Tag Archives: IPCC

So What Exactly Is 'Extremely Dangerous' Climate Change?

Before we get a handle on  ‘extremely dangerous’ climate change, let us start by getting an understanding of what everyday ‘dangerous climate change’ means. In the opening paragraph of the introduction to the IPCC Fourth Assessment Report we get a little enlightenment (see here):

The ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC) is to achieve the stabilization of greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.

And in the Copenhagen Accord of December 2009 we see this:

We underline that climate change is one of the greatest challenges of our time. We emphasise our strong political will to urgently combat climate change in accordance with the principle of common but differentiated responsibilities and respective capabilities. To achieve the ultimate objective of the Convention to stabilize greenhouse gas concentration in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system, we shall, recognizing the scientific view that the increase in global temperature should be below 2 degrees Celsius, on the basis of equity and in the context of sustainable development, enhance our long-term cooperative action to combat climate change.

Thus we could define ‘dangerous climate change’ as something that threatens food production and economic development, and this in turn is expected to take place at two degrees of warming above pre-industrial temperatures. Note that we are now straying out of the life sciences and into the social sciences. Further, the direction of causation has gone from CO2 emissions, to atmospheric CO2 concentrations, to global mean temperatures, to socio-economics and geo-politics. The final step of this progression is something most scientists are loathe to make. As Gwynne Dyer writes in his book “Climate Wars”

….the modellers….wisely stay well clear of any attempt to describe the political, demographic and strategic impacts of the changes they foresee.

And this is why the IPCC’S famous ‘burning embers’ diagram (referred to in my last post here) uses wording that carefully avoids encroaching on the area of economics or geopolitics in any discernible way.

Nonetheless, we have a tentative grasp on the societal impacts of dangerous climate change from the IPCC (somewhat loosely defined as economic and agricultural disruptions), so let us see how far up the causation change the scientists can take us with respect to ‘extremely dangerous’ climate change.

Scientists like Kevin Anderson at the Tyndall Institute believe that even at two degrees Celsius of warming we are  in danger of seeing ‘extremely dangerous’ climate change and given the fact that we could overshoot to four degrees and beyond, the ‘extremely dangerous’ outcome appears almost inevitable.

To better understand what a world subject to such ‘extremely dangerous’ temperatures would actually look like, a conference entitled ‘4 Degrees and Beyond’ held was in Oxford in September 2009 (conference proceedings can be found here), and subsequently a series of academic papers were authored following the conference and were published in The Royal Society’s Philosophical Transactions in January 2011 (the papers can be found here). Together, this research provides a detailed list of impacts at both the sectoral and geographical level. If you want to get a feeling for the kinds or risks you and your family face, then I strongly recommended you follow the links above. But what you won’t get is any higher level macro economic, or geopolitical analysis.

While most scientists are wary of pushing past the scientific impacts and entering into the realm of geopolitics, Kevin Anderson is one of the few who does. Here is his view of what a four degree Celsius and rising world will look like:

For humanity it’s a matter of life or death. We will not make all human beings extinct as a few people with the right sort of resources may put themselves in the right parts of the world and survive. But I think it’s extremely unlikely that we wouldn’t have mass death at 4C. If you have got a population of nine billion by 2050 and you hit 4C, 5C or 6C, you might have half a billion people surviving.

At last something pretty concrete. It may or may not be true, but that is the whole point of doing a risk assessment. In other words, we need to ask the question “What is the probability associated with a tail risk of three or four degrees of warming around within our or our children’s life times, and if this came about what would be the consequences?”

While Anderson is one of the few scientists who have a view on record that stresses the potential for geo-political chaos, the military are much more forthcoming. either in publications that originate in departments of defence or military associated think tanks. Most such publications present a shopping list of potential climate change outcomes or present one central scenario that is the best estimate case. Occasionally, however, you do see a scenario-type approach, and the Age of Consequences report put out in 2007 by the US Center for Strategic & International Studies is one such example. The report outlines three scenarios: first, a 1.3 degree Celsius rise in temperature by 2040 which is called the expected scenario; second, a so called severe scenario of 2.6 degrees of warming by 2040; and, third, a catastrophic scenario of 5.6 degrees of warming by 2100. Given our risk time horizon, let’s see what the ‘severe’ scenario has in store for us:

In the case of severe climate change, corresponding to an average increase in global temperature of 2.6°C by 2040, massive non- linear events in the global environment give rise to massive nonlinear societal events. In this scenario …. nations around the world will be overwhelmed by the scale of change and pernicious challenges, such as pandemic disease. The internal cohesion of nations will be under great stress, including in the United States, both as a result of a dramatic rise in migration and changes in agricultural patterns and water availability. The flooding of coastal communities around the world, especially in the Netherlands, the United States, South Asia, and China, has the potential to challenge regional and even national identities. Armed conflict between nations over resources, such as the Nile and its tributaries, is likely and nuclear war is possible. The social consequences range from increased religious fervor to outright chaos. In this scenario, climate change provokes a permanent shift in the relationship of humankind to nature.

From the above, we can get a tentative feel as to how bad things could get. So, as a working definition, I propose that ‘extremely dangerous’ climate change be taken to mean a transformation of the natural environment that starts to re-arrange societies in a non-linear manner. Further, such a rearrangement will have negative implications for the wealth and health of individuals and families in not only developing countries but also developed countries.

So given the complexity of the issue, how can an individual assess this climate change risk?

Well, the world is a complex place and we already have to make decisions in the face of uncertainty and incomplete information, so what else is new? Actually, in comparison, say, with the decision to marry, I think it is far easier to assess the risk of global warming. For a start, we have a number of facts that can move us quite far up the causation curve  as we move from carbon emissions, to atmospheric C02 concentrations, to global mean temperatures—and then finally to the much more difficult-to assess socio-economic and geopolitical consequences. So as more data comes in, we will have a progressively better idea of how hot things will get. We will then have to take a stab at the economics and politics; but if you have ever been involved in the financial markets, you will have had to do that every day regardless.

In sum, climate change is tough, but so is an assessment of the future risk and return when buying 10,000 dollars worth of shares in Apple Computer or Google. Further, climate change is a high stakes game from a risk perspective: if the value of your holdings in Google crashes, it may be painful for your wealth. If climate change comes in at the negative end of the distribution, it threatens countless lives—maybe including you and your family’s. That is why I think it deserves attention from any thinking person who considers the future.

Defining the Tail Risk

When looking at risk, financial industry professionals will generally start at the tail; in other words, those unlikely but highly hazardous outcomes that reside at the ends of the distribution of all possible outcomes.  In simple terms, if you invest in stocks, bonds or derivatives, then what is the likelihood of a really bad market move taking place—one that will at best stop you sleeping at night or at worst get you fired.  To think about these things is a precondition for long-term survival in the financial industry, and it is certainly not alarmist.

Unfortunately, few people in the financial industry (who are trained to deal with the concept of risk), let alone the general public, take this method of thinking over to climate change—a lack of foresight that could be highly detrimental to their financial and even physical health.

But at what probability does an outcome, and associated consequence, become significant enough to act upon? The life insurance industry gives us some idea. The United States Centre for Disease Control (CDC) puts out a publication called the National Vital Statistics Reports in which it aggregates and analyses mortality data for the United States. In their latest report dated March 16, 2011 they analyse the 2009 data set (most up-to-date figures) and you can find mortality rates by age in Table 1. An extract is given here:

Critically, the life insurance industry is an industry of tail risk. The average American in their late 20s has only a 0.1% chance of dying in any given year and those in their late 50s 0.5%. Yet the latest figures from the life insurance industry’s think tank LIMRA show that 70% of US households have some type of life insurance (of which 44% are individual policies). For those households with children, the numbers are even high: 81% for Generation Y’ers rising to 91% for Baby Boomers.The industry has been in a bit of a panic recently because overall life insurance ownership has been on a gradually declining trend over the longer term, but the fact is that the majority of Americans understand the long-tailed risks of a major breadwinner in the family dying and actually do something about it. In sum, faced with the tail risk of death, adults buy life insurance to manage the risk, especially those people who have children.

Before we look at the tail risk of climate change, it is important to note that life insurance does not hedge against the risk of death: if you die, you are still dead regardless as to whether you own life insurance. What you are really insuring against is not your own death but the sustainability of your family’s prospects after your death. The realisation is that if you die without life insurance, your family will have a degraded life path. In the case of your children, this may, for example, mean reduced educational opportunities that will have negative consequences for their entire life. So actually the act of buying life insurance shows a high degree of concern for the quite distant future as not only are you thinking about a time horizon covering the insurance policy in question but also an even more distant time horizon that encompasses your family’s well being much further into the future after you have gone.

So let’s take a family with children and have a look at the tail risk of climate change. Well, if you have children, then their working lives will likely encompass the 2020s to 2060s, and their life expectancy will likely take them to the end of the century. What is the climate-related tail risk they face over that time period? The answer appears to be a far higher risk than that associated with the loss of a bread-winning parent during childhood. A paper by Richard Betts et al in the UK Royal Society’s flagship journal (that can be found here) spells it out:

The evidence available from new simulations with the HadCM3 GCM and the MAGICC SCM, along with existing results presented in the IPCC AR4, suggests that the A1FI emissions scenario would lead to a rise in global mean temperature of between approximately 3◦C and 7◦C by the 2090s relative to pre-industrial, with best estimates being around 5◦C. Our best estimate is that a temperature rise of 4◦C would be reached in the 2070s, and if carbon-cycle feedbacks are strong, then 4◦C could be reached in the early 2060s—this latter projection appears to be consistent with the upper end of the IPCC’s likely range of warming for the A1FI scenario.

A1FI is the high carbon emissions scenario prepared for the Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report (AR4), which is also the emissions trajectory we are currently following owning to the general failure of carbon emission mitigation efforts made by governments around the globe to date. A description of the scenarios can be found here.

At the time of the Copenhagen Accord in 2009, the international community made a commitment to ‘hold the increase in global temperature below 2 degrees Celsius’ from pre-industrial revolution levels (we are up around 0.8 degrees Celsius now). Further, that two degree Celsius degree line is already deemed by mark the border between ‘dangerous climate change’ and ‘extremely dangerous climate change’ (see the Anderson and Bows paper at the Royal Society link above). The IPCC’s famous burning embers diagrams (updated chart below taken from the NYT here) adds some detail to the likely impacts. In short, we will rapidly progress up to the top of the bars shown below (click for larger image).

In sum, as the world temperature likely rises above the two degree Celsius level in most of our life times and probably moves to four degrees and beyond in our children’s life times based on the current emissions trajectories, we will all experience ‘extremely dangerous climate change’. The idea of ‘extremely dangerous climate change’ within the framework of risk is something I will leave to the next post. Suffice as to say, at a four degree global surface temperature mean warming, we will see the global land mean temperature rise by five to six degrees, a six to eight degrees rise in China, an eight to 10 degree rise in Central Europe and a 10 to 12 degree rise in New York (see here). With these kinds of changes, the planet our parents were born into will not be the same as the planet our children mature into.

Extremely dangerous climate change is, however, a risk that we cannot insure against, rather it is something that we can only respond to through mitigation, adaption or suffering. But first we have to recognise the reality for what it is.