October 30, 2006
Stern’s Cherry Picking on Disasters and Climate Change
Posted to Author: Pielke Jr., R. | Climate Change
The Stern Report has this passage on p. 131:
The costs of extreme weather events are already high and rising, with annual losses of around $60 billion since the 1990s (0.2% of World GDP), and record costs of $200 billion in 2005 (more than 0.5% of World GDP). New analysis based on insurance industry data has shown that weather-related catastrophe losses have increased by 2% each year since the 1970s over and above changes in wealth, inflation and population growth/movement. If this trend continued or intensified with rising global temperatures, losses from extreme weather could reach 0.5 - 1% of world GDP by the middle of the century. If temperatures continued to rise over the second half of the century, costs could reach several percent of GDP each year, particularly because the damages increase disproportionately at higher temperatures.
The source is a paper prepared by Robert Muir-Wood and colleagues as input to our workshop last May on disasters and climate change. Muir-Wood et al. do report the 2% trend since 1970. What Stern Report does not say is that Muir-Wood et al. find no trend 1950-2005 and Muir-Wood et al. acknowledge that their work shows a very strong influence of 2004 and 2005 hurricane seasons in the United States. Muir-Wood et al. are therefore very cautious and responsible about their analysis. Presumably this is one reason why at the workshop Robert Muir-Wood signed on to our consensus statements, which said the following:
Because of issues related to data quality, the stochastic nature of extreme event impacts, length of time series, and various societal factors present in the disaster loss record, it is still not possible to determine the portion of the increase in damages that might be attributed to climate change due to GHG emissions . . . In the near future the quantitative link (attribution) of trends in storm and flood losses to climate changes related to GHG emissions is unlikely to be answered unequivocally.
The Stern Report’s selective fishing out of a convenient statement from one of the background papers prepared for our workshop is a classic example of cherry picking a result from a diversity of perspectives, rather than focusing on the consensus of the entire spectrum of experts that participated in our meeting. The Stern Report even cherry picks from within the Muir-Wood et al. paper.
Why does this matter? The Stern Report uses the cherry-picked information as the basis for one of its important conclusions about the projected costs of climate change(on p. 138),
The costs of climate change for developed countries could reach several percent of GDP as higher temperatures lead to a sharp increase in extreme weather events and large-scale changes.
To support its argument the Stern Report further relies on a significantly flawed report from the Association of British Insurers, which we critiqued here. Its presentation of the future costs of disasters and climate change is highly selective to put it mildly.
I haven’t yet read the whole Stern report, but if its treatment of disaster costs and climate change – an area where I do have some expertise – is indicative of its broader analysis, then Richard Tol’s comment in the open thread would appear to be on target.Posted on October 30, 2006 11:58 AM
Then there is this gem in footnote #62 on p. 138, "For example, hurricane damages scale as the cube of windspeed (or more), which itself increases exponentially with ocean temperatures."
Windspeed increases exponentially with ocean temperatures? This politial scientist thinks not.
See Table 1 here:
Posted by: Roger Pielke, Jr. at October 30, 2006 01:21 PM
I think their approach makes sense. More stuff to break=more damage in monetary terms. If we depress the world's economy significantly, then there will simply be less stuff to break, and the storms will have less impact on stuff, though perhaps more on human life. Those, however, are the hard decisions that all of us have to make.
Posted by: Dan Collins at October 30, 2006 03:08 PM
"If we depress the world's economy significantly, then there will simply be less stuff to break"
Dan, you are right
Posted by: Demesure at October 31, 2006 12:58 AM
While this report may certainly have its nits and warts, in the big picture it seems to do a good job of digesting and presenting fairly a tremendously complicated and difficult subject matter.
I believe that should and will be taken seriously by business leaders and politicians here and abroad, despite the fact that, given the scale of the problem, many simply prefer not to address it. There is already a majority in the Senate ready to act on climate change, so if there is a change in control of the House, I think it is pretty clear that we will see the log jam start to break up. It will cost the Republicans too much politically to stand in the way, and industry is looking for consistent policy at the national level, in lieu of many different state and local policies.
Naturally there will be opportunities for critics of the Stern report, but this will not die the death of a thousand cuts. Instead, the logs will be rolling in Congress and internationally, with opportunities for critics to help shape policy in the areas of their expertise.
Besides the science, I think the Stern report's discussion of the nature of the economic/policy-making problem, summarized in Chapter 2, is quite useful in explaining alot of the foot-dragging. Here are a few quotes:
"This is a global problem and mitigation is a global public good. This means that it is, from some perspectives, ‘an international game’ and the theory of games does indeed provide powerful insights. The challenge is to promote and sustain international collective action in a context where ‘free-riding’ is a serious problem. Adaptation, like mitigation, raises strong and difficult international issues of responsibility and equity, and also has some elements of the problem of providing public goods."
"Compared with efforts to reduce emissions, adaptation provides immediate, local benefits for which there is some degree of private return. Nevertheless, efficient adaptation to climate change is also hindered by market failures, notably inadequate information on future climate change and positive externalities in the provision of adaptation (where the social return remains higher than the return that will be captured by private investors). These market failures may limit the amount of adaptation undertaken – even where it would be cost-effective."
"The poorest in society are likely to have the least capacity to adapt, partly because of resource constraints on upfront investment in adaptive capacity. Given that the greatest need for adaptation will be in low-income countries, overcoming financial constraints is also a key objective."
"Climate change shares some characteristics with other environmental challenges linked to the management of common international resources, including the protection of the ozone layer and the depletion of fisheries. Crucially, there is no global single authority with the legal, moral, practical or other capacity to manage the climate resource."
"This is particularly challenging, because, as Chapter 8 makes clear, no one country, region or sector alone can achieve the reductions in GHG emissions required to stabilise atmospheric concentrations of GHGs at the necessary level. In addition, there are significant gains to co-operating across borders, for example in undertaking emission reductions in the most cost-effective way. The economics and science point to the need for emitters to face a common price of emissions at the margin. And, although adaptation to climate change will often deliver some local reduction in its impact, those countries most vulnerable to climate change are particularly short of the resources to invest in adaptation. Hence international collective action on both mitigation and adaptation is required."
"Economic tools such as game theory, as well as insights from international relations, can aid the understanding of how different countries, with differing incentives, preferences and cost structures, can reach agreement. The problem of free-riding on the actions of others is severe. International collective action on any issue rests on the voluntary co-operation of sovereign states. Economic analysis suggests that multilateral regimes succeed when they are able to define the gain to co-operation, share it equitably and can sustain co-operation in ways that overcome incentives for free-riding."
Posted by: TokyoTom at October 31, 2006 05:27 AM
I wish I could share your optimism. What we have with the STern report is (yet another) example of what Steve Rayner has called "bad arguments, for good causes."
"While this report may certainly have its nits and warts, in the big picture it seems to do a good job of digesting and presenting fairly a tremendously complicated and difficult subject matter."
Have a look at Richard Tol's review that I just posted and see if you think that "nits and warts" are inconsequential. The treatment of work that i have been involved in, documented in this post, seems representative of the report's more general treatment of the state of the impacts and economics literature.
Posted by: Roger Pielke, Jr. at October 31, 2006 06:55 AM
I've started looking at the Stern Review, but am having a hard time with it since almost all the science presented is of the "all scientists now agree" sort. And almost all of them are ones which many scientists don't agree on. Even when there's partial agreement, the review tends to try sneaking in more agreement than there actually is. Thus most everyone will agree that increased CO2 in the atmosphere will cause surface heating. But many people disagree that the pure CO2 heating is augmented by a positive net feedback from water (not just water vapor but cloud formation, etc.) Therefore all but the lowest of the temperature increases presented in the Stern Review are not at all agreed on. And so even the starting position is biased and likely quite wrong, not even counting the economic mistakes such as Tol points out.
IOW, I can't take the Stern Review at all seriously.
Posted by: Dave Dardinger at October 31, 2006 10:31 AM
1.) What amount, precisely, is "significantly"?
Posted by: A Jones at October 31, 2006 10:56 AM
Benny, you are an astute observer of the things you wish to see.
You trumpet your fear that “the Stern Review is dead in the water”, regardless of its inherent strengths, weakenesses and flaws, because “It seems to have split the British Government.” The spilt is easily explained, as the Government believes green taxes are needed but does not wish to do so at its competitive disadvantage and certainly not until the US is also on board. Doesn’t the Times article make this clear? “yesterday both Mr Brown and Tony Blair emphasised the importance of international action - rather than domestic taxes - to reduce carbon emissions.”
Naturally OPEC can be expected to disfavor green taxes and other policies directed towards GHG emissions – the fact that markets exist mean that inevitably a portion of the tax or demand reduction will be felt by OPEC members. Your concern for the welfare of OPEC members is commendable, but are you suggesting that we should not tackle climate change mitigation issues because it would be unfair to OPEC? (And if so, couldn’t we address that issue by direct compensation to OPEC for their losses?)
You ask whether “anyone seriously believe[s] it will change the international impasse on Kyoto”. As I noted on the previous thread, I believe that the Stern report should and will be taken seriously by business leaders and politicians in the US and abroad, despite the fact that, given the scale of the problem, many simply prefer not to address it.
There is already a majority in the Senate ready to act on climate change, so if there is a change in control of the House, I think it is pretty clear that we will see the log jam start to break up. Democrats have incentives to push the issue, already have support from key Republicans in the legislature (and Schwartzenegger in California). There are a number of federal court cases underway that are eroding the Administration’s position that it has no current authority to act and that create opportunities for action at the state level. Industry is looking for consistent policy at the national level, in lieu of many different state and local policies, and Republicans now have too much to lose politically from by direct obstructionism – which is why Bush hired Paulson as Treasury Secretary and has been trying to limit political damage by the empty Asia-Pacific Coalition and trumpeting his rather feeble nuclear and coal pork projects.
It makes sense to move domestic policies quickly in directions that favor clean power generation and a public that is tired of expensive, ineffective and counterproductive wars in the ME is likely to be receptive to policies that appear to move to reduce our reliance on ME oil. And domestic industry concerns that have jammed policy action (in part counterbalanced by those looking to profit from new technologies) can be met by the right mix of pork and by free distribution of emission rights.
So yes, we are ready for change, and the Stern report and “An Inconvenient Truth” are likely to resonate not only with a US public repulsed by Republican excesses but also by industries that want to see a clear set of rules, rather than a thousand cuts.
Posted by: TokyoTom at October 31, 2006 10:11 PM