Tuesday, June 17, 2014

Right Now We ‘Grossly Underestimate’ Economic Damage from Climate Change, Lord Stern Paper Says

British economist Lord Nicholas Stern. (Credit: AP Photo / Keystone, Peter Schneider) Click to enlarge.
Our current models “grossly underestimate” the economic damage that will be wrought by climate change, according to British climate change economist Lord Nicholas Stern.  So he and a colleague just published a new preliminary paper that makes a few key updates.

Right now lots of mainstream climate research, including the Intergovernmental Panel on Climate Change (IPCC), relies on versions of the “DICE model” to project the damage climate change will do to the global economy in computer simulations.  And so far, the modeling done by IPCC has predicted relatively modest hits to world economic production from climate change if global carbon emissions continue on a business-as-usual path.  But the DICE model also has several well-known limitations, including an overly simplistic model of how the economy grows, too little attention to climate sensitivity, and too little attention to certain extreme risks.  When Stern and Simon Dietz — colleagues at the London School of Economics’ Grantham Research Institute on Climate Change — retooled the model to address this issues, they found the modest hits ballooned into massive reductions within the next two centuries.

The updated analysis of economic growth itself didn’t change the business-as-usual path too dramatically. But when it was combined with the midrange numbers from Stern and Dietz’s updated climate sensitivity, the resulting projection shows global living standards peaking around 2150 and then dropping — leading to an overall collapse of almost two-thirds from where they would otherwise be in 2200 under the standard models. Incorporating the high-end climate sensitivity numbers and the possibilities of extreme risk, global living standards peak before 2100, then collapse down to or below where they were in 2005.

From there, Stern and Dietz determined that the price of carbon emissions should fall between $32 and $103 per metric ton in 2015, and should then rise to between $82 and $260 per metric ton by 2035.

Right Now We ‘Grossly Underestimate’ Economic Damage from Climate Change, Lord Stern Paper Says

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