Earlier this week the United Nations Intergovernmental Panel on Climate Change issued its special report: Global Warming of 1.5 °C. The alarmed reaction of United Nations Secretary-General Antonio Guterres was typical. “This report by the world’s leading climate scientists is an ear-splitting wake-up call to the world,” said Guterres in a statement. It confirms that climate change is running faster than we are—and we are running out of time.”
Under the Paris Climate Agreement reached in 2015, the nations of the world committed to the goal of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.” In order to achieve this goal, the IPCC report concludes that humanity must cut greenhouse gas emissions—chiefly carbon dioxide emitted by the burning of fossil fuels—in half by 2030, and reach net zero emissions by 2050.
In evaluating the report, let’s discuss global temperature trends, extreme weather trends, energy technology transitions, and money.
The new report finds that the observed global mean surface temperature trend has increased by about 0.87°C above the average during the 1850–1900 period. The report then estimates that anthropogenic global warming is currently increasing at 0.2°C (likely between 0.1°C and 0.3°C) per decade due to past and ongoing emissions. That rate implies that average global temperatures will reach the 1.5°C threshold by around 2050.
The IPCC report relies upon six long-term surface temperature datasets to come up with the 0.2°C per decade rate of increase. Interestingly, the report does not cite the two global temperature datasets derived from satellites: the University of Alabama in Huntsville reports that global average temperatures are rising at a rate of 0.13°C per decade, and Remote Sensing Systems reports the rate of increase at 0.18°C per decade. At the UAH rate of warming, the 1.5°C threshold would not be exceeded until around 2070. (Note in passing, recent research suggests that without anthropogenic warming, the planet would already be headed well down the path toward a new ice age.)
The IPCC report argues that limiting future temperature increase to 1.5°C is urgent because the “temperature rise to date has already resulted in profound alterations to human and natural systems, bringing increases in some types of extreme weather, droughts, floods, sea level rise and biodiversity loss, and causing unprecedented risks to vulnerable persons and populations.”
Given that it is generally agreed that the world has warmed over the past century, it is not surprising that the frequency of heat waves is up. University of Colorado Roger Pielke, Jr., offers a succinct roundup of the new report’s rather modest assertions about global trends in other types of extreme weather. For example, the new report acknowledges that the IPCC’s earlier Fifth Assessment Report (AR5), released in 2014, noted that “there was low confidence in the sign of drought trends since 1950 at global scale” and that “the recent literature does not suggest a necessary revision of this assessment.”
The new report further notes that global “streamflow trends are mostly non-statistically significant” and confirms the AR5’s finding that “there is low confidence due to limited evidence … that anthropogenic climate change has affected the frequency and the magnitude of floods.” What about hurricanes and typhoons? “Numerous studies towards and beyond AR5 have reported a decreasing trend in the global number of tropical cyclones and/or the globally accumulated cyclonic energy,” the new report says. In fact, the 40-year trend in accumulated cyclonic energy (roughly, the amount of energy released by all tropical cyclones each year) is downward. Noting the proliferation of contradictory studies, the report also observes that there is low confidence in the studies reporting increasing trends in the global number of very intense cyclones.
Melting ice from the polar regions and mountain glaciers is expected to boost the rate of sea level rise increasing the risks of coastal flooding. A recent study evaluating 25 years of satellite altimeter data suggested that sea rise has been accelerating. If such acceleration is sustained, sea level will rise about 25 inches instead of 12 inches by 2100.
Although climate change is projected to become a significant factor in species extinction, a recent study found that most extinctions to date are the result of habitat loss, introduced species, and hunting. Climate change might well pose unprecedented risks to vulnerable populations in the future, but the fact is that the chance of dying from a natural disaster including extreme weather has fallen by more than 90 percent since the 1920s.
On to money and technology. The IPCC report finds that the only way keep the planet from warming more than 1.5°C is to totally replace by 2050 all fossil fuel energy by building lots of wind and solar power generation and vastly improving energy efficiency. The IPCC report gives short shrift to the one low-carbon energy technology that could technically be deployed with fair rapidity: nuclear power.
The report does acknowledge that France took just 25 years to deploy enough nuclear power plants to generate 80 percent of its electricity.
The report then, however, goes on to observe that “[t]he current deployment pace of nuclear energy is constrained by social acceptability in many countries due to concerns over risks of accidents and radioactive waste management.” This is obtuse. If environmental activists who are now worried about man-made global warming hadn’t spent decades irrationally demonizing nuclear power, the world would already have been well on the way toward relative energy decarbonization. The report does at least also note that for nuclear power “comparative risk assessment shows health risks are low per unit of electricity production.” Please take note, environmental activists.
So what, according the IPCC report, will it cost to transition from fossil fuels to wind and solar? “Global model pathways limiting global warming to 1.5°C are projected to involve the annual average investment needs in the energy system of around $2.4 trillion [in 2010 U.S. dollars] between 2016 and 2035 representing about 2.5% of the world GDP,” states the report. For comparison, the International Energy Agency recently observed that “total energy investment worldwide in 2016 was just over $1.7 trillion, accounting for 2.2 percent of global GDP.” Of that, only $297 billion was spent on renewable energy sources.
So how much economic damage will pursuing the IPCC’s fast transition to a no-carbon energy system spare us? The report asserts that if no policies aimed specifically at reducing carbon dioxide emissions are adopted, then average global temperature is projected to rise by 3.66°C by 2100, resulting in global GDP loss of 2.6 percent from what it would otherwise have been. Comparatively speaking, in the 2°C and 1.5°C scenarios, global GDP would only be reduced by 0.5 percent or 0.3 percent respectively.
Concretely, the global GDP of $80 trillion, growing at 3 percent annually, would rise to $903 trillion by 2100. A 2.6 percent reduction means that it would only be $880 trillion by 2100. A 0.3 percent decrease implies a loss of $2.7 trillion resulting in a global GDP of $900 trillion. Note that the IPCC is recommending that the world spend between now and 2035 more than $45 trillion in order to endow $2.7 trillion more in annual income on people living three generations hence. Assuming the worst case loss of 2.6 percent of GDP in world with a population of 10 billion that would mean that they would have to scrape by on an average income of just $88,000 per year (the average global GDP per capita now is $10,500.)
There is no denying that man-made global warming could become a significant problem for humanity over the course of this century. In addition, the projections of the climate and econometric models could be way underestimated. Consequently, hedge fund manager Bob Litterman sensibly argues that climate change is an undiversifiable risk that would command a higher risk premium. Litterman likens climate change risk to the systemic risk that investors face in the stock market. It is hard to hedge when unknown unknowns can cause the prices of all assets to decline at once. While Litterman’s analysis strongly suggests that some investments toward mitigating climate risk should be made, it is not unreasonable to question the expensive and rushed decarbonization schemes proposed in the IPCC report.
In any case, given that all national commitments to address climate change are voluntary under the Paris Agreement, it seems unlikely that many (any?) of its signatories will accede to the IPCC’s steep and expensive decarbonization recommendations.