Even Good Climate News Flipped to Alarmism

cartoon-figuresVeterans of the climate policy debate have known for years that no matter what, those worried about emissions can take any new information to conclude: “Things are worse than we thought! We need our preferred policies more than ever!” A Working Paper from earlier this year shows just how far this trend can be pushed, whereby elite researchers took the U.N.’s reduction in the bottom range of man’s likely influence on global temperatures to argue for increased worry about the future.

“When Is Good News Bad?”

To show that I am not attacking a straw man, let me quote liberally from the Abstract of the paper, “Climate Uncertainty: When Is Good News Bad?” published early this year by Freeman, Wagner, and Zeckhauser (two of whom are at Harvard):

Climate change is real and dangerous. Exactly how bad it will get, however, is uncertain. Uncertainty is particularly relevant for estimates of one of the key parameters: equilibrium climate sensitivity—how eventual temperatures will react as atmospheric carbon dioxide concentrations double. Despite significant advances in climate science…the “likely” range has been 1.5-4.5°C for over three decades. In 2007, the Intergovernmental Panel on Climate Change (IPCC) narrowed it to 2-4.5°C, only to reverse its decision in 2013, reinstating the prior range. In addition, the 2013 IPCC report removed prior mention of 3°C as the “best estimate.”

…Intuitively, it might seem that a lower bottom would be good news. Here we ask: When might apparently good news about climate sensitivity in fact be bad news? The lowered bottom value also implies higher uncertainty about the temperature increase, a definite bad. Under reasonable assumptions, both the lowering of the lower bound and the removal of the “best estimate” may well be bad news. [Bold added.]

To paraphrase, the IPCC’s Fifth Assessment Report (AR5), which came out in 2013, lowered the “likely” range of global warming as the result of a doubling of atmospheric CO2 concentrations. Specifically, in the Fourth Assessment Report (issued in 2007), the IPCC had put the bottom end of the range at 2 degrees Celsius, but by the AR5 six years later, it was forced to lower the range by half a degree Celsius in light of the mounting evidence that temperatures were not responding as much to CO2 emissions as the computer models had projected.

At the time of the AR5’s release, many of the moderate (sometimes known as “lukewarmer”) analysts announced the good news—see for example climate scientist Judith Curry’s summary. Yet as the block quotation above illustrates, Freeman, Wagner, and Zeckhauser study various conditions in which the latest IPCC report would be bad news, meaning we should be more worried about human-caused climate change.

Turn That Smile Upside Down

To be clear, I want to explicitly confirm that there is nothing demonstrably incorrect in the analysis from Freeman et al. Although their arguments will probably only appear comprehensible to professional economists, the underlying logic of their case is straightforward enough: People are “risk averse,” meaning they care not just about the mean of an uncertain distribution but also about its variance.

For example, imagine Lottery A has a 50% chance of paying $900 and a 50% chance of paying $1,100, whereas Lottery B has a 50/50 chance of paying $300 and $1,700, respectively. Both lotteries have the same expected payoff—namely, $1,000—but Lottery B has a wider variance. It is riskier. Most people would probably choose Lottery A versus B, because it is closer to a “sure thing” of $1,000. Indeed, many people are so risk averse that they would take a guaranteed $900 (say) rather than play Lottery B, even though Lottery B’s expected payoff (of $1,000, remember) is higher than $900.

In this context, Freeman et al. develop a model of social preferences over climate outcomes in an environment of uncertainty. They document conditions under which even ostensibly “good news” that results in a reduction in the lower bound of predicted temperature increase nonetheless constitutes an inferior “lottery,” compared to a prior “lottery” in which we had a smaller variance but with the same (or even higher) mean prediction of temperature change.

This is the technique by which Freeman et al. take the IPCC’s good news and make it bad. The reduction in the lower bound on the range of climate sensitivity—from 2°C down to 1.5°C—other things equal is obviously a good thing, from the perspective of avoiding future climate change damage.
However, Freeman et al. point out that other things aren’t equal. The change in the range could mean that humans now assign a higher variance to future temperatures. Coupled with risk aversion, this could imply that we are worse off than we thought as of the Fourth Assessment Report, and that citizens should be more willing to have their governments engage in costly mitigation policies to halt carbon dioxide emissions.

Where There’s a Will, There’s a Model

To repeat, there is no demonstrable mistake in the analysis of Freeman et al. However, we should still interpret their paper with a large degree of caution.

In the first place, they most definitively do not show that the latest IPCC report actually is cause for increased alarm. Rather, they merely show that it might be. For example, on pages 5-9 of the paper they come up with specific numerical examples consistent with the broad IPCC statements, which—when plugged into their formal model—yield the answer of “bad news.” Yet to repeat, the IPCC’s statements themselves do not directly yield this answer, because they are not specific enough.

More generally, however, we have to recognize that academic economists are very clever people and can come up with models to prove just about anything. (You think I’m bluffing?) Ask yourself this: Suppose the AR5 had instead raised the lower bound from 2°C to 2.5°C. Would Ivy League economists have produced a paper showing that this actually reduced the need for a carbon tax?

Of course, we can’t know for sure what would have happened in that alternate universe, but I am pretty sure that if the latest IPCC report had raised the bottom end of its projections, then the overwhelming interpretation would have been: “Human activities more damaging than we originally thought! The ‘social cost of carbon’ estimate has been increased by such-and-such percent. It’s more urgent than ever to impose a carbon tax and other restrictions.”

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