The Shub Niggurath (Hattip BishopHill) arguments against the IPCC’s SSREN growth figures are complex. The Greenpeace model on which they were based basically took a baseline projection and backcast from there. A cursory look at the figure GDP figures shows that the economic models point to knife-edge scenario. The economic models indicate that the wrong combination of policies, but successfully applied, could cause a global depression for a nigh-on a generation and lead to 330 million less people in 2050 than the do-nothing scenario. But successful combination of policies will have absolutely no economic impact.
Shub examines this table :-
Table 10.3, page 1187, chapter 10 IPCC SRREN
(Page 32 of 106 in Chapter 10. Download available from here)
I have looked at the GDP per capita and population figures.
To see whether the per capita GDP projections are realistic, I have first estimated the implied annual growth rates. The IEA calculates a baseline of around 2% growth to 2030. The German Aerospace Centre then believes growth rates will fall to 1.7% in the following 20 years. Why, I am not sure, but it certainly gives a lower target to aim at. Projecting the 2030 to 2050 growth rate forward to the end of the century gives a GDP per capita (in 2005 constant values) of $56,000. That is a greater than five-fold increase in 93 years.
On a similar basis there are two scenarios examined for climate change policies. In the Category III+IV case, growth rates drop to 0.5% until 2030. It then picks up to 2% per annum. Why a policy that reduces global growth by 75% for 23 years should then cause a rebound is beyond me. However, the impact on living standards is profound. Almost 30% lower by 2030. Even if the higher growth is extrapolated to the end of the century, future generations are still 12% worse off than if nothing was done.
But the Category I+II case makes this global policy disaster seem mild by comparison. Here the assume is that global output per capita will fall year-on-year by 0.5% for nearly a generation. That is falling living standards for 23 years, ending up at little over half what they were in 2007. This scenario will be little changed in 2050 or 2100. Falling living standards mean lower life expectancy and a reduction in population growth. The model reflects this by projecting that these climate change policies will lead to 330 million less people than a do-nothing scenario.
Let us be clear what this table is saying. If the world gets together and successfully implements a set of policies to contain CO2 levels at 440ppm, the global output in 2050 will be 40% lower. There is a downside risk here as well – that this cost will not contain the growth in CO2, or that the alternative power supplies will mean power outages, or that large-scale, long-term government projects tend to massively overrun on costs and under perform on benefits.
Let us hark back to the Stern Review, published in 2006. From the Summary of Conclusions
“Using the results from formal economic models, the Review estimates that if we don’t
act, the overall costs and risks of climate change will be equivalent to losing at least
5% of global GDP each year, now and forever. If a wider range of risks and impacts
is taken into account, the estimates of damage could rise to 20% of GDP or more.
In contrast, the costs of action – reducing greenhouse gas emissions to avoid the
worst impacts of climate change – can be limited to around 1% of global GDP each
Stern looked at the costs, but not at the impact on economic growth. So even if you accept his alarmist prediction costs of 5% or more of GDP, would you bequeath that to your great grandchildren, or a 40% or more reduction lowering of their living standards along with the risk of the policies being ineffective? Add into the mix that The Stern Review took the more alarming estimates, rather a balanced perspective(1) then the IPCC case for reducing CO2 by more solar panels and wind farms is looking highly irresponsible.
From my own perspective, I would not have thought that the impact of climate mitigation policies could be so harmful to economic growth. If the models are correct that the wrong policies are hugely harmful to economic growth, then due diligence should be applied to any policy proposals. If the economic models from the IPCC are too sensitive to minor changes, then we must ask if their climate models suffer from the same failings.
- See for instance Tol & Yohe (WORLD ECONOMICS • Vol. 7 • No. 4• October–December 2006)
Update 27th July.
Have just read through Steve McIntyre’s posting on the report. Unusually for him, he concentrates on the provenance of the report and not on analysing the data.