CCNet
Editor: Benny Peiser Faculty
of Science, |
Over-Presumption and Myopia: The IMF
on Climate Change Issues
A flawed product
As already
foreshadowed, the latest (April 2008) issue of the International Monetary
Fund’s twice yearly World Economic
Outlook includes a substantial chapter, of nearly 60 pages in all, on
‘Climate Change and the Global Economy’.
The main stated focus of the chapter is ‘the macroeconomic and financial
implications… of policies to address climate change’ (p. 133), and under this heading
it has useful things to say – in particular, about the choice of measures to
limit ‘greenhouse gas’ emissions. In
that context, its emphasis on carbon-pricing policies and their design is
welcome. To this extent, as also in some
other features, one can agree with the judgement passed on the chapter by the
Fund’s Executive Board (p. 227), that ‘the analysis adds value to the debate on
climate change’.
In some other
aspects, however, the chapter has not come out well. Its handling of the issues
is subject to three linked and mutually reinforcing weaknesses.
·
It
takes as its point of departure an inappropriate definition of ‘climate
change’.
·
Partly
for this reason, it gives a summary account of events, relationships and prospects
which is unbalanced, because too unqualified.
·
It
accepts uncritically an established official advisory process which is open to
serious criticism, in ways that Fund staff could and should have made
themselves aware of.
Under all these
headings, the treatment is over-presumptive, while in the latter case it
represents an opportunity missed because it went unperceived.
A misuse of language
The chapter begins
badly. ‘Climate change is a potentially catastrophic global externality and one
of the world’s greatest collective action problems’ (p. 133)
Here and right
through the text – and, inexcusably, without any explicit statement to that
effect - the term ‘climate change’ is taken to refer only to changes arising from human activity, as though no other
factors were involved and no alternative definition was possible. But other
factors are involved: climate change
can occur, has occurred, and may well be occurring now, independently of human
activity. In recognition of this elementary fact, the Intergovernmental Panel
on Climate Change (IPCC) defines the term ‘climate change’ more broadly. The
Fund should have explicitly followed the Panel’s usage, and made a clear
distinction at the outset between the phenomenon of climate change and the
hypothesis (many would say, the fact) of anthropogenic global warming (AGW).
A propensity to overstatement
To write as though
climate change today can be simply subsumed under AGW is going a long way too
far. At some points in the chapter related though more specific forms of
overstatement are to be found. Here are some instances with comments. In the
interests of accuracy, I have replaced ‘climate change’ by ‘[AGW]’
·
‘[AGW]
is a powerful global trend’ (p. 173). More cautious language would have been
better, in the light of (1) the questions that still remain as to the actual
extent of global warming, (2) the acknowledged uncertainty as to how far such
warming as may have occurred can be attributed to human activity, and (3) the
apparent stability of global temperatures over the past decade.
·
‘Stern points out that if GHG concentrations
stabilize at 750 ppm by the end of the century, there would be at least a 50
per cent chance that global temperatures would increase by more than 5C, with
potentially disastrous consequences for the planet…’ (p. 135, italics added). It would be more
accurate to say: ‘Stern takes the view
that…’
·
‘…the
types of abrupt shocks (such as extreme weather events) that are likely to
accompany [AGW]…’(p. 150). This oversimplifies a complex and much-debated set
of relationships.
·
‘… the
damage from [AGW] and its costs are irreversible’ (p. 141), or ‘to a
considerable extent irreversible’ (p. 133).
More guarded language would have served the interests of accuracy.
·
‘… the
significant probability of climate catastrophes’ (p. 143) and ‘… the rising
probability of catastrophic risk.’ (p. 155).
It is misleading to imply that such probabilities are actually known,
and known moreover to be increasing.
All the above quoted
statements are too unqualified. They typify the widespread tendency, official
and unofficial, to go beyond prevailing scientific opinion while purporting to
reflect it, and to give an over-confident picture of what is known or
established as probable.
A failure to take due note
In the IMF as within
its member governments, it seems to be taken for granted that the large-scale
established expert advisory process which governments have created in this area
is objective and authoritative. Within that process, a central though far from
exclusive role has been played by the IPCC, through its series of massive
Assessment Reports: the latest of these, known for short as AR4, appeared in
the course of 2007. A widely held official view, set out in the Leaders’ Declaration
from last year’s G8 Summit meeting, is that policies to curb emissions rest on ‘the scientific knowledge as represented in the recent IPCC reports’.[3]
This uncritical view of the IPCC process has been challenged by
a number of commentators, whose work goes unrecognised in this IMF chapter. In
2005 the House of Lords Select Committee on Economic Affairs, in a unanimous
report, expressed ‘concerns about the objectivity of the IPCC process’[4], but
the report is not included in the chapter’s extensive list of references.
Before and since the Select Committee report, critics of the Panel have drawn
attention, in my opinion with good reason, to flaws which include:
·
Weaknesses
in the treatment of some economic issues.
·
Over-reliance on peer review procedures which do
not serve as a guarantee of quality and do not ensure due disclosure.
·
Serious failures of disclosure in relation to
studies which the IPCC has drawn on.
·
Basic errors in the handling of data, allied to
failure to consult or involve trained statisticians.
·
Failure to ensure an adequate range of views and
expertise.
·
Failure to take due note of critics in the
preparation of the Assessment Reports.
·
Failure on the part of the Panel and the IPCC
directing circle to recognise and deal with the above deficiencies.
These professional
shortcomings have recently been documented, in relation to key chapters in the
report of Working Group I which forms the first volume of AR4, in an article by
David Holland in the journal Energy and
Environment.[5] The article forms one of a collection of
articles on the IPCC, brought together in a special issue of the journal under
the editorship of Benny Peiser. None of these articles is referred to here; and
readers of World Economics may like
to know that likewise unlisted are (1) the twin articles, with 14 co-authors
between them, that made up a dual critique of the Stern Review in the journal
in 2006, and (2) the two articles that I contributed on climate change issues
last year.
In relation to this
critique of the official process and its results, special mention should be
made of the work of two Canadian authors, Stephen McIntyre and Ross McKitrick.
Both separately and in joint writings, they have made an outstanding
contribution to public debate.[6]
Neither name features in the chapter’s list of references. One outcome
of their work has been that twin inquiries into issues of disclosure were set
up by committees of the US Congress: the reports from both appeared in
mid-2006. It would seem that neither of these revealing documents has attracted
attention within the Fund.[7]
A specific lapse
In connection with
the IPCC’s treatment of economic aspects, one of the points at issue concerns
cross-country comparisons of output (real GDP).
Authors involved in the official process have made use of comparisons
based on exchange rates rather then purchasing power parity (PPP) converters,
despite the fact that this yields a distorted picture of the world economy and
of the process of economic growth; and the IPCC has continued to make use of
scenarios in which this mistaken procedure is followed. It is surprising to see
that the same error occurs in the IMF chapter, where misleading comparisons of
energy-intensities and emissions-intensities are made. Thus the text says of
A missed opportunity
Had the IMF chapter authors made themselves
aware of the reasons for viewing the established
official advisory process as flawed, they could have pursued their own
inquiries into the subject: they could have tested the hypothesis. It is true
that, generally speaking, Fund staff are not well equipped to follow or pass
judgement on the scientific debate – as, indeed, is apparent from what has been
said above. But they are competent to judge whether influential studies have
made due disclosure of sources and procedures; whether the selection and
treatment of data have been professionally up to par; how far valid criticisms
under these headings have been fully taken into account by the responsible
authors, reviewers and agencies; whether in relation to economic and
statistical aspects the expert network is adequately representative; and how
far the official advisory process as a whole, and the IPCC process within it,
have ensured a balanced and informed treatment of arguments and evidence. Where
so much is at stake, these things should not just be taken for granted.
Conclusions
In respect of the matters raised here, this
latest IMF publication marks no advance. To the contrary, it mirrors, and
serves to confirm and reinforce, the over-presumptive and unresourceful
treatment of climate change issues by the Fund’s member governments and in
particular by its clients in national capitals, that is, the central economic
departments of state – treasuries, ministries of finance and economics, and, in
the US, the Council of Economic Advisers..
In relation to
climate change issues, a new framework is needed - less presumptive, more
inclusive, more watertight professionally, and more attuned to the huge
uncertainties that remain. My fast-fading hope has been that the Fund, as also
the OECD where the economic departments have likewise recently become more
involved with the subject, would be able to contribute to establishing such a framework.
[1]
David Henderson was formerly Head of the Economics and Statistics Department of
the OECD, and is currently a Visiting Professor at the
[2] This article follows on from my earlier piece, entitled ‘New Light or Fixed Presumptions?’, which appeared in the last issue but one of this journal, and it draws on the text that I used for a seminar presentation at the IMF in early March. Thanks are due to the Fund for giving me a much-appreciated opportunity to make the presentation.
[3] Italics added. Had I been a pre-Summit Sherpa, involved in the drafting of the Declaration and free to speak my mind, I would have argued for changing ‘scientific knowledge’ to ‘the weight of scientific opinion’.
[4] ‘The Economics of Climate Change: Volume I: Report, p. 6.
[5] David Holland, ‘Bias and Concealment in the IPCC Process: The “Hockey-Stick” Affair and Its Implications’, Energy and Environment, Vol 18, No 7 & 8, 2007.
[6] McKitrick’s website provides an annotated list of references, while McIntyre’s blog, climateaudit.org, is a continuing source of analysis and commentary.
[7] References here are to (1) National Research Council
(of the US National Academies) (2006), report on ‘Surface Temperature
Reconstructions for the Last 2,000 Years’, Washington, D.C., The National
Academies Press; and (2) the Wegman report at http://energycommerce.house.gov/108/
home/07142006_Wegman_Report.pdf.
[8]
Angus Maddison’s estimates for 2003 show the emissions intensity of GDP in
[9] I
reviewed the use and rationale of PPP converters, as also the outcome of
exchanges that had taken place between IPCC authors and Ian Castles and me, in
‘SRES, IPCC and the Treatment of Economic Issues: What Has Emerged?’ (Energy and Environment, Vol 16 No
3&4, 2005). This piece also has escaped
IMF notice.