Posted by: Roger Pielke, Jr.
For a while now there has been a debate going on about how the Intergovernmental Panel on Climate Change out to project forward into time economic growth. Such projections are important for developing scenarios of carbon emissions that are used as input to climate models. The debate involves differences between market exchange rates (e.g., $1 = 1.26 Euro) and what is called Purchasing Power Parity, e.g., a Big Mac = $2.90 in the U.S. but only $1.26 in China. (On these differences see this article.)
This week The Economist reminds us why this debate matters for the issue of climate change.
“The IPCC’s forecasts of global output are based on national GDP converted to dollars using market exchange rates. They also bravely assume that most of the gap in average income between rich and poor countries will be closed by the end of this century, even while the rich continue to get richer. Because using market exchange rates overstates the initial gap in average income between rich and poor countries, this results in improbably high projections of GDP growth in developing countries, much faster than has ever been achieved before. As a result, the IPCC’s projections of future carbon emissions, on this basis alone, are probably overstated.