The Only Certainty is Uncertainty..

Uncertainties associated with climate change have polarized public debate. People use the uncertainty related to climate change and its impacts justify inaction while others take the opposite position and propose that the large risks should be mitigated regardless of the costs. Due to the high degree of uncertainty, the are limitations to using economic models to model climate change. By extension, modelling of abrupt climate change would be even more difficult.

I would like to propose that there are different sources of uncertainties involved in this debate. One source of uncertainty is an individual's aversion to risk (and adverse, abrupt climate change). Different people, from different places, would have different degrees of risk aversion. This would lead to uncertainties in predicting the impacts of climate change as well as the determining the thresholds or tipping points which calls for more action to prevent catastrophic consequences. 

Schneider and Mastrandrea (2005) put forward that stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference (DAI), as proposed by the United Nations Framework Convention on Climate Change, is largely a 'normative decision, influenced by value judgements, sociopolitical processes, and factors such as development, equity, sustainability, uncertainty and risk'. They propose the use of a probabilistic risk management framework to assess 'dangerous' climate change and use it as an effective method for informing the policy process (by determining the level of DAI and setting climatic (temperature) thresholds) and evaluating the implication of different policies. However, they recognise the limitations to this method as determining the level of DAI is ultimately still a value-laden process, which will lead to different levels for different stakeholders, in different regions of the world. David Archer (2012) proposes a similar idea. He proposes that contrary to climate change, the economy is 'much harder to forecast'. By extension, the uncertainties within economic models would be more significant than climate change models. He claims that eocnomics and other social sciences are not securely founded whereas physical sciences are based on a solid foundation of natural laws. Hence, economics is an awkward tool for the climate change decision (modelling uncertainty and risk aversion) because many aspects of the natural world are not economically fungible. However, he does concede that although it is not well suited to assess policy options, it can be used, at least in the short term.

This sets the tone for the debate on the role of economics within climate change as it is laden with uncertainties and value judgements from a diverse group of people. The decision for action/ inaction still lies with individual perceptions.

On the other hand, McKibbin and Wilcoxen (2002) discuss the role of economics within modelling climate change and put forward that the only certainty about climate change models is the prevalence of uncertainty at every juncture and the 'single most important attribute of climate change as a policy problem is uncertainty'. In contrast to the previous example, this case study delves into the uncertainties related to the science of climate change (projection of climate change).

They highlight three undisputed facts about climate change. Firstly, the presence of greenhouse gases and the greenhouse effect has been universally accepted. Secondly, most have also acknowledged that the concentration of many greenhouse gases has been increasing rapidly due to human activity and lastly, consequences of rising concentration of greenhouse gases are being clearer. These show that human activity affects climate change and there is a chance for man to prevent abrupt climate change.

Uncertainties and disputed facts about climate change comes in terms of the precision of how much warming will result from a given increase in greenhouse gas concentrations, or when such warming will occur, or how it will affect different regions and ecosystems. More importantly, the cost of reducing greenhouse gas emissions is also uncertain. For example, population growth and the rates of productivity growth in individual industries are key determinants of the cost of reducing greenhouse gas emissions, but neither can be projected with much confidence beyond a few years into the future. The table above is obtained from the article and it describes the uncertainties assigned to possible scenarios of the impact of global warming on the climate. The level of certainty uses terminology used by the Intergovernmental Panel on Climate Change where 'very likely' means a 90-99 percent chance, 'likely' means 66-90 percent chance. Being able to formulate accurate costs and benefits of climate change policy is crucial for justifying any proposed actions but uncertainties in climate change are pervasive. Regardless of how much models are built to incorporate uncertainties relating to climate change, it will be close to impossible for models to be able to accurately predict climatic changes.

This blog post has shown that what seems to be certain is that uncertainty is prevalent in both economics as well as climate change models. All these factors have to be taken into consideration when making decisions to mitigate climate change. 

References:

Archer, D (2012) Global warming: understanding the forecast. New Jersey: Wiley. 

McKibbin W. J. and Wilcoxen, P. J. (2002) 'The role of economics in climate change policy', Journal of Economics Perspectives, 16, 2, 107-129. 

Schneider, S. H. and Mastrandrea, M. D. (2005) 'Probabilistic assessment of ''dangerous'' climate change and emissions pathways', PNAS, 102, 44, 15728-15737.

Intergovernmental Panel on Climate Change (2001) Climate Change 2001: The Scientific Basis, Contribution of Working Group I to the Third Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge: Cambridge University Press.