Paper: Climate Policy Models Are ‘Useless’

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Michael Bastasch DCNF Managing Editor
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Models used to craft climate models are “close to useless” when it comes to crafting policies to combat global warming, according to a recent paper published by the National Bureau of Economic Research.

Economist Robert Pindyck writes that integrated assessment models (IAMs) used to craft global warming policy “have flaws that make them close to useless as tools for policy analysis” and trick government officials “into thinking that the forecasts the models generate have some kind of scientific legitimacy.”

Why are IAMs poor tools for figuring out the impacts of environmental policies? In the case of global warming, Pindyck argues scientists know very little about “climate sensitivity” and the “relationship between an increase in temperature and GDP.”

“IAMs can be misleading — and are inappropriate — as guides for policy, and yet they have been used by the government to estimate the social cost of carbon (SCC) and evaluate tax and abatement policies,” Pindyck writes.

The federal government’s “social cost of carbon” estimate is a key component of evaluating the costs of increasing levels of carbon dioxide in the atmosphere from human activities. The basic idea goes that CO2 is emitted into the atmosphere, causes a certain amount of warming and drives certain events that impact the economy.

Scientists and environmental activists tend to argue that global warming will drive more “extreme weather” like hurricanes, cyclones, floods, snowstorms, droughts and tornadoes. There are also predictions that disease could become more widespread from global warming, and warnings that food and water supplies could be endangered.

So far, the evidence does not support claims that weather is getting more extreme or many of the other catastrophic claims made by some scientists and activists. But the government has gone ahead and increased the SCC based on models that Pindyck argues are misleading.

Even the Working Group that developed the SCC acknowledged that “[t]here is currently a limited amount of research linking climate impacts to economic damages, which makes this exercise even more difficult.”

In 2013, the Obama administration increased the SCC from $21 per ton to $37 per ton — a move that inflates the benefits of pending federal regulations on CO2 emissions from power plants and other administration actions to cut emissions.

“Claiming that IAMs can be used to evaluate policies and determine the SCC is misleading to say the least, and gives economics a bad name,” Pindyck writes. “If economics is indeed a science, scientific honesty is paramount.”

Other economists have also criticized the Obama administration’s SCC estimate. Economist Robert Murphy with the Institute for Energy Research has argued the SCC is “a very malleable concept that can be inflated or deflated by turning certain wheels.”

“In any event, the public should realize just how ‘unsettled’ the economic side of the carbon debate is,” Murphy said. “The estimates keep bouncing around all over the place, and the estimates are driven by very controversial parameter choices, not objective assessments given by physicists and climatologists.”

So what does Pindyck give as a solution to IAMs?

“I have argued that the best we can do at this point is come up with plausible answers to these questions, perhaps relying at least in part on consensus numbers supplied by climate scientists and environmental economists,” Pindyck wrote.

“It might not inspire the kind of awe and sense of scientific legitimacy conveyed by a large-scale IAM, but that is exactly the point,” he added. “It would draw back the curtain and clarify our beliefs about climate change and its impact.”

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