Citizen Action Monitor

Be wary of financial analysts peddling reduced climate risk compatible with economic growth

Market-based economic solutions are not helpful in dealing with violent climate change

No 1206 Posted by fw, December 9, 2014

redflag 2“As it stands, it is difficult not to conclude that the delusion of absurdly low emission growth and early peaks is maintained to facilitate post-peak reduction rates compatible with economic growth….We live in a … world where very large changes are already occurring, both in terms of impacts of a changing climate and of societal responses and stresses…. But with climate change, we are not talking about small changes; we are dealing with a world of very large changes…. By contrast, neoclassical (market) economists continue to propose marginal-based theories of small changes, regardless of the scale of the problem; this is not only academically disingenuous but also dangerously misleading. With global warming, we are dealing with non-marginal, major changes occurring very rapidly; a type of problem that market economics is ill-equipped to address. That is not to say that costs, and particularly prices and market economics, cannot be helpful in dealing with niche aspects of climate change; but they are not helpful in addressing the overall challenge.”Kevin Anderson, Deputy Director of the Tyndall Centre for Climate Change Research

This is Part 4 of a multipart series extracted from Kevin Anderson’s incisive, fact-filled 2012. 24-page article. To access the preceding three parts, click on these links — Part 1, Part 2, and Part 3

To read Anderson’s full 24-page paper, click on the following linked title. Alternatively, below is a reposting of excerpted passages selected for this post, Part 4. It features added subheadings inserted as hanging indents in bold italics, a few added links, and text highlighting for content emphasis.

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Climate change going beyond dangerous – Brutal numbers and tenuous hope by Kevin Anderson, Published in What Next Volume III: Climate, Development and Equity, September 2012 (24 pages)

Why does this sound different from the standard analyses?

The standard, or mainstream analyses mistakenly assumed CO2 emission growth at 1-2 % per year before peaking

Virtually all mainstream analyses assume that emissions will grow by only 1-2 per cent per year before peaking. In reality emissions are growing nearer to 3-5 per cent per year and are set to continue, with nothing in train to curtail this level of growth. The UK Committee on Climate Change (CCC) is just one of many organisations from across the climate change community that relies on such modelling assumptions for its policy recommendations.

And all mainstream analyses mistakenly assumed emission peaking within 2010-2016, which don’t reflect the emerging reality

Virtually all mainstream analyses also assume emissions will peak within the period 2010-2016 (with the occasional outlier at 2020). The Stern report specifies the year as 2015; the CCC’s work is premised on a 2016 peak; and the recent report on adaptation and mitigation (ADAM) from the EU similarly assumes that emissions will peak in 2015 (Stern, 2006; CCC, 2008; Hulme et al., 2009). Studying the actual emissions globally, the question must be asked whether any of these assumptions of low growth rates and early peaking dates represent an adequate illustration of short-term reality.

The implication that China and India will peak by 2017/18 in neither reasonable nor equitable

It is worth noting that a 2015/16 peak in global emissions implies that emissions from China and India peak by 2017/18; yet no analysts suggest this is, in any respects, either reasonable or equitable. In brief, almost all orthodox, low-carbon emission scenarios are premised on implicit assumptions about emission peaks for non-Annex I nations that few, if any, analysts considers appropriate.

Moreover, post-peak emission reduction rates of 2-4 % per year are “absurdly” below Anderson’s 10-20 % estimate

Turning to post-peak emission reduction rates, our estimate of a required 10-20 percent per annum reduction (from energy) is far more challenging than the estimates suggested in most other analyses, where rates are typically 2, 3 or 4 per cent per annum.

As it stands, it is difficult not to conclude that the delusion of absurdly low emission growth and early peaks is maintained to facilitate post-peak reduction rates compatible with economic growth.

Proposed large-scale supply-side technological fixes won’t solve the 10-20 % emission reduction challenge fast enough

A more specific dividing line can be drawn between our analysis and that of Stern, the CCC and others, who suggest that large-scale supply-side technologies (new nuclear energy or coal with carbon capture and storage) will solve the problem. This begs the question of how possible and likely it is that supply-side technology could be put in place fast enough for emissions to come off the curve in time to avoid global warming of more than 2°C.

This is not to say that technology is unimportant. Quite the contrary, appropriate technologies are a prerequisite for achieving a low-carbon future – but they are not in and of themselves adequate or sufficiently timely. Reductions are needed urgently and large-scale technology cannot deliver under such temporal constraints.

Time is also the enemy facing alternative climate stabilization proposals

Behavioural changes could bring about a faster transformation, as might some ‘demand- side technologies’, but there simply is no way of getting the supply-side technologies in place fast enough in the wealthier parts of the world. Sokolow’s famous wedges could have worked if the process of change had been initiated earlier (that is, a much lower reduction rate would have been sufficient – a rate that a gradually increasing wedge, or wedges, of mitigation might have been able to deliver – see Figure 6).

Fig 6

Fig 6

Only immediate, substantial emission cuts can save us this late in the game

Where we are now, we need some wedges that are the other way around, with the broad side yielding substantial emission cuts almost immediately. Because we are addressing climate change at such a late stage we cannot solely rely on supply-side technology wedges, and wait for them to grow to a significant level.

Proposals grounded in standard market economics do not translate well in the current world of violent climate change

The analysis offered in this article also challenges the standard economic – or, more precisely, the narrowly constrained financial – characterization of the problem; we have left it so late to respond that net costs are now essentially meaningless. We live in a non-marginal world, where very large changes are already occurring, both in terms of impacts of a changing climate and of societal responses and stresses, whether in relation to mitigation or adaptation. These step-changes will only escalate as global warming proceeds. Conventional market economics is premised on understanding and making small (marginal) changes. But with climate change, we are not talking about small changes; we are dealing with a world of very large changes, outside the realm of standard market theory. In physics, Newtonian principles are deployed to understand how a car works, but in order to understand subatomic particles physicists turn to a different theoretical framing of the problem – quantum mechanics. By contrast, neoclassical (market) economists continue to propose marginal-based theories of small changes, regardless of the scale of the problem; this is not only academically disingenuous but also dangerously misleading. With global warming, we are dealing with non-marginal, major changes occurring very rapidly; a type of problem that market economics is ill-equipped to address. That is not to say that costs, and particularly prices and market economics, cannot be helpful in dealing with niche aspects of climate change; but they are not helpful in addressing the overall challenge.

End of Part 4

This article is based on a transcript of a public presentation at the UK’s Department for International Development (DFID) in July 2011, available at http://www.slideshare.net/DFID/professor-kevin-anderson-climate-change-going-beyond-dangerous

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