s virtually impossible to properly define a true baseline since there are many factors that can influence the future pathway. I can see why it’s necessary to use one, but suggesting that it’s some realistic representation of a future no policy pathway is probably unrealistic.
ATTP,
Yes, model baseline is best viewed as a scenario. Eyeballing “DICE” model charts, the projected no policy carbon emissions lies between RCP6 and RCP85 ( roughly 70GT/yr CO2 in 2100). Yet economists draw no fire for being unrealistic.
Chubbs,
Yes, it is slightly bizarre. You would think that if there was a group of scholars who could assess the most likely baseline scenario, it would be economists. Yet, it’s climate scientists who seem to be getting most of the flack for using high emission scenarios as baselines.
mt says: I’m not sure what Mr Fuller is congratulating me for. My position is mostly unchanged.
Maybe it’s a real-life example of the apocryphal Mark Twain quote:
https://quoteinvestigator.com/2010/10/10/twain-father/
“it’s climate scientists who seem to be getting most of the flack for using high emission scenarios as baselines.” Shoot the messenger, right? Rest assured that if/when the output hits the fan, scientists will be blamed for being too conservative in their scenarios and baselines. The folks who are providing the flack might listen to Shakespeare… the fault lies not in our climate scientists, but in ourselves… but they probably won’t.
So many good jokes about economists. I recall punch line to one where engineer, philosopher and an economist are stranded on a desert island… economist solution begins “assume a boat…”
I think that does capture something about the freedom available to economists in building their models and ideas that may not be available with other disciplines. Nordhaus remains a free man to this day!
Chubbs,
Note that the baseline in Nordhaus’ paper is actually current-policy (as of 2015), not no-policy. I’m not really sure why no-policy or current-policy emissions lying between RCP6 and RCP8.5 would be considered unrealistic though?
Paul,
Well, this seems to be the current debate with some arguing that current policy is close to RCP4.5. I agree, though, that this isn’t obviously correct. I guess this depends somewhat on whether or not you accept the recent arguments about the current policy pathways being well below RCP6 and that something like RCP8.5, or close to this, is now largely ruled out.
Paul,
ATTP hits the point I was trying to make. Certain scenario attributes go together. To get high emissions through 2100 requires low cost and abundant fossil fuel and expensive alternatives. Similarly low emission cases imply reduced economic advantage for fossil fuels. It is inconsistent to say that we are on a relatively low emission path; while maintaining that reducing fossil fuel use is too costly for soceity.
We are in a period of rapid change in energy economics, so our ability to predict the future is limited. In the past decade, fossil fuels have lost a large portion of their economic advantage making high emission scenarios less realistic. Like RCP85, the 2015 DICE emission projection is outrunning actual emissions. As outlined above, I don’t think the fossil fuel resource base supports cost-advantaged growth in fossil fuel emissions to 2100. Not against alternatives that have more sustainable resources and improving economics.
Chubbs,
I guess a question is whether or not the low cost of alternatives that will probably influence the future energy pathway is simply happening because we’ve been lucky that they’ve turned out to be cost competitive, or if it’s because of policies that have incentivised their development. My sense is that it’s probably some combination of factors, but this might imply that defining a no-policy, or even current policy, pathway is pretty tricky.
is this “happening because we’ve been lucky that they’ve turned out to be cost competitive, or if it’s because of policies that have incentivised their development.” ? I think the incentives for fuel development etc. remain heavily skewed toward fossil fuels as a general rule. I think the incentives for green energy sources, such as they are and have been, have contributed to the increase and deployment success. We have also seen economy of scale cost-reduction thanks to the ramp up of production, which I think, was to be expected. I don’t think we have been particularly lucky with development, I think breakthroughs have been the product of hard work. It’s tempting to ponder how much more green energy we might have deployed if we had shifted all or most of the energy incentives from fossil fuels to renewables. I think we might cite great good luck had a country like the US or UK have accidentally or deliberately greatly reduced the policy incentives that go to fossil fuel. Do you feel lucky, punk? This punk, says…. hmmmm… not really lucky so far. I keep hoping for that stroke of luck that would eliminate incentives and subsidies for fossil fuels.
https://www.nature.com/articles/d41586-021-02847-2
https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs
Cheers
Mike
ATTP,
Our ability to pick economic winners and losers from a range of unproven technologies is often limited. That said, the solar learning curve has been relatively stable for decades and the outcome could have been anticipated. Policy has been important; because, research and technology development alone is not enough for commercial success. Learning by doing and building commercial scale are important.
Agree that “no policy” is difficult to define and to evaluate. There will always be policy and policy change. Its much more than “no policy” a whole list of assumptions and model projections are carried along. OK for the near term, but problematic for 2100.
I’m not aware of any credible climate models that don’t support the conclusion that shifting out of fossil fuel burning as rapidly as possible is indicated. There are of course, the incredible not-so-credible models like Lomborg’s that support less urgency, reduced emissions targets and maximising the use of fossil fuels until enough people agree with him about what the solutions to a problem he downplays should be.
I’m inclined towards using economic modeling more narrowly to help pick the pathways that maximise growth of clean energy rather than for questioning IF we should do so – which pathways ought to include enough support for R&D and demonstrations of emerging technologies that we don’t see worthwhile developments fail for reasons other than lack of actual potential. I would even like to see a fund that can buy up some of the failed ventures to put them into the public domain – where commercial failures are not down to lack of potential of the technologies, but fail for other reasons.
It seems kind of obvious to me that attempting too much, too fast can be counterproductive -there is an element of truth to the alarmist economic fears of disruption and loss of prosperity the opponents of strong action like to emphasise, whilst falsely highlighting the unreasonable and fanatical voices and suggesting they are representative. The economic health of existing commerce and industry is a prerequisite to mobilising existing industrial capabilities to advance the shift to low emissions technologies. Economic modeling can be used help find any ‘sweet spots’.
It doesn’t look like hypocrisy to me, just practicality, to use existing fossil fuel based industries to maximise the growth of the clean energy generation that will replace them; the very best use for coal fired electricity may be in powering PV and battery production, with an immediate energy multiplier effect, ie that use results in much more energy production overall that ultimately makes doing away with the fossil fuel burning easier.
The polar temps seem a bit off right now. Do those temps have any significance for permafrost stability? Does this situation tell us anything about the economic models or can the economic models tell us anything about these temp anomalies? Much ado about nothing, maybe.
Carbon brief article on costs of mitigation is good (has some stuff on baselines and market failure):
Usually ‘no policy baselines’ are really just the most conservative and unimaginative projection of the current state of affairs into the future. In other words ‘no technology changes and everything gets done the same way forever’: this is captured neatly by the deprecated phrase “business as usual”. In reality most everything will be quite different in 100 years time.
BAU is useful as a baseline as long as everyone acknowledges that this is a bit of a strawman.
Where this starts to go wrong is thinking that this baseline represents an optimum that will be costly to move out of. We are not in an optimal welfare state, and are anyway paying the cost of continual transition, the question is just how to guide the direction and speed of this transition.
I think once you start accurately calculating the cost of mitigation simply from sea level rise, as “we” are forced to move up and/or back from the coast, it becomes pretty clear that we are looking at the penny of prevention cost model versus a pound of adaptation costs. Every day that we don’t spend every available penny on prevention, we saddle our children and grandchildren with the costs of our delay. Because sea level rise is such a slow process, it is pretty easy to ignore. It might be easier to spot as a serious problem if the weather at the poles changed and they suddenly got a lot warmer, but how likely is that sort of thing? I think all the economists and a lot of climate scientists have been pretty clear that such a thing is pretty darn unlikely. No worries.
Like RCP85, the 2015 DICE emission projection is outrunning actual emissions.
There’s a largely unacknowledged issue with emissions scenarios that there is decadal-scale variability in real-world emissions and the ability of near-term scenario trajectories to match observations will be somewhat beholden to the period which came before it, with little relevance for long-term behaviour.
For example, following the relatively slow emissions growth of the 1990s there was a decade of very high growth from 2000-2010. This lay at the 85th percentile of SRES (no-policy) scenarios made at the turn of the century. Conversely, the period 2010-2020 lay around the 15th percentile of SRES scenarios. A representative 2020 emissions figure lies just below the SRES median. However, if the same SRES scenarios were forced to agree with observations up to 2010, thereafter following its original 2010-2020 trajectory, about 80% of scenarios would exceed observations.
With the DICE scenario emissions are forced to agree with obs up to 2015, really just after the China-led surge ended. In that situation it’s always going to be very likely that a scenario will exceed observed emissions growth in the near-term.
The practice of tying climate model data to agree with observations on a single year would be considered absurd because of climate variability, but it’s normal practice in emissions modeling.
Ben,
That is a good article, thanks.
Paul,
Indeed, this is one of the issues I have with Pielke’s claims about having falsified some of the high-emissions pathways. Just because the recent short-term trends don’t match observations isn’t a strong argument for claiming that these scenarios have been falsified (other than in the sense that the real world will not precisely match the scenario, which is largely known a priori).
Yes, economic model base cases generally assume that current conditions will be maintained as far as the study cares to extrapolate. Not a bad assumption when alternative options are limited. However, currently there is a close battle between competing technologies. Highly unlikely that both technologies will continue to duke it out evenly for decades. What is going to get better for fossil fuels in the future: technology, resources, economic scale, incumbency, environmental impact, policy support?
“Just because the recent short-term trends don’t match observations isn’t a strong argument for claiming that these scenarios have been falsified…” This isn’t a specific point I’ve thought about before, but Ken’s objection is obviously valid.
Permit me to generalize a bit. This is yet another data point tending to indicate that prominent people thinking about the energy-economics prognosis from a professional standpoint don’t have as good a grasp about how to think about these matters as do scientific and engineering professionals from tangentially related specialties. It’s shocking and discouraging.
It’s understandable that saying “they should be ignored” seems to outsiders like a vast overreach.
And given what deniers are willing to say and believe about climate science, it is indeed problematic to make such a claim. It’s so much easier to defer to credentials and publication records.
But taking all self-declared expertise at face value has never been wise. I don’t care what “experts” on homeopathic medicine have to say about their field of expertise. I think identifying real expertise is a central issue of modern governance.
MT,
Indeed, given how climate deniers can make strong claims about the veracity of work they have no direct experience in, I’m reluctant to do the same. However, that they have a tendency to do so doesn’t mean it’s never a valid approach.
One issue I have with the claims made by, for example, RPJ, is the confidence with which they are made. I have no problem with the argument that we seem to be moving away from some of the high emission pathways, or that we may well peak emissions soon, given that alternatives are becomining increasingly cost competitive. What I have an issue with are claims that these high emission pathways are essentially now impossible. Even though our current trajectory is clearly away from this, there is nothing stopping humanity from making stupid decisions that would put us back onto such a trajectory. I really hope this won’t happen, and I am reasonably confident that it won’t, but not confident enough to claim that it’s no longer possible.
This all ignores that we don’t even need to be on one of these higher emission pathways for the impacts to be severely disruptive.
“Indeed, given how climate deniers can make strong claims about the veracity of work they have no direct experience in, I’m reluctant to do the same.”
This is a topic I’ve tried to raise before. I sometimes think of it as a question of the epistemic status of the various disciplines.
Climate deniers, claiming that physical climatology is not competent to make the assertions that it does, are wrong. I am firmly convinced of this based on direct experience of the nature of the reasoning behind the claims.
It doesn’t follow that DICE-style climate economics is competent to make the assertions that it does. I think it is possible for one academic discipline to have a stronger epistemic basis than another. Indeed I see no reason to expect the contrary.
The trouble is that decision-makers have no clear basis for making this very consequential judgment. To further complicate the question for climate policy, the three working-group structure of IPCC tends to imply comparable authority for all three reports.
MT,
Yes, I agree that not all disciplines should be expected to have the same epistemic strengths. However, as you say, it’s not trivial to demonstrate this, or quantify it in some way. In some sense, this is why I find some of the social science work that focusses on the science society, or science policy, interface somewhat frustrating. They were the scholars who could have helped to understand when we should trust the results from a discipline, and when we might want to be more skeptical. However, they’ve sometimes confused things, rather than helped to clarify these issues.
mt: “The trouble is that decision-makers have no clear basis for making this very consequential judgment. I would go a step beyond your point and suggest that decision-makers often give more weight to an academic discipline (economics) that has a weaker epistemic basis than another one (climatology). This is only natural and logical because many voters who select the decision-makers think that hurting the economy by abandoning a highly profitable fossil fuel energy model may be a bigger problem than turbo-charging the sixth great extinction event by refusing to allow for the requirement that we collectively strand assets. Nobody wants the music to stop while they are holding a portfolio of assets that will be worthless because they have to left where they are.
At least in the UK, a lot of the “decision-makers” (rich people/CEOs and politicians) come through degrees with a significant side-serving of economics (e.g. PPE degrees) or through the finance industry. Actually making things is for the less well-to-do (e.g. a lot of the inventors/industrialists in the steam age came from more middle-class roots and had odd egalitarian ideas compared to the aristocrats).
Germany it seems more common for CEOs to have an engineering/science background, so I think this might be partly an Anglophone thing.
Hence, economists get treated very seriously…
I’ve been meaning to add some comments here (beyond what I (“tidal”) said at Stoat’s before this post was published.
And I may yet get to those comments!
But I thought it would be useful in the wake of the the 4 posts just upthread between mt and ATTP to introduce another relevant (and timely) debate between “scientists and engineers” and “economists” about the feasibility of rapid changes in type and availability (quantity, etc.) of energy access and economic impacts of same.
A quote from mt makes a nice segue/intro to my comment:
As we’re all aware, there’s a fierce and consequential debate happening right now as to whether the EU – and particularly Germany – should outright boycott the import of Russian coal, oil and (most contentiously) gas.
The debate centres around both whether it is technically feasible for the economy (specifically Germany’s) to backfill supply and make process or other changes at the level of households, industry, etc. *AND* what the costs to Germans and Germany would be.
And the public and policymakers want/demand some clarity – or at least guidance – on these questions, because they want to evaluate the benefits of doing so (inflict pain on Russia, help Ukraine, etc.) against the self-imposed costs of doing so (and, of course, whether it is technically feasible).
You’d be more prone to act if the benefits (pain to Russia) greatly exceeded the costs (pain to self) and/or if the costs were considered quite small.
The early public framing of the debate has been characterized by fuzzy, “my preferred policy”-biased descriptions of the costs ranging from “incalculable”, “heaviest proportions” (Minister of Economic Affairs Habeck) to “manageable”.
Into this fray, in the the past week, two groups have published analyses looking to *quantify* and bound both the technical and economic implications of an embargo (or, just Russia cutting off supply). (1) The Leopoldina National Academy of Science, almost all German science, technology and engineering professionals (including names I recognize from climate work – Ottmar Edenhofer at PIK, and Jochem Marotzke at Max Planck at the Max Planck Institutes); and (2) a collaboration of leading (domestic and ex-pat) German economists.
Adam Tooze has published a very good, accessible article.
But I’d urge people to read the full reports (an English version of the economists policy brief is – I don’t think Tooze included the English link.)
Also a subsequent supplement from the economists yesterday, going into more detail about the differences between the economists’ approach and that off the science, tech, engineering types.
And also the informative, engaging, thoughtful, thorough (and *colourfully* “commented”!) twitter threads the (economist) authors have attempted – I’ll shortlist @BachmannRudi, @ben_moll and @kuhnmo.
While both reports determine that the technical and economic implications appear far lower than most people’s intuition, what seems to particularly surprise – and irritate – readers is that the economists suggest that not only is the economic hit likely very low – 0.2 to 0.3 reduction in 2022 German GDP in their main case – but also that the feasibility for technical and other substitution and elasticity responses is greater than the technologists conclude. (Such as an outer bound of an ~8% resultant decline in primary energy, even if Russia imports represents 30% now.)
I am going to leave it there for now, but there are some things I want to highlight in the context of this forum discussion:
• It’s the *economists* who are suggesting that the economy can absorb and respond to such a shock to its energy system at more modest costs (multiple meanings) than either the technologists or (moreso) the public and policymakers believe. I think this is important to keep in mind when critiquing (particularly) energy IAM’s. (If I come back, I will extend my own thoughts on the damages in IAM’s.)
• Sure, again, an option is here is also to “ignore the economists” and just go with the public stand-in for costs as “Incalculable!”. But note that there is both public and policymaker *demand* for such inputs *AND* you can make potentially very wrong assumptions if the economists are giving you a realistic number you just somehow, somewhy reflexively balk at.
There was supposed to be a summary table image in the post above, but I apparently messed up the html tags. ¯\_(ツ)_/¯.
Here’s the raw url link:
I also apparently messed up a closing html tag elsewhere in the comment, if anyone wants to diagnose and fix.
oh, geez, Adam Tooze’s “Chartbook” link also got dropped by my html misadventures….
Here it is:
https://adamtooze.substack.com/p/chartbook-97-is-boycotting-russian?s=w
One issue the UK is facing (compared to Germany) is that there is much higher inequality in energy costs:
https://www.ons.gov.uk/economy/inflationandpriceindices/articles/energypricesandtheireffectonhouseholds/2022-02-01
There are various reasons, but the UK has the worst insulated housing stock in northern Europe, partly just due to poor regulation and cultural preferences, but also gas has historically been pretty cheap, due to the big boom in local production a couple of decades ago. Germany, on the other hand has high taxes on household energy consumption, and pretty well-built houses.
I don’t see how the less-well off in the UK are going to be able to cope with current energy prices next winter unless government takes some pretty drastic action, and this is going to get worse if the EU completely cuts off Russian oil/gas (I guess it won’t just be Germany).
The ECONtribute report is a neat illustration of the kind of method economists tend to use: looking at small fluctuations, you can get an idea about how easy it is to substitute one kind of energy for another, and then try to model a larger disruption.
The question is whether that works, or, for example, limited capacity (in the short term) for physically moving energy from one place to another (pipelines, LNG terminals) or use a different energy carrier means the nice smooth substitution curve runs into a brick wall at some point outside the calibration region. For which you need to know something about physical infrastructure.
Rust,
Those are good points. I think one issue is that there are (at least?) two types of IAMs. There’s the cost-benefit ones like DICE, which are actually quite simple, and then the ones that actually try to model how energy systems could evolve. I think it’s the latter that were mostly being discussed in the Carbon Brief article that Ben highlighted earlier and are probably what were used to make the assessments that you’re discussing. As I understand it, even they have some issues since when estimating the cost of changing the energy infrastructure, they don’t always include the benefits of doing so, but they are pretty sophisticated models and we should, in my view, be careful of relying on intuition when trying to assess the impact of various possible changes.
Rust,
Would expect energy/economic models to perform better in the short-term, i.e, Russian sanctions, since they have a good picture of the current state of the energy system. However, the predictions are going to degrade with forecast length as the energy system evolves in an unanticipated manner. I am not sure we have any climate scenario which tracks the soft climate policy path we are on: heavy reliance renewables/EV, with much less attention to other alternatives or to other sectors, like agriculture or heavy industry. If we can’t predict the near-term evolution of the energy system, you can be sure the long-term is off. In contrast, don’t need to get the trajectory right in a climate model. One of the reasons climate modeling is an easier problem.
Economics, unlike most other prediction fields,has a savage negative feedback loop.
A bit like gambling on the ponies compared to a poker machine.
In the latter you know the odds are fixed against you, play long enough and your stake diminishes.
–
Gambling on the horses on the other hand has a negative feedback loop.
The more likely the outcome, the more likely people with an ability to fix the outcome will fix the outcome.
Worse they could be competing against each other without knowing they are doing so
.-
Now take Economics.
Whether tulips from Amsterdam, the stock market or options the moment one economist makes a prediction all the people affected by it try to change the import in their own benefits.
–
In other words they moment they make a prediction it is highly likely to destroy that prediction.
rust/tidal
I have no serious knowledge about everything called an “IAM”, but I have looked under the hood at DICE.
Also, although there is a policy decision to be made here, cutting off Russian fuel is more of a steering question than a goal-setting question, and is not dependent on the sorts of long-term extrapolation that I find so dubious in DICE and its ilk.
That is to say, one is asking what the immediate impact of such a change would be. (I also think it’s fair to use GDP as a metric of short term impact, whereas in the long run it is rather meaningless.)
I am a bit confused though, about what “It’s the *economists* who are suggesting that the economy can absorb and respond to such a shock to its energy system at more modest costs (multiple meanings) than either the technologists or (moreso) the public and policymakers believe. I think this is important to keep in mind when critiquing (particularly) energy IAM’s.” is supposed to mean.
In general there’s a concern that economic models are too sanguine. This would be the case here as well. So I’m not sure what your emphasis is about. If you’re implying that this is contrary to expectations of people skeptical of this methodology, I’d suggest the opposite is true.
Again, I don’t really have any knowledge of what “energy IAMs” operating on an interannual prognosis window actually do, but I don’t a priori, lacking detailed knowledge, find them as implausible as multidecadal DICE type models.
Tangentially, I think there’s a case to be made that climate models are too sanguine as well.
In general models do well in the realm of observed cases. They are of necessity better at interpolating than extrapolating, and it’s difficult to avoid having some of their skill be derived from simply predicting that things will be as they always have been.
I think in general, complex models of complex systems are likely to give you a lower bound on the amount of disruption to expect in a perturbed system. The perturbed system could have dynamics which are missing from the model, which don’t really come into play in interpolations but may be hugely important outside the bounds of prior experience.
We’re in the habit of defending against a claim that climate models are too alarmist, but these critiques generally lack substance. I think the real concern is in the opposite direction.
I think it’s fair to say that the further we get from known conditions, the more likely it is for models in general to miss or underestimate disruptive phenomena. Further, from a cost-weighted risk perspective, such failures would be much more consequential than comparable overestimates of disruption.
MT,
I think you’re right that models of complex systems can miss certain outcomes when they considering regions that are not well understood, especially if the system is undergoing a large, quite rapid, perturbation. We may already be seeing some indications of this with the recent heatdome over the PNW and with both poles being anomalously warm. It may even be that the models can capture these type of events, but that we tend to not highlight the rare events that we may not trust.
However, I think there’s a difference between how some of these models are used. I may express this poorly (I’ve been thinking of how to explain this and still haven’t quite got it yet). We tend not to use climate models to highlight some kind of optimal pathway, or to suggest that there are unlikely to be disruptive impacts along some pathways. We may be aiming for something like 2C, but this isn’t really because we think it will be fine if we keep warming below 2C, but because the impacts will get increasingly severe the more we warm and because limiting warming to 2C is probably a realistic goal. If anything, we’d like to do better than that. Most who work with these models are probably well aware that there may well be impacts that these models don’t capture well.
Cost-benefit IAMs, on the other hand, are being used to estimate optimal pathways, even though these pathways are well outside anything we’ve experienced. So, in some sense, a simple model is being used to model what is clearly a very complex system and the output of this models is explicitly indicating some kind of optimal pathway even though it seems clear that there are many factors that are not included, and many impacts that these models don’t consider.
So, even though I agree that complex models will probably miss things when considering a system that is well outside the regions for which we have priorer understanding, there does seem to be a difference between using these models to indicate what we might want to consider avoiding, and using them to argue that certain pathways are optimal.
I was going to apologize for interrupting this valuable and fascinating conversation but I don’t think I will, because reasons (which I hope will be obvious to others than myself). If the image doesn’t come through, here’s the “money” quote:
Even if fossil energy has enabled all the development of the past 200 yrs—and even if safe energy is intermittent & cannot power some things we love, like flying—it STILL seems 100% worth it to me to have life on earth continue rather than end. I mean, come on!
Lots more downthread.
Ken, your point is of course well taken even if multidecadal general-economics IAMs have some skill.
I think that sort of IAM “modeling” effort is essentially fictitious, of little value other than as a rather ill-considered exploration of systems dynamics, and lacking in any serious, never mind testable and tuneable, connection of the model dynamics to those of the real world. So (and meaning no disrespect, as I see your point) I find your claim redundant.
Any use whatsoever of these methods to inform policy is pretentious and dangerous in my opinion.
Susan, greetings.
Gen’s point is fairly obvious once you accept the explicit premise and a couple of implicit ones. I’ll leave the implicit ones aside for now, and try to stick to the spirit of this conversation.
For now I’d like to point out that it’s a hard sell, even accepting the premises. This raises another question about “optimal policy”.
To maximize the likelihood of long-term health of the biosphere, if politics didn’t matter, the best bet after all would indeed be to drastically and urgently reduce human consumption, and (I realize this is controversial in some circles but the math is inescapable) drastically reduce human population as well. I might even support it in some form. But it isn’t going to happen, because politics does matter.
I’d like to suggest that the “optimal” path we’re looking for is the least damaging one that the world’s population will tolerate. There’s a political constraint here. And neither Gen’s simple claim nor the economists’ oversimplified models take it into account.
We really aren’t, collectively, (acknowledging existing or foreseeable power constellations as part of our collective circumstance) smart enough to properly follow anything like an apolitically optimal path. I’d be relieved to be convinced that we’re smart enough to avoid a massive collapse.
I’m a fan of Genevieve’s activism but I always find myself conflicted in these cases. It seems obvious to me that substantially changing the planet’s climate is a really foolish thing to do and that there is a real risk of some pretty severe outcomes and that we will almost certainly eventually regret not having done more. However, I’m also aware that many people would like to live better lives, and that many even in the developed world are still not particularly comfortable. Also, even though climate change will be disruptive, it’s unlikely to be a true extinction level event (although that doesn’t mean that it can’t be pretty catastrophic).
So, I find it difficult to get a balance between highlighting how serious this will become (or might already have become) if we don’t take serious action to reduce emissions and being aware that some amount of future emissions are unavoidable, partly because we can’t turn everything off overnight and partly because some continued fossil use might still be reasonable. I’m also aware that I’m fortunate and find it difficult to promote a narrative that might imply that those less fortunate will have to suffer to solve a problem that is not of their making.
Although there is indeed policymaker and public demand for quick simple answers, that things like DICE provide about costs versus benefits, those answers are probably very wrong to the point of not being fit for purpose.
More realistically, there are huge risks and opportunities that are poorly mapped out. There are a bunch of no- and low-regret strategies, though, for e.g. mass deployment of technology similar or lower in cost to fossil tech, and helping to push earlier-stage tech over the hump. From a strategy point of view, that gives you many more options, and most importantly allows you to learn what the costs and benefits really are.
I keep meaning to take the time to read through all this properly, from which I’m sure I’d learn. Eric Steig’s opening remark speaks to me. But it is so frustrating to see people of good will being overcome by heedless kleptocracy, and, really, all or most of the deadly sins. Today, fusspotting over earlier skilled defiance of truth, reality, and humanity’s need for sharing and good will, I remembered the 1947 meeting that helped get this nastiness off the ground. DeSmog treats it well enough:
https://www.desmog.com/mont-pelerin-society/
science denialism is intended to quash immediate impulses to respond to the crisis, thus buying time for commercial interests to find a way to profit.
Dr. Mann agrees with ATTP that human extinction is unlikely.
“There is no evidence of climate change scenarios that would render human beings extinct,” Michael Mann, a distinguished professor of atmospheric science at Penn State and author of “The New Climate War: The Fight to Take Back Our Planet” (PublicAffairs, 2021), told Live Science in an email.
However, it’s possible that climate change will still threaten the lives of hundreds of millions of people, such as by leading to food and water scarcity, which has the potential to trigger a societal collapse and set the stage for global conflict, research finds. ”
https://www.livescience.com/climate-change-humans-extinct.html
Hundreds of millions of deaths are possible per this article. I think we might be setting the bar too low for declaring a global emergency and getting really activated to produce a change in our global pathway if our reluctance to move into alarm mode is dictated by the threshold of a human extinction event. People say they have difficulty promoting actions plans and narratives that create extensive suffering, but it is really quite easy to produce those results. No promotion of that narrative and outcome is needed. All that is required to move forward with the narrative that creates extensive suffering is to be cautious about declaring the emergency in forcefully certain terms. Do it or don’t. Human extinction? Am I worried about human extinction? About as much as I am concerned about the fact that our sun has a pretty well-defined lifetime. I am more concerned about the fast moving sixth extinction event, resource depletion, loss of natural global habitat that is essential to so many species, including our own. Is it difficult to find a balance between highlighting how serious this situation is and the other concerns that arise once you fully embrace how serious this situation is? I am not struggling with choosing a severe imbalance about how serious this situation is with the stakes defined in the Live Science article: “it’s possible that climate change will still threaten the lives of hundreds of millions of people, such as by leading to food and water scarcity, which has the potential to trigger a societal collapse and set the stage for global conflict, research finds… ” I can sort that out rather quickly and easily.
Cheers
Mike
Smallbluemike – There will be those directly impacted – the droughts and wildfires, the floods, the inexorable seawater inundations but I think the human capacity for making things much worse than they need to be through mismanagement, blameshifting and conflict should not be underestimated. That is the negative feedback that can make the direct impacts look small.
We are well along the mismanagement pathway – doubt, deny, delay as mainstream climate “policy” and persistent blaming of climate activism (labeling the alarmed as alarmists) for the inadequacies of what sincere climate policy there is as well as for just banging on about it all the time. We might yet get perovskite solar cells that are cheap as chip wrapping and batteries that can run ships and trucks and planes but so long as our best examples of governance evades responsibility or climate accountabilty and avoids any commitments that involve any kind of economic sacrifices that won’t be enough. Likely not enough to even compensate for the feedbacks of mismanagement.
thank you, Ken. Your evaluation of our situation is similar to my own. It is a comfort to know that others folks are evaluating the situation and maybe feeling a bit of dread and alarm.
Speaking of “Ignoring the Economists”, it is like 5 parts hilarious, 3 parts predictable and 2 parts tragic observing that the political response in the West to the supply shocks to hydrocarbons and other commodities affected by the Russian sanctions (and the war on the ground in Ukraine) is clearly going to focus on measures to specifically effectively *increase demand* (and thereby prices as well at the margin!) for these goods with targeted tax cuts, rebates, etc. And largely across the board (by income, vehicle type, etc.).
This is definitely a case of “ignoring the economists”.
There’s no way these are the first, best proposals the economists gave. This is the politicians (reading their publics) rejecting what the economics suggested.
And I think people should keep this in mind, in that climate economists – including the individual climate economists that climate activists have a particular animus for – have been unanimous *for decades* that “we” should be pricing carbon. And, we’ve largely been unable to get the political will to follow that advice – irrespective of whether the level of the tax was small or large enough for the liking of “but the fat tails, and tipping points!” commentariat. (With scant few notable exceptions like Canada, where yours truly was schlepping from M.P.’s office to the next M.P.’s office in the wilderness for years… with (literally less-than) nothing to show for it until finally everything broke successfully at once federally in 2018.)
My point being – people should note very carefully about the *political economy* of the present response to the knock-on effects of the war the next time they broad-brush pillory climate economics or economists. Which often comes across more as scapegoating rather than reasoned critiques and/or alternatives.
> it is like 5 parts hilarious…
That the response would be incoherent was entirely predictable. But I don’t think you’re being entirely fair. Fuel prices had gone up, because demand in quite inelastic and supply has gone down. But that’s effectively an uncontrolled carbon tax. And it has no particular relation to costs. I think (without having actually looked closely at the numbers) that compared to where we were before, we now have all the carbon tax we wanted, and more. So, arguably, adjusting tax rates is defensible.
“The speed of the breakup of [the Conger] ice shelf reminds us that things can change quickly,” King said. “Our carbon emissions will have an impact in Antarctica, and Antarctica will come back to bite the rest of the world’s coastlines and it may happen faster than we think.”
https://www.theguardian.com/world/2022/mar/25/satellite-data-shows-entire-conger-ice-shelf-has-collapsed-in-antarctica?utm_term=623db5cc662cc65ef357fef4ebb7b5dc&utm_campaign=GuardianTodayUS&utm_source=esp&utm_medium=Email&CMP=GTUS_email
The actual bite that will follow from quick changes in the Antarctica will happen on a time frame that spur rapid change in human behavior. I think that is good news and bad news.
Should we ignore economists? Maybe the problem is larger than can be managed by simply ignoring the economists. I think maybe we are observing a multi-disciplinary failure to understand and communicate the impacts that follow from our carbon outputs. The theoretical puzzle and practical crucible of economics render economics to be of little use to us when we decide to pursue the kind of outcomes that we want to see with climate change and the larger matter of environmental protection or destruction. Bucky Fuller said, we can afford to do anything we have to do. Modern monetary theory supports Bucky on that proposal. Our species’ ability to fund conflict with few economic constraints supports Bucky’s position.
To illustrate the strange economic outcomes that can arise from the practical crucible of economics and our legal system, I offer the following story regarding the economic costs imposed on Exxon following the negligence that created the Exxon Valdez oil spill:
“In 1994 a federal jury valued the case similarly to the survey respondents, although entirely independently, penalizing Exxon $5 billion. But Exxon fought that verdict through a series of appeals that concluded 19 years after the spill with the U.S. Supreme Court arbitrarily reducing the amount to $507 million—nothing to Exxon, the most profitable company in history, which had paid its CEO, Lee Raymond, $683 million over the 14 years the case was on appeal. As James Madison intended when he created the constitutional system, the justices acted as supreme sovereigns to protect the private property of the wealthy against the democratic will of the majority, in this case making new law on their own authority to do so.”
https://blogs.scientificamerican.com/guest-blog/costs-and-values-the-legacy-of-the-exxon-valdez-disaster/
Maybe it’s not just economists? There are some powerful forces at work in our world and they use many tools at their disposal. Some powerful forces melt glaciers at what is believed/hoped to be a very slow speed. Other powerful forces can slow essential accountability and societal change to a speed that makes glacial change look fast-paced.
On a positive note: it’s unlikely that these issues/matters will lead to a human extinction event according to people in a position to have special knowledge on that question. I believe the folks who point out that a human extinction event is unlikely are correct. Is that the question we need to be asking? I think the extinction event question is the wrong question. I think the right questions are: Is our carbon output practice likely to cause hundreds of millions of human deaths, drive the hyper-speed sixth great extinction event and cause societal collapse? How likely are these outcomes? Do we want to avoid those outcomes? Can we change the trajectory and nature of our activities that are likely produce these outcomes? How would we do that, if we choose change?
Cheers
Mike
You need to be more careful with your sources, especially when they confirm your prejudices. Flinging around “arbitrarily” is just ignorant; try https://en.wikipedia.org/wiki/Exxon_Shipping_Co._v._Baker
Rust,
Yes, I agree that the real issue is political will, rather than the advice being given by economists (although I might argue that they haven’t really been vocally saying that a carbon price *should* be introduced 🙂 ). It seems pretty obvious that pricing carbon would have helped to reduce emissions more than they have to date, but it’s not clear that you really need a CBA-like IAM to know that, or that they really provide some reliable estimate of what it should be (AFAIA, the range is pretty large).
ATTP, you write that economists haven’t really been vocal saying that a carbon price should be introduced.
https://clcouncil.org/economists-statement/
https://www.carbontax.org/economists/
https://en.wikipedia.org/wiki/Economists%27_Statement_on_Carbon_Dividends
Tom,
Fair enough. Maybe I wasn’t being fair on economists.
I guess I view the massive energy price hikes and the resulting policy changes as a useful preview of what kinds of challenges we face reducing emissions. e.g. the political sensitivity to petrol/diesel prices neatly illustrates why broad-based/strong carbon prices are so hard to enact in law.
May I interrupt the Planet A dismal science report with some good news from Planet B?
We can now get a good look around it:
https://vvattsupwiththat.blogspot.com/2022/03/o-brave-new-world-that-has-such-climate.html
If we enclose it in a Dyson Buckydome and add an atmosphere, in a few eons life forms may evolve and start arguing about the moral hazards of Dyson Buckydomes
It’d be interesting to hear what economists of the libertarian kind have to say about what happened in Texas:
https://99percentinvisible.org/episode/grid-locked/
ERCOT has left behind a so-called energy-only market for Texas:
https://bravenewclimate.proboards.com/thread/743/ercot-texas
Willard,
Unfortunately, free-market advocates are often only interested in self gain. Hard to get them interested in climate or other common goods, like low cost energy.
EU talking about effectively broadening their carbon pricing system to include domestic users and transport fuels:
https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_3542
Recently, price exceeded 100€/tonne, which should provide pretty strong incentives for decarbonising pollution, as well as a meaty reward for all the owners of dirty power stations who got allocated free credits.
” I agree that those are all quite reasonable inferences from this type of work.”, indeed.
I agree with them as well.
But they were inferences that existed prior to the models, and since the models are undersconstrained anyway, any model that produced contrary results would have been discarded.
This is where the epistemic status question comes in, or in a less binary form, Bayesian reasoning. How much do we trust our models vs how much do we trust our priors.
Underconstrained models confirm our priors and generate no new information.
Some people have convinced themselves that climate models are underconstrained and economic models aren’t. I find that position incoherent.
I still think there’s a real risk that ESMs are underconstrained, but I have to admit I’ve been out of the loop for some considerable time and probably don’t have a right to a strong opinion on that.
But atmosphere/ocean models, old school CGCMs, with everything else as boundary conditions, those things work, and they work damned well. They can tell us things we didn’t know in advance.
I think it’s very important for everyone to understand that true simulations exist in physical climatology, and that they don’t in economics. Comparable confidence in economic models to climate models is baseless and confused.
MT,
I think the point that Scher & Koomey make in this paper is quite good:
One problem, I think, is that some think that because physical models and social/economic models both rely on sets of equations that there is some kind of equivalence. However, the equations underpinning physical models typically have strong fundamental foundations and either apply generally or it is well known when they apply and when they don’t. My sense is that the equations underpinning social/economic models may apply in some circumstances, but are not applicable in all and it can be difficult to know when they’re likely to break down.
Perhaps, on climate models, this might be useful:
https://www.realclimate.org/index.php/archives/2022/03/the-future-of-climate-modeling/
With regard to taxes, European taxes are huge compared to those in the US. This makes an asymmetry. Sadly, in any crisis big fossil has the tools to take advantage in favor of more profits and continue to slow the process of stranding their assets.
[Speaking of which, crypto is buying up the worst polluting potential for stranding dirty coal etc., giving it new life.] John Oliver is both amusing and on point about it:
taxes, that is, at the petrol pump
Susan, I wonder if the economic models are in tune where technology is taking us (there is no free will at play here). if we go full metaverse you can multiply crypto’s energy demand several orders of magnitude to power the AR/VR machines. Much of our technology is on its own evolutionary path. Or so say the futurist… Kevin Kelly’s Technium comes to mind.
One way to describe how I feel about the (energy-intensive) metaverse and its illusory fakery (Oliver is terrific, I repeat). “It’s a black-and-white time now. One might say that postmodernism is over and history is back.” – https://www.newyorker.com/magazine/2022/03/28/the-russians-fleeing-putins-wartime-crackdown
Meanwhile, back to economics (and Haworth’s Doughnut Economics, from whence the graphic comes:
This is making an important point about how cost-benefit analysis effectively erases the idea of rights and justice in favor of pure preference:
https://lpeproject.org/blog/climate-change-racial-justice-and-cost-benefit-analysis/
The problem is that economics inherently takes a rather crude utilitarian philosophy that puts everything on an ordered line. That is, the choice to frame essentially ethical decisions in terms of monetary value is a profound value-laden decision.
Economists tend to pose as hard-headed realists when they convert lives into cash and discount them in time, but maybe they are just morally bankrupt.
In this case, the cost-benefit analysis might tell you polluting now creates benefits that are worth the cost you inflict on future generations, but what right do you have to make that choice? They most certainly have not consented.
I think the concept of planetary boundaries (and fancy circle chart) is great as a reminder that we are simultaneously cross many dangerous red lines apart from emitting too much greenhouse gas.
As a reference:
https://www.science.org/doi/10.1126/science.1259855
Some things need captions: e.g. what are “novel entities”? Turns out they are thinking of persistent agents/chemicals/objects introduced into the biosphere. Persistent pollutants, global spread of engineered organisms, microplastics.
Ben,
Thanks, that is an interesting article about cost-benefit analyses. I don’t have any problem with trying to assess the cost of something and even understanding what sort of benefit will accrue. However, as the article indicates, sometimes we should aim do things simply because they are the right thing to do, not because we’ve done some kind of CBA and concluded the the benefit outweighs the cost. Maybe there will be circumstances where the costs are prohibitive; we probably can’t do everything we would like to do. There may even be circumstances where a CBA-like analysis is suitable, but it still requires (as the article highlights) a large number of value judgements which are not objectively defined.
See-also https://wmconnolley.wordpress.com/2017/05/05/4698/
Yep, wmconnolley’s post is on the mark. Even if you try to compensate future people for the damage you did (which btw we are not doing), they didn’t agree to the swap and so it seems important to try to reduce that kind of imposition.
ATTP: indeed, “optimal” in a CBA and the “right thing to do” are two different things, although I feel like they are unfortunately often conflated in the narrative.
> they didn’t agree to the swap
Suppose they did, it still might not be right. Perhaps the problem is that doing the right thing is a very hard problem. (In fact it more or less refutes libertarianism.) As de Beauvoir once observed, the bread one eats could always be somebody else’s. Take debt.
Worse is that costs are more indirect than CBA fans presume. We’re talking about risks, first and foremost. Those who design things so that they don’t fall down estimate the risk they could, not the price it’d cost them if they did.
Chubbs,
Highly unlikely that both technologies will continue to duke it out evenly for decades. What is going to get better for fossil fuels in the future: technology, resources, economic scale, incumbency, environmental impact, policy support?
I’m just not really sure that’s true, or at least there is a lot of wiggle room in the realm of uneven duking.
Historically coal won against biofuels, but most estimates suggest biofuels consumption for energy is at an all time high today, maybe even double the rate during the 19th Century.
Oil and gas emerged and battled with coal, but ultimately each has found their own use cases and global consumption is fairly evenly split between the three.
—————-
Regarding the issue of where current policies would take us, I’m not sure it’s fully appreciated that pretty much all widely-publicised “current policy” estimates are not “no further policy” estimates. The CAT and UNEP methods do nothing at all to limit policy in their projections after 2030.
CAT and UNEP both employ a percentile matching method. They estimate 2030 emissions based on their expectations of policy effects, then find how that figure compares against hundreds of scenarios in the AR5 database. They then assume that the percentile of their estimate in the range of scenarios can be extrapolated to 2100. And that’s basically it. Since ALL of the mitigation scenarios in the AR5 database feature substantial policy increases after 2030 they are inescapably projecting based on expectation of future policy increases.
The UNEP method write-up does make it clear that they are projecting on the basis of continued action rather than stalled action. In other words, it is intended that the projections feature substantial future policy increases.
There are two major issues for me:
1) I think most people believe CAT and UNEP estimates are “no further policy” when they are a long way from that.
2) The result is highly dependent on the scenario database used. The AR5 database contains vanishingly few mitigation scenarios which reach above 2.5C by 2100 so the current policy result being above that is quite telling. Actually, only a handful of the hundreds of mitigation scenarios are anywhere near current policy 2030 emissions and most of the close ones are scenarios which delayed policy before massively ramping up post-2050. There are scenarios which no doubt strongly weight the current policy result while having 2100 carbon prices in excess of $2,000.
If the database had contained a high proportion of RCP6-level mitigation scenarios it’s pretty clear the current policy would be ~3.5C.
Paul S,
I oversimplified my views above. Let me add some detail. You are right, any transition to a new energy source will take a long time and even with a loss of market share there will be a long tail of fossil fuel use in: older equipment, geographies with large fossil fuel endowment and in market segments which favor fossil fuels.
As I pointed out above, the economics of fossil fuels are going to degrade with time as resources diminish. Renewables/EV on-the-other hand have benefited from learning curve economics and increasing manufacturing scale and there are no obvious resource limitations to further scale increase. I don’t see time being on the side of fossil fuels. If we look out 10-20 years main competitive factors are likely to be worse: scale, technology, resources, and policy.
In some energy market segments there are scale advantages that limit the number of supply chains: manufacturing, research, sales, fuel distribution, etc. In cars for example, manufacturers aren’t going to want to develop and manufacture new products in both fossil and non-fossil for a prolonged period of time. They will tend to pick a winner to reduce cost. Different winners in different segments happens now and will continue. However there are many adjoining energy segments, Success in a geography or application will increase competitiveness in adjoining markets.
Renewables/EV are well suited to soft climate policy. They can grow with limited policy support. The biggest hurdle for new technology is introduction into markets when limited scale is a disadvantage. This is where policy has provided a big help for renewables/EV. But policy doesn’t need to be sustained as competitive scale is gained. Success in one segment encourages policy support in other segments.
As I stated above, not sure any of our current model scenarios are realistic. Renewables//EV have gained enough scale to be competitive without large subsidies or hard climate policy. That opens a path to reach the current scale of fossil fuels at a competitive long-term cost, without much policy change. Whether it happens is a technology development/resources/engineering problem that our current models aren’t going to provide much guidance on.
I think the extent to which climate scenarios have missed non-fossil energy growth is often misrepresented. There’s a tendency to cherry-pick the fastest growing technologies and ignore the ones which are growing slower than models expected.
Going back to the SRES no-policy baselines, the median expectation for total zero carbon energy supply (solar+wind+hydro+nuclear+biofuels) was for a ~ 10x increase from 2000 to 2100, going from a 20% to 60% share of the total energy market. Biofuels were typically the largest factor in that expected growth. There’s no breakdown between solar, wind and hydro but I would guess the remainder would mostly be nuclear and wind.
I have no doubt that solar growth has outstripped almost all SRES model expectations and it looks extremely likely that it will continue to do so, but then nuclear has fallen short by the same magnitude and the outlook for biofuels now looks a lot less rosy. SSP median baseline expectations for non-fossil energy are overall pretty similar, but with a greater emphasis on solar and wind and much less love for biofuels.
With regards climate it’s not really important that models predict which specific technologies will win. Only that they provide a reasonable general representation of how new technologies might develop. Obviously some will develop faster and others slower.
Willard: Indeed, some risks are simply unacceptable, and just act as constraints. We are building a bridge to an acceptably livable future, and it must not fall down.
Paulskio: I think the explosion in renewables is more interesting than you are arguing. It also now looks like ground transport will be dominated by EVs by 2050, which is also a large change in itself; this would be a big deal emissions-wise even if the grid doesn’t change much.
The zero-carbon share in 2100 is one thing, but most of the SSPs and SRES scenarios have little growth by 2060. Don’t the A1F1 and A2 scenario groups only have 30% zero-carbon energy in 2100? (maybe it depends on what you consider a baseline zero-policy scenario)
Wind+solar electricity production have doubled in the last 6 years, now at slightly above 10% of all electricity production, exceeding nuclear. At current installation rates (i.e. the exponential growth stops), you would still end up with the majority of electricity production being wind+solar in about 20 years time.
This still looks small in primary energy terms, because electricity is a small proportion of overall primary energy. In primary energy terms, ‘nothing exciting is happening’ only if the build-out rate of wind+solar stops growing: one more doubling in installation rates and they take over quite quickly. I feel like I’ve been having this conversation for a few years now, and the wind+solar curve has in that time grown substantially… (so apologies for the repetition)
Human extinction continues to be pretty unlikely, so we don’t have to worry about that. But a livable planet is at risk according to some. And I think the sixth great extinction event is underway at record-setting speed, so that might be a concern.
“U.N. Secretary-General Antonio Guterres said the report by the Intergovernmental Panel on Climate Change revealed “a litany of broken climate promises” by governments and corporations, accusing them of stoking global warming by clinging to harmful fossil fuels.
“It is a file of shame, cataloguing the empty pledges that put us firmly on track toward an unlivable world,” he said.”
https://apnews.com/article/climate-united-nations-paris-europe-berlin-802ae4475c9047fb6d82ac88b37a690e?user_email=41c09d9ba95e5ce77e15cc0ea980b96fdbe087a98aa4d98ab0a976127007c9ed&utm_source=Sailthru&utm_medium=email&utm_campaign=April05_MorningWire&utm_term=Morning%20Wire%20Subscribers
Gutteres sounds like an alarmist some days.
Cheers
Mike
Ben,
My point really isn’t about whether or not it’s interesting. It’s about the extent to which a low-carbon energy transition is already accounted for in policy-equivalent climate scenarios. My contention is that climate scenarios even going as far back as SRES appear to have broadly consistent transitions to current outlooks on a policy-equivalent basis, and that the common suggestion that we’re ahead of the curve on this front is due to a selective reading of data – highlighting the fastest growing technologies and ignoring the ones with slow or stalled growth.
I actually got the maths wrong on the 60% SRES figure. It’s really a transition from 15% in 2000 to 45% median in 2100, with a range of 25 – 85%. A2 and A1FI type scenarios are towards the low end of this range at about 30% as you say. Though note that doesn’t necessarily mean less low-carbon growth. A2 low-carbon energy growth is pretty close to the overall median, while A1FI is considerably higher. It’s just that total energy consumption growth in those scenarios is very high. All SRES scenarios are no-policy baselines.
At current installation rates (i.e. the exponential growth stops), you would still end up with the majority of electricity production being wind+solar in about 20 years time.
I don’t think that checks out. Say 2021 solar+wind generation was 2900 GWh, total electricity 29000 GWh, and annual solar+wind growth is 400 GWh/year. If total remained at 29000 that would put 2041 solar+wind at 38%. But total electricity generation is growing at about 2x the pace of solar+wind, which means solar+wind would be 24% at 2041.
If we put that into context of the full low-carbon energy picture by adding in reasonable growth based on recent trends for hydro and nuclear electricity generation, then compare with SRES and SSPs, there’s really no clear distinction. The SRES median, which again assumes no climate policy, is pretty much exactly the same as our forecast at 2040, though of course with a much greater fraction due to nuclear generation. The SSP2-6.0 (best stand-in for median current policy scenario) median is about 10% below, but our forecast is well within the envelope of the 6 contributing models. The SSP4-6.0 (SSP4 being closest to socio-economic scenario of past 10 years) median is pretty much exactly on trend with our forecast at 2040.
“Say 2021 solar+wind generation was 2900 GWh, total electricity 29000 GWh, and annual solar+wind growth is 400 GWh/year.”
I assume the service life of PV and wind assets are factored in. Most of the stuff we deployed from the early 2000s forward will last between 20-30 years but nothing last forever. By the year 2050 all of the assets we added in the 2020s will need to be replaced. Nuclear plants seem to have very long service life spans judging by how many plants built 30 and 40 years ago have been given 20 & 30 year extensions but that might be changing: https://www.powermag.com/nrc-dramatically-reconsiders-slr-approvals-sets-new-conditions-for-nuclear-life-extensions/
My personal experience with residential solar has been pretty good and I’m hoping to get 25-30 years from them. I generated 95MW (exported 32MW) for the 1st 10 years so getting a lifetime generation of 200+ Megawatts seems likely ($24k US$ 2012).
And as we ponder the outcomes of a 1.5 or 2.0 future let us not forget that there are currently 350,000 unique man made molecules being dispersed into the biosphere.
https://www.sciencetimes.com/articles/35681/20220120/350-000-human-made-products-making-go-beyond-safe-planetary.htm
First run nuclear plants were built with an expected life span of about 30 years. Some early plants have had their life spans extended with retrofitting and various improvements. Current nuclear plant design anticipates a life span of 40 to 50 years. The life of a nuclear plant is expected to end in decommissioning and license termination after decontamination and waste removal have been verified. Of the roughly 150 nuclear power plants that have been shutdown, 17 had completed the decontamination process as of 2016. here is a link to that information source: https://world-nuclear.org/information-library/nuclear-fuel-cycle/nuclear-wastes/decommissioning-nuclear-facilities.aspx
I don’t think that the small nuclear reactor design decommissioning is likely to be as difficult as the practice with earlier designs, but time may tell us more on that. I would love to see the global nuclear power industry work together to complete more decommissioning and cleanup as a prerequisite for building out more plants, but I think such a thing is unlikely. I expect that all of our power generation modes have similar decommissioning and cleanup challenges, but nuclear stands out for the toxicity and long half life of the contamination and waste product.
typo – should say 40 to 60 years for current design
PaulS: yes, I was mistakenly ignoring growth in electricity use, which makes a substantial difference over the next couple of decades. Getting to ~50% wind/solar electricity in 20 years would still need something like 5% annual installation growth. Looks very different to the situation 10 years ago where the fraction of low-carbon electricity production was rapidly decreasing. Recent hydro+nuclear additions have been enough to keep the proportion of generation from these sources steady.
If I understand, you are pointing out that substantial clean energy transitions are included in some of the scenarios that are, in IAM-speak ‘baseline no-policy scenarios’. There are storylines where the world goes down a much more environmentally sustainable path and transitions somewhat away from fossil fuels. There is by definition no ‘climate mitigation policy’ in the baseline scenarios since ‘policy’ is the knob you turn to move away from baseline. But these are nevertheless the kind of storylines very different to the status quo that one might imagine only occurring with a broad commitment to environmentalism.
So then if you take a median of some ‘business as usual’ scenarios and some quite optimistic ‘sustainability-driven’ scenarios, we are roughly following that path, if e.g. capacity additions of low-carbon energy flatline.
Ben – “Even if you try to compensate future people for the damage you did (which btw we are not doing), they didn’t agree to the swap and so it seems important to try to reduce that kind of imposition.”
I have thought that Social Cost of Carbon helps bring some perspective on why committing to zero emissions is worth policy action but pricing carbon ought not be about any kind of payment for compensation for those costs, rather it should aim at inducing changes to how the energy industry invests. It is enough that it reduce the profitability of investing in more fossil fuels and make low emissions the preferred energy industry and energy intensive industry investment choice. Economic modeling might help in finding the optimum carbon price settings for that purpose.
It seems unlikely that any Common Law remedies that demand compensation for climate harms after they occur will succeed but may determine that ongoing fossil fuel investments without regard to emissions are negligent and impose climate related considerations into corporate governance.
mrkenfabian: I was arguing that compensation would be ethically problematic anyway, so best to just not do any further damage. Nevertheless, carbon pricing is a tool that doesn’t have a preordained “purpose” and there is a certain logic to using it to compensate people or to produce an “adaption” or disaster management war chest.
Ben, I think that we should not let ourselves depend on revenues from carbon pricing for funding anything because I think such taxes/levies should be designed to be avoidable, ie if it works revenues should decline. We should be pleased when that becomes no revenue – because that means low emissions alternative have been taken up. Retail level carbon pricing relies on the availability of alternatives and that has to come from changes at the producer level; without the alternatives in place it risks raising prices without resulting in their take up. I do think energy producers are where the changes must occur – and carbon pricing most of all needs to influence their decisions about future investments.
I am not a fan of taxes tied to expenditures for specified purposes; they seem to be more about making them more politically palatable – including as pork barrelling. Scrutiny of government revenues and expenditures is something we need every time, all the time but I think governments should not have their hands tied; they need the ability to be flexible without having to revoke and remake legislation every time.
(Previous attempt to post similar went… somewhere, possibly moderation?)
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