Bob Ward, Policy and Communications Director at the Grantham Research Institute on Climate Change and the Environment (LSE), has written a letter to the Financial Times on 28th December 2018. It is copied in its entirety below:
“Your excellent editorial “ How to rescue the global climate change agenda” (December 27) is right to call for a transformation of the policy discussion on climate change in order to accelerate the transition to a zero-carbon economy. However, you neglected to highlight a key solution: economists and finance ministries must stop relying on models that are simply not fit for purpose when making investment decisions.
The potential impacts of climate change caused by fossil fuel use are grossly underestimated by the current generation of economic models, which cannot quantify the cost of, and therefore omit, tipping points in the climate system, such as the destabilisation of the land-based ice sheets in Greenland and West Antarctica, and apply inappropriate discounting such that huge damages to future generations are trivialised.
Similarly, economic models overestimate the costs of new zero-carbon technologies because they do not take adequate account of co-benefits, such as reductions in local air pollution, and of processes such as learning by doing. These models have failed to forecast how quickly the production and development costs of renewable energy technologies, such as wind and solar, have fallen over the past few decades and years.
The consequence of these shortcomings was starkly illustrated earlier this month during the Nobel Prize lecture by William Nordhaus, the great pioneer of climate economics. He told the audience in Stockholm that his widely used model indicates “optimal climate policy” would result in global warming of 3C by the end of this century and 4C by 2150. Such a result is simply not credible when compared with the scientific evidence collated by the Intergovernmental Panel on Climate Change earlier this year, showing how devastating a global temperature rise of more than 1.5C would be.”