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Diary of a Tree Stump

Something lighter:                                    

  “I would vote for a tree stump if it could beat Donald Trump”

   [Timothy Egan, in his Nov. 8, 201...

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BUSINESS DISCOVERS THE COSTS OF EXTREME WEATHER -- THAT'S GOOD NEWS!


Saturday February 15, 2014

        The weather has become the go-to excuse for economists and businessmen who want to explain poor performance. “Unusually, disruptive weather across large stretches of the country kept people indoors,” explained Lawrence Yun, the chief economist of the National Association of Realtors, in accounting for a slowdown in home sales in Dec. Speaking on CNBC, Diane Swonk, the chief economist of Mesirow Financial, used the January chill that gripped much of the nation to explain disappointing numbers on U.S. auto sales. “It literally freezes the economic activity,” she noted. Similar explanations were offered for the very weak ISM manufacturing numbers released in early February. Economists blamed the huge miss on Non-Farm Payroll numbers in Dec.  – 74,000 instead of the consensus expectation of 197,000 – on bad weather. The same excuse was trotted out when the January ADP number came in weak. The Bureau of Labor Statistics did not blame the weak NFP number of 113,000 on the weather, but pundits were quick to point out that the January employment survey was taken during the one mild week during the month. To top it off the weather has been trotted out as an excuse for a possibly weak GDP number for the first quarter of 2014 – which really jumps the gun because the quarter is not yet half over.  As many financial bloggers have noted, the weather excuse has become the economic equivalent of “the dog ate my homework.”
       

          Change the word “weather” to the phrase “climate change,” however, and be prepared for howls of protest. Though this is another dismaying example of the how toxic the phrase has become, the universal acceptance that extreme weather has economic consequences points to a path towards awakening the public to the risks we all face. This is simply because we will experience climate change as weather, and the more businesses and municipalities find themselves suffering economically because of extreme weather events, the more they will realize that even more frequent extreme storms, temperatures, floods, and droughts are a risk factor (to use the language of corporate reports) going forward.

           No one would claim that all extreme weather events are the result of global warming, but one of the most widely agreed-upon consequences of warming is an increase in extreme weather events. Climate is what you expect, and weather is what you get. If the weather we experience ever more frequently diverges from expectations, then it is natural to wonder whether climate is changing.

          One of the biggest impediments to any public awakening is that the phrase “global warming” implies that the extremes will only be in the form of heat and everywhere at once. Hence the blizzard of smugness – “where’s your warming?” – that was an insufferable fellow-traveler with the arrival of the Polar Vortex in January (an easy answer, by the way, is “Alaska” where unseasonable warmth led to a massive avalanche that isolated the town of Valdez for two weeks).  When climate changes, however, the scientific consensus is that the transition is not smooth. The term favored by climate scientists is “flicker” where climate jumps back and forth between hot and cold and wet and dry until it finally settles in a new state.  In this context, rather than putting aside concerns about global warming when the temperature plunges, we might well wonder whether or not the extreme is yet another data point in an accelerating pattern of extreme events.
           

        There have been numerous studies of the potential economic impact of climate change (I helped edit one published by the UNDP and World Bank in 2005), the most recent being “The Weather Business” published by the German financial colossus Allianz. Many of the earlier studies speculated about future events, while now, a businessman, economist, a mayor, governor, or President doesn’t need a study to envision the costs of weather catastrophes. All they have to do is look at their corporate results, or busted budgets. The increasing pace of extreme weather events is telling us that climate is changing and it is costing us money now (the Allianz report estimated the cost of worldwide weather disasters in 2012 to be $170 billion).
           

         Which brings us back to the question of the difference between thinking about the costs of extreme events as “weather” related losses or as costs related to “climate change.” Attributing poor performance to the weather contains an implicit assumption that this was a one-time event, not likely to be repeated as things revert to normal. Recognizing that an event might – might – be related to changing climate means that a CEO or political leader recognizes that he or she should be prepared for things not returning to normal. Which corporate leader or politician would you prefer to have making decisions about budgets and strategy?
          

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Short Take

THOUGHTS ON WHY THE EARLY IPCC ASSESSMENTS UNDERSTATED THE CLIMATE THREAT

 

An oped involves extreme compression, and so I thought I’d expand on why I think the initial IPCC reports so underestimated the threat. Make no mistake, the consensus in the summaries for policy makers in the first two assessments did underestimate the threat. The consensus was that permafrost would be stable for the next 100 years and also that the ice sheets would remain stable (there was even a strong sentiment at that time that the East Antarctic sheet would gain mass). Moreover, in 1990, the concept of rapid climate change was at the periphery of mainstream scientific opinion. All these things turned out to be wrong

Of course, there were scientists at that time who raised alarms about the possibility of rapid climate change, collapse of the ice sheets, and nightmare scenarios of melting permafrost, but, fairly or not, the IPCC summary for policy makers was and is taken to represent the consensus of scientific thinking.

In my opinion such documents will always take a more conservative (less dramatic) position than what scientists feel is justified. For one thing the IPCC included policy makers, most of whom were more incentivized to downplay the threats. For another, many of the national governments that were the customers for these assessments barely tolerated the exercise and gave strong signals that they didn’t want to see anything that called for dramatic action, and this being the UN, there was a strong push to present a document that as many governments as possible would accept.

And then there is the nature of science and the state of climate science at that point. There is an inherent structural lag built in to the nature of science. For instance, the 1980’s were marked by the rapid development of proxies to see past climate changes with ever more precision. By the mid-late 80’s the proxies and siting had been refined sufficiently that the GISP and GRIP projects could confidently get ice cores from Greenland that they felt represented a true climate record and by then they also had the proxies with the resolution to see the rapid changes that had taken place in the past. Given the nature of data collection, interpretation, peer-review and publishing, it wasn’t until 1993 that these results were published.

It took nearly another decade for this new, alarming, paradigm about how rapidly global climate can change to percolate through the scientific community, and, even today, much of the public is unaware that climate can change on a dime.

As for the ice sheets, when I was on the West Antarctic Ice Sheet in 1996, there was talk about the acceleratio of  ice streams feeding the Thwaites and Pine Island glaciers, but the notion that there might be a significant increase in runoff from the ice sheet over the next hundred years was still very much a fringe idea.

With permafrost, the problem was a sparsity of data in the 80s and early 90s and it is understandable that scientists didn’t want to venture beyond the data.

The problem for society as a whole was that the muted consensus on the scale of the threat diminished any sense of urgency about dealing with the problem. Perhaps the best example of this was the early work of William Nordhaus. Working from the IPCC best estimates in the early 1990s Nordhaus published one paper in which he predicted the hit to the US GDP from climate change in 2100 would be about ½ of 1%. Nobody is going to jump out of their chair and demand action if the hit to the economy was going to be 0.5% of GPD a hundred years laterLibertarians such as William Niskanen seized on this and testified before Congress that there was plenty of time to deal with global warming if it was a threat at all.  

And then there was the disinformation campaign of industry, particularly fossil fuel lobbyists, as well as pressure from unions (the UAW in particular) and the financial community. These highly motivated, deep-pocketed interests seized on scientific caution to suggest deep divisions among scientists and that the threat was overplayed. Little wonder then that the public failed to appreciate that this was a looming crisis that demanded immediate, concerted action.

 



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