Part II: Hot potato revisited2
A lack-of-progress report on the Intergovernmental
Panel on Climate Change
You might think that a policy issue which puts at stake
hundreds of billions of dollars’ worth of global output
would arouse at least the casual interest of the
world’s economics and finance ministries. You would
be wrong. Global warming and the actions
contemplated to mitigate it could well involve costs
of that order. Assessing the possible scale of future
greenhouse-gas emissions, and hence of man-made
global warming, involves economic forecasts and
economic calculations. Those forecasts and
calculations will in turn provide the basis for policy on
the issue. Yet governments have been content to
leave these questions to a body – the
Intergovernmental Panel on Climate Change
(IPCC) – which appears to lack the necessary
Yet hot-headed attempts to link specific weather
disasters to the greenhouse effect are scientific bunk.
The correct approach is coolly to assess the science of
climate change before taking action. Unfortunately,
climate modelling is still in its infancy, and for most of
the past decade it has raised as many questions as it
has answered. Now, however, the picture is getting
clearer. There will never be consensus, but the
balance of the evidence suggests that global warming
is indeed happening; that much of it has recently
been man-made; and that there is a risk of potentially
disastrous consequences. Even the normally stolid
insurance industry is getting excited. Insurers reckon
that weather disasters have cost roughly $400 billion
over the past decade and that the damage is likely
only to increase. The time has come to accept that
global warming is a credible enough threat to require
a public-policy response.
expertise. The result is all too likely to be bad policy, at
potentially heavy cost to the world economy.
In our Economics focus of February 15th this year,
we drew attention to (and posted on our website)
telling criticisms of the IPCC’s work made by two
independent commentators, Ian Castles, a former
head of Australia’s Bureau of Statistics, and David
Henderson, formerly the chief economist of the
Organisation for Economic Co-operation and
Development (OECD) and now visiting professor at
Westminster Business School. Their criticisms of the
IPCC were wide-ranging, but focused on the panel’s
forecasts of greenhouse-gas emissions. The method
employed, the critics argued, had given an upward
bias to the projections.
The IPCC’s procedure relied, first, on measuring
gaps between incomes in poor countries and
incomes in rich countries, and, second, on supposing
that those gaps would be substantially narrowed, or
entirely closed, by the end of this century. Contrary to
standard practice, the IPCC measured the initial gaps
using market-based exchange rates rather than rates
adjusted for differences in purchasing power. This
error makes the initial income gaps seem far larger
than they really are, so the subsequent catching-up is
correspondingly faster. The developing-country
growth rates yielded by this method are historically
implausible, to put it mildly. The emissions forecasts
based on those implausibly high growth rates are
accordingly unsound.
The Castles–Henderson critique was subsequently
published in the journal Energy and Environment
(volume 14, number 2–3). A response by 15 authors
associated with the IPCC purporting to defend the
panel’s projections was published in the same issue.
It accused the two critics of bias, bad faith, peddling
‘‘deplorable misinformation’’ and neglecting what the
15 regard as proper procedure. Alas, it fails to answer
the case Mr Castles and Mr Henderson had laid out –
namely, that the IPCC’s low-case scenarios are
patently not low-case scenarios, and that the panel
has therefore failed to give a true account of the range
of possibilities. If anything, as the two critics argue in
an article in the subsequent issue of Energy and
Environment, the reply of the 15 authors gives new
grounds for concern. This week the IPCC is preparing
to embark on its next global-warming ‘‘assessment
review’’ – and if the tone of its reply to the critics is any
guide, it is intent on business as usual.