Economists and macroeconomics must necessarily deal with a grand experiment wherein none of the variables feeding the show can be adjusted or fixed; economists face worse problems than do researchers pursuing cutting-edge experimental physics. Our experience with and expectations of economic phenomena as factors of predictable results are necessarily shaped by history and cultural memory. Operational, empirical economics— investment choices— heavily depend on expert opinion in shaping decisions having a massive impact on human commercial activity; abstract hypothesis on future behavior of the economy is not only inevitable but also critical in terms of its plausibility and validity— as a day-to-day practical matter.
Given the urgency we face with slewing certain parts of our economy so as to improve our trajectory, "getting it right" with regard to the discount rate is arguably of paramount importance. In a nutshell and in the language of an ignorant layperson (the author), the discount rate is a number expressing the time value of money, so it follows that— In the simplest terms— the communally acceptable, conventionally-derived discount rate in a given economic context significantly determines the viability of any proposed investment in that context. Given our culture, the money required for scaled climate mitigation work will not be forthcoming without the seemingly tiny number of the discount rate being "right," with "right"judged in 1/100ths.
In The role of the discount rate for emission pathways and negative emissions Emmerling et al plow directly into the discount rate, their paper serving nicely to illustrate exactly how important is an accurate target rate:
The importance of the discount rate in cost-benefit analysis of long term problems— such as climate change— has been widely acknowledged. However, the choice of the discount rate is hardly discussed when translating policy targets—such as 1.5 °C and 2 °C–into emission reduction strategies with the possibility of overshoot. Integrated assessment models (IAMs) have quantified the sensitivity of low carbon pathways to a series of factors, including economic and population growth, national and international climate policies, and the availability of low carbon technologies, including negative emissions. In this paper we show how and to what extent emission pathways are also influenced by the discount rate. Using both an analytical and a numerical IAM, we demonstrate how discounting affects key mitigation indicators, such as the time when net global emissions reach zero, the amount of carbon budget overshoot, and the carbon price profile. To ensure inter-generational equity and be coherent with cost-benefit analysis normative choices, we suggest that IAMs should use lower discount rates than the ones currently adopted. For a 1000 GtCO2 carbon budget, reducing the discount rate from 5% to 2% would more than double today's carbon price (from 21 to 55 $/tCO2) and more than halve the carbon budget overshoot (from 46% to 16%), corresponding to a reduction of about 300 GtCO2 of net negative emissions over the century.
The discount rate is widely acknowledged as a key factor in our success with fixing our climate problem, even as it is famously controversial in this application. To an untrained eye the variances we still see— decades into discussion-- in proposed acceptable discount rates as they apply to investment in a functional climate capable of sustaining our culture are not an inspiration to confidence in our outcome. To a person making an investment decision determining how many centimeters of sea level rise we see in 200 years, it's paralytic.
It's not directly climate-related in the sense we usually think of here at SkS, but Yang & Wen's Investigating the Role of the Tibetan Plateau in the Formation of Atlantic Meridional Overturning Circulation is still thought-provoking. 6 years ago Francis and Vavrus published findings suggestive of a connection between Arctic warming and extreme weather in midlatitudes. Despite "teleconnections" being an accepted concept in meteorological and climate research, this publication experienced surprising resistance— including from some seemingly unlikely quarters. But Francis & Vavarus' finding shrinks in comparison to other teleconnections investigations. Here in a peer-reviewed AMS journal we read Yang & Wen laying out their reasoning behind a bold claim: without the Tibetan Plateau and its unique geography, the Atlantic Meridional Overturning Circulation (AMOC) would not exist. As they bluntly express it, "We illustrate that there would be no AMOC without the presence of the TP." This assertion may be launched thanks to a previous chain of accepted research helping us to understand how exquisitely interconnected Earth systems are.
Physical science of anthropogenic global warming
Observation of global warming and global warming effects
The climatology of cold and heat waves in Brazil from 1961 to 2016
Random trend errors in climate station data due to in homogeneities
More extreme marine heatwaves in the China Seas during the global warming hiatus (open access)
Modeling global warming and global warming effects
The Response of the Northwest Atlantic Ocean to Climate Change
Eddy activity response to global warming-like temperature changes
Nonlinear Climate Responses to Increasing CO2 and Anthropogenic Aerosols Simulated by CESM1
Mechanisms of future changes in equatorial upwelling: CMIP5 inter-model analysis
Projected changes in extreme precipitation events over various subdivisions of India using RegCM4
Temperature domination of AMOC weakening due to freshwater hosing in two GCMs (open access)
Flow?dependent stochastic coupling for climate models with high ocean?to?atmosphere resolution ratio
Role of Arabian Sea Warming on the Indian Summer Monsoon Rainfall in a Regional Climate Model
Climate Futures for Western Nepal based on Regional Climate Models in the CORDEX?SA
Humans dealing with our global warming
Resilience Dynamics of Urban Water Supply Security and Potential of Tipping Points (open access)
Assessment of carbon footprint in the construction phase of high-rise constructions in Tehran
The role of the discount rate for emission pathways and negative emissions (open access)
Climate Policy Must Favour Mitigation Over Adaptation
Biology and global warming
Climate change causes functionally colder winters for snow cover-dependent organisms
When to start and when to stop: Effects of climate on breeding in a multi?brooded songbird
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Posted by Doug Bostrom on Tuesday, 8 October, 2019
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